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Strategic Decarbonization under the EU Carbon Border Adjustment Mechanism: An Evolutionary Game Model for Morocco

This study employs an evolutionary game model to demonstrate how Morocco can achieve strategic decarbonization under the EU's Carbon Border Adjustment Mechanism by identifying the specific economic conditions under which coordinated government policy support and firm-level low-carbon adoption become a stable equilibrium.

Original authors: Tarek DRISSI BOUZAIDI, Faouzi DAOUI, Said TOUNSI, El hassane MANOUZE, Sara MOUJTAHID, Mohamed IDALFAHIM

Published 2026-10-16

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CC BY 4.0

Original authors: Tarek DRISSI BOUZAIDI, Faouzi DAOUI, Said TOUNSI, El hassane MANOUZE, Sara MOUJTAHID, Mohamed IDALFAHIM

Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). ✨ This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer

The global economy is increasingly governed by a new kind of border tax, one that charges money not for the weight of a shipment or the distance it travels, but for the carbon pollution embedded in the goods themselves. This mechanism, known as the Carbon Border Adjustment Mechanism, is a policy tool created by the European Union to ensure that companies importing products from outside Europe pay a price for their greenhouse gas emissions, similar to what European manufacturers already pay. The goal is to prevent "carbon leakage," where industries might move to countries with weaker environmental rules to avoid costs, and to encourage cleaner production worldwide. For a country like Morocco, which trades heavily with Europe and relies on industries like fertilizer production, this rule changes the math of doing business. It forces a question that goes beyond simple accounting: how do a nation's government and its private companies react when faced with a new, expensive reality? Do they wait and hope the problem goes away, or do they actively change their behavior to survive?

Researchers Tarek Drissi Bouzaidi and his colleagues at several Moroccan universities set out to answer this question by building a theoretical model of the future. They did not look at this as a simple list of costs and benefits, but rather as a strategic game between two adaptive players: the Moroccan government and the country's exporters. In their model, the government can choose to be "active," implementing policies like subsidies for green technology, better carbon tracking systems, or domestic carbon pricing, or it can remain "passive," doing little to help or hinder the transition. Simultaneously, the exporting firms can choose to stick with their current, high-polluting methods or invest in new, low-carbon technologies. The researchers used a method called evolutionary game theory, which is a way of studying how strategies change over time as players learn from their successes and failures, rather than assuming everyone makes a perfect decision instantly.

The study focuses on a specific economic reality: the cost a Moroccan company faces is not just the price of the new technology, but also the specific penalty it might face at the European border. The researchers calculated this penalty by looking at the difference between the carbon price in Europe and the price paid in Morocco, multiplied by how much pollution the product creates and how much of that product is sold to Europe. They found that the system does not have a single, guaranteed outcome. Instead, it has two stable paths, or "traps," that the country could fall into. One path is a "passive trap," where the government does nothing and companies keep polluting because the cost of changing is too high. The other is a "success trap," where the government actively supports the transition and companies switch to clean energy because the combined benefits of avoiding penalties and receiving support outweigh the costs of change.

The most important finding of the paper is that the country can get stuck in the bad path even if the good path is available. Whether the system moves toward the successful outcome depends heavily on a specific threshold. If the cost for a company to switch to clean technology is too high, or if the government's support is too weak, the companies will not change, and the government will see no reason to keep spending money on support. However, the researchers showed that if the government can lower the cost of transition—perhaps by making renewable energy cheaper or providing better financing—or if the penalty for staying dirty becomes severe enough, the companies will switch. Once enough companies switch, the government's active policy becomes a stable, self-reinforcing success.

The model also highlights that the threat of the European tax alone is not a magic solution. While a higher penalty at the border does make companies more likely to change, the researchers found that the cost of the transition itself is the most powerful lever. If the price of switching to green technology is too high, even a large border penalty might not be enough to convince a company to change, especially if the company is small or lacks access to capital. The study suggests that for Morocco, the most effective strategy is not just to wait for the European rules to force change, but to actively lower the barriers for its own industries. This includes investing in renewable energy infrastructure, helping companies measure their emissions accurately so they are not penalized unfairly, and creating a domestic carbon pricing system that works in harmony with the European rules.

The researchers were careful to note that their work is a theoretical simulation, not a prediction of exactly what will happen. They used normalized numbers to test the logic of their model, not to forecast specific financial figures for Moroccan industries. Their work proves that a coordinated approach is mathematically possible and stable, but it requires the right conditions to be met. If the government and the private sector can align their incentives so that the cost of inaction becomes greater than the cost of action, the country can move toward a cleaner, more competitive future. If they fail to coordinate, the system risks remaining stuck in a cycle of high pollution and economic vulnerability. The paper concludes that the path forward depends on specific, measurable actions: reducing the cost of green technology, improving the accuracy of emissions data, and ensuring that domestic policies and international rules work together rather than against each other.

Technical Summary: Strategic Decarbonization under the EU Carbon Border Adjustment Mechanism: An Evolutionary Game Model for Morocco

Problem Statement
The European Union's Carbon Border Adjustment Mechanism (CBAM), entering its definitive phase in 2026, alters market access for imports based on verified embedded emissions. While existing literature quantifies CBAM exposure through input-output and computable general equilibrium models, these approaches often treat the border measure as a generic tariff or fail to model the repeated strategic adjustments between domestic policymakers and exporting firms. Specifically for Morocco, a country with high EU trade integration and a strategic fertilizer industry but an underdeveloped domestic carbon pricing system, there is a need to understand how sectoral exposure, carbon-price differentials, and transition costs interact to determine the evolutionary path toward decarbonization. The core research question is: Under what conditions does the Morocco-CBAM system converge toward an active domestic policy response and low-carbon production, and how do specific economic parameters shift the evolutionary thresholds?

Methodology
The study employs a two-population evolutionary game theory framework to model the strategic interaction between an adaptive Moroccan policy regime and CBAM-exposed exporting firms.

Actors and Strategies: The government population chooses between an Active (A) or Passive (P) policy state ( $x \in [0,1]$ ). The firm population chooses between Low-carbon (L) and High-carbon (H) production technologies ( $y \in [0,1]$ ).
CBAM Incidence Function: A key methodological extension is the derivation of a sector-linked CBAM incidence term ( $B$ ). Unlike generic tax models, $B$ is explicitly defined as the product of EU exposure share ( $\alpha$ ), commercial cost pass-through ( $\phi$ ), covered export quantity ( $q$ ), the residual EU-domestic carbon price gap ( $\tau$ ), and the emissions intensity differential between technologies ( $\Delta e$ ).
Dynamics: The model utilizes replicator dynamics to describe the growth rates of strategies based on relative payoffs. The system is analyzed for static Nash equilibria, local stability via Jacobian eigenvalues, and global dynamics through nullclines and trajectory invariants.
Validation: An illustrative numerical scenario using normalized values is employed solely to verify the analytical mechanism and stability conditions, without claiming empirical calibration to Moroccan data.

Key Contributions

Analytical Extension: The paper provides a Morocco-specific extension of the government-exporter evolutionary game by embedding an explicit, sector-linked CBAM incidence function. This separates the external EU carbon-price signal, the fraction of cost borne by suppliers, and the emissions differential, distinguishing the model from generic tax-subsidy games.
Stability Characterization: The study derives complete static and dynamic stability conditions, including pure and mixed Nash equilibria, corner eigenvalues, and an interior saddle condition. It identifies a "coordination regime" where the system exhibits bistability (path dependence) between a passive/high-carbon trap and an active/low-carbon equilibrium.
Policy Mapping: The analytical quantities are mapped to measurable inputs (trade data, emissions, energy prices) to support future sector-level calibration. The model translates these into specific policy levers involving Measurement, Reporting, and Verification (MRV), renewable energy access, transition finance, and carbon pricing design.

Results

Equilibrium Conditions: The desirable "Active/Low-carbon" equilibrium ( $E_3$ ) is locally asymptotically stable if public benefits ( $R_G$ ) exceed implementation and incentive costs ( $C_G + E + S$ ), and if private transition costs ( $C_L$ ) are lower than the sum of low-carbon gains, policy support, avoided domestic penalties, and avoided CBAM incidence.
Path Dependence: In the coordination regime, the system is bistable. The initial state determines whether the economy converges to a low-carbon transition or remains trapped in a high-carbon state. The basin boundary is defined by an analytical trajectory invariant.
Comparative Statics:
- A higher residual CBAM burden ( $B$ ) lowers the government-activity threshold ( $x^*$ ) required for firms to adopt low-carbon production.
- Higher transition costs ( $C_L$ ) raise this threshold, making adoption more difficult.
- The switching threshold is more sensitive to transition costs than to the magnitude of the CBAM incidence in the illustrative scenario.
- A domestic carbon price has a dual effect: it may increase domestic compliance costs ( $F$ ) but reduce the residual border charge ( $B$ ) if recognized by the EU, necessitating a coordinated design rather than a simple penalty approach.

Significance and Claims
The paper positions itself as an applied environmental systems model rather than a forecast. Its primary significance lies in identifying the mechanisms and thresholds that govern strategic decarbonization under CBAM.

Theoretical Contribution: It demonstrates that CBAM cannot be modeled as a uniform national shock; exposure must be indexed by sector and product scope to accurately reflect firm-level incentives.
Policy Insight: The framework suggests that while a higher border burden can theoretically lower the threshold for private adoption, relying on external penalties is not a welfare-improving strategy. Instead, the most effective domestic leverage is reducing transition costs ( $C_L$ ) through renewable energy access and finance, strengthening MRV to avoid unnecessary border charges, and designing domestic carbon pricing that is consistent with EU crediting rules.
Future Utility: The authors claim the framework is designed for empirical extension. By combining product-level trade data with verified emissions and technology costs, the model can be calibrated to compare specific decarbonization packages based on their ability to move exporters across the basin boundary while accounting for fiscal costs and trade effects. The study explicitly avoids making claims about the specific behavioral parameters of Moroccan firms, focusing instead on the structural logic of the interaction.

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