TORONTO, Ontario - CANADA has threatened to take Europe to the World Trade Organisation if it singles out the country's oil sands as dirty oil, but officials said Tuesday such action wouldn't affect free trade negotiations with the European Union (EU).

An EU committee is set to vote Thursday on a proposed fuel quality directive that labels Canada's oil sands as more polluting than oil from other parts of the world. The directive aims to curb emissions from transport fuels by 10 per cent. If approved, it will go to the full European parliament.

Canada's western province of Alberta has the world's third-largest oil reserves after Saudi Arabia and Venezuela, with more than 170-billion barrels.

Canada doesn't sell oil to Europe, but government and industry officials fear the dirty oil label would set a bad precedent.

"It risks sullying our reputation in an unfair way and could hurt us in other markets," Natural Resources Minister Joe Oliver said in a telephone interview with The Associated Press. "We will take action if necessary, but I'm hoping it won't get passed."

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