(Adds details from proposal)
By Jeff Mason
BRUSSELS, Jan 30 (Reuters) - The European Commission will propose stricter environmental standards on fuel and require oil companies to reduce emissions from oil refining and transport as part of EU efforts to fight climate change, a proposal shows.
A draft proposal, obtained by Reuters ahead of its planned release on Wednesday, says oil companies will be required to monitor greenhouse gas emissions that result from harvesting, refining and transporting oil, which the proposal calls oil's "life cycle."
Those emissions must be reduced by 1 percent annually starting in 2011 through 2020, the proposal said.
"The level of life-cycle greenhouse gas emissions per unit of energy reported in 2020 shall be no greater than 90 percent of the level reported in 2010," it said.
"Monitoring and reducing fuel life cycle greenhouse gas emissions can contribute to helping the (EU) meet its greenhouse gas reduction goals."
The new rules are part of the bloc's efforts to meet commitments under the Kyoto Protocol to lower emissions of the gases scientists blame for warming the earth.
The proposed law also sets stricter environmental standards on fuel sold in the 27-nation European Union in an effort to reduce air pollution and cut back on greenhouse gas emissions.
Sulphur content in diesel would be limited to 10 ppm from 2009, while poly aromatic hydrocarbons in diesel would be limited to 8 percent, the draft said.
Maximum sulphur level standards for "non-road gas oil" would be lowered to 10 ppm from 1000 ppm for land-based uses and to 300 ppm from 1000 ppm for inland waterways, the draft said.
The proposal also foresees a new blend of petrol with "higher permitted oxygenate content (including up to 10 percent ethanol)" to enable more use of biofuels.
A spokesman for the Commission, the EU's executive branch, confirmed that the proposals would be presented on Wednesday.
The Commission will also come out with a proposal in 2007 that would require recovery of volatile organic compound (VOC) vapours at filling stations, the draft said. Vapour from VOCs contributes to air pollution.
The suggested rules come just weeks after the Commission challenged the world to reduce its emissions of greenhouse gases by 30 percent by 2020 compared to 1990 levels.
The Commission said the EU should adopt the 30 percent goal if other developed nations joined in, otherwise it proposed committing to a 20 percent drop in the bloc's own emissions.
But the bloc's commitment to climate change reduction has been tested in recent weeks as it grapples with how to reduce carbon dioxide (CO2) emissions from cars.
Environment Commissioner Stavros Dimas favours binding legislation to force car manufacturers -- a key industry in Europe -- to lower CO2 emissions of new cars to an industry average of 120 grams per km in 2012.
Industry Commissioner Guenter Verheugen has opposed rules that single out only car makers, supporting instead an approach that targets fuel standards and driver behaviour.
Late on Tuesday an agreement had still not been reached that would allow the cars proposal to come out the next day.