How Does CBAM Drive Green Technological Innovation Toward Sustainable Development? Cost, Awareness, and Information Channels in an E-DSGE Model

A sustainable low-carbon transition requires policy that curbs emissions while accelerating green technological innovation. The EU Carbon Border Adjustment Mechanism (CBAM) imposes carbon costs on high-emission exports; yet, how it shapes exporters’ green innovation remains poorly understood. We develop an open-economy Environmental Dynamic Stochastic General Equilibrium (E-DSGE) model embedding three CBAM transmission channels: cost-driven (higher carbon-intensive production costs), awareness-driven (firms’ forward-looking expectations), and information-enhancement (lower green R&D financing costs). The model decomposes CBAM’s green-innovation effects by jointly endogenizing forward-looking green R&D investment and carbon disclosure quality in general equilibrium. Calibrated to Chinese data and solved in Dynare 7.0, the model is simulated over forty quarters. Under the baseline calibration, simulations suggest a CBAM shock raises green R&D investment by approximately 6.5% at its peak and the green technology level by approximately 12.5% by quarter 40, while brown emission intensity falls by approximately 10%. Within this window the policy carries a net welfare cost of approximately 0.34% of steady-state consumption, concentrated in transition-period labor disutility, with most gains accruing later. Combining CBAM with R&D subsidies modestly reduces the within-window welfare cost and raises long-run green technology. Realizing this sustainability potential requires policy credibility, carbon-information infrastructure, and coordinated innovation support.