Since Canadian producers do not qualify to use the CARBOB average-intensity value of 95.86 gC[O.sub.2]/MJ, their actual carbon-intensity value will be used, which, according to all indications and previous studies, will result in a significant deficit balance.
Second, Canadian imported crude oil is not taxed similarly to domestic crude oil due to the availability and operation of the CARBOB baseline figure to domestic but not to Canadian oil producers.
(105) Likewise, in the case of Canadian oil exports to California, the LCFS acts to make it difficult for Canada--and all other countries where oil producers do not qualify to use the CARBOB baseline figure--to penetrate the Californian market.
The difference in treatment is even more pronounced when the foreign producer's actual GHG emissions are near to or exceed Canadian emissions, but the foreign producer can claim the benefit of CARBOB, while Canadian producers cannot.
Regardless, Canada could also argue that in providing local producers with the advantage of using the CARBOB figure while denying Canadian producers its use, the U.S.
That being said, it is reasonable to assume that the higher cost of exporting oil to California for Canadian producers vis-a-vis domestic producers and foreign producers that qualify for the CARBOB figure would significantly distort trade flows.
More specifically, crude-oil producers that constituted at least two percent of the 2006 California baseline crude or those whose oil is not a high-carbon-intensity crude oil can simply use a standard baseline rate (i.e., the CARBOB figure of 95.86 gC[O.sub.2]/MJ) as opposed to calculating their actual carbon intensity.
Under the current regime, Mexican oil producers qualify to use the CARBOB figure of 95.86 gC[O.sub.2]/MJ, as over two per cent of the 2006 baseline mix included Mexican oil, while Canadian oil producers must calculate their emissions.