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February 21, 2026SustainabilityOpen Access

Domestic Carbon Pricing Coordination Under CBAM: Resource Reallocation, Green Innovation, and Policy Synergy

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Authors

JZJingwen ZhangLZLiuyan Zhao

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Overview

Environmental model analyzes carbon pricing impacts on emissions and innovation in open economies, suggesting policy synergy.

Key Points

  • The research aims to understand how domestic carbon pricing can effectively support decarbonization under CBAM.
  • Developed an environmental DSGE model for a small open economy
  • Included a cleaner green sector and an emissions-intensive brown sector
  • Analyzed the effects of carbon pricing on resource allocation and financing conditions
  • Assessed the impact of coordinated domestic carbon price increases under CBAM
  • A coordinated increase in carbon price cuts emissions and shifts investment towards the green sector
  • CBAM leads to a deeper near-term economic contraction and tighter financing conditions
  • Endogenous green innovation coupled with targeted credit support results in smoother economic adjustments
  • The combination of carbon pricing, innovation support, and financial stability enhances welfare gains

Cite This Study

Zhang et al. (2026) studied this question.

synapsesocial.com/papers/69994c9f873532290d0213a5https://doi.org/10.3390/su18042095
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