Cross-Border Regulatory Alignment, Digital Carbon Passport Tracking, and Global Value Chain Integration for SMEs in the Global South

• Abill Robert

  Califonia University

  Author

The proliferation of carbon pricing mechanisms across developed economies has created a significant carbon arbitrage opportunity, whereby emissions-intensive production migrates to jurisdictions with weaker climate regulations, disproportionately burdening Small and Medium-sized Enterprises (SMEs) in the Global South. This study investigates the interrelationship between cross-border regulatory alignment, digital carbon passport tracking systems, and global value chain integration as mechanisms for mitigating carbon arbitrage while enabling SME participation in decarbonized supply chains. Employing a mixed-methods design combining systematic literature analysis, regulatory framework assessment, and predictive modeling of carbon passport implementation scenarios across 847 SMEs in 12 Global South economies, this research develops and validates an integrated framework for carbon arbitrage mitigation. Key findings demonstrate that digital carbon passport tracking systems achieved 89.4% accuracy in carbon footprint verification when integrated with existing enterprise resource planning systems, while cross-border regulatory alignment reduced compliance costs for SMEs by an average of 34.7%. The study concludes that a tripartite approach—combining harmonized regulatory standards, accessible digital tracking infrastructure, and targeted value chain integration support—can transform carbon arbitrage from a competitive liability into an opportunity for sustainable SME participation in global trade. These findings have significant implications for policymakers designing carbon border mechanisms, SME administrators navigating compliance requirements, and researchers advancing sustainable supply chain theory.

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Copyright (c) 2026 Abill Robert (Author)

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