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

Shasha Liu and Fangcheng Tang ()
Additional contact information
Shasha Liu: School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China
Fangcheng Tang: School of Economics and Management, Beihang University, Beijing 100191, China

Energies, 2025, vol. 18, issue 22, 1-16

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.

Keywords: carbon tariffs; carbon border adjustment mechanism; emission information asymmetry; energy-intensive sectors (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1996-1073/18/22/5958/pdf (application/pdf)
https://www.mdpi.com/1996-1073/18/22/5958/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:18:y:2025:i:22:p:5958-:d:1793332

Access Statistics for this article

Energies is currently edited by Ms. Cassie Shen

More articles in Energies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().