Work

Emission Information Asymmetry in Optimal Carbon Tariff Design: Trade-Offs Between Environmental Efficacy and Energy Transition Goals

Year: 2025

Type: article

Abstract: Against the global rollout of Carbon Border Adjustment Mechanisms (CBAMs), carbon tariffs have emerged as a core tool for developed economies to internalize environmental externalities—especially for energy-intensive imports that dominate cross-border carbon flows. However, emission information asymmetry, a critical barrier to implementing cross-border energy and environmental policies, undermines the design of optimal carbon tariffs, as it distorts the link between tariff levels and actual fossil energy-related emissions. This study develops a two-country analytical model to examine how biased assessments of exporters’ carbon intensity influence optimal tariff settings, exporters’ strategic behavior, and aggregate carbon emissions—with a focus on energy-intensive production contexts. The results show that underestimating carbon intensity reduces exporters’ compliance costs, incentivizing emission concealment; this weakens tariffs’ environmental stringency and may raise global emissions. Overestimation, by contrast, inflates exporters’ marginal costs, discouraging green investment and causing emission displacement rather than reduction. The analysis highlights a policy feedback loop wherein misjudged emission information distorts both trade competitiveness and environmental performance. This study concludes that a transparent, accurate, and internationally verifiable carbon accounting system is essential: it not only facilitates the effective implementation of CBAM but also aligns optimal carbon tariffs with CBAM’s dual goals of climate action and trade equity, while supporting global energy transition efforts.

Source: Energies

DOI: 10.3390/en18225958

Authors: Shasha Liu, Fangcheng Tang

Institutions: Beijing University of Chemical Technology, Beihang University

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Climate action

Open Access status: gold

Estimated APC paid: $3,137