Year: 2025
Type: article
Abstract: This study examines how information frictions in climate policy credibility shape carbon border adjustment mechanisms when trading partners cannot fully verify each other’s commitment to green industrial policies. A dynamic signaling framework models exporters’ policy commitment capacity as private information, incorporating Bayesian belief updating subject to signal noise and reputation decay. The analysis derives a Perfect Bayesian Equilibrium characterizing optimal CBAM tariff responses conditional on importers’ evolving credibility assessments. The calibrated model achieves strong empirical validation (R2 = 0.884, explaining 88% of tariff variance; rank correlation ρ=0.950), with Monte Carlo simulations demonstrating robust internal consistency (RMSE = 2.56 percentage points). Results identify a critical belief threshold (pt<0.3) triggering hyperelastic tariff responses: below this credibility level, small perception declines generate disproportionately steep border tax increases (elasticity ≥ 2), trapping countries in high-tariff equilibria despite genuine commitment. Information frictions impose aggregate welfare losses equivalent to 30% of potential coordination gains, decomposed into four sources: information opacity (40%), cognitive biases in belief formation (27%), policy distortions induced by credibility concerns (20%), and reputation maintenance costs (13%). These quantitative patterns, while illustrative within the baseline calibration, motivate testable implications regarding elasticity asymmetries and credibility persistence. The framework identifies targeted policy interventions—third-party verification of commitment durability, rule-based tariff adjustment protocols, and institutional commitment devices—systematically prioritized by marginal welfare impact to guide beliefs away from credibility traps while maintaining environmental rigor.
Source: Sustainability
DOI: 10.3390/su172310843
Authors: Haoling Zhan, Shanqi Zhou, Tian Luo
Institutions: Shanghai Maritime University, Hangzhou Normal University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Climate action
Open Access status: gold
Estimated APC paid: $2,896
OpenAlex ID: W4416954052