diff --git a/src/cli/config_merge.rs b/src/cli/config_merge.rs
index 37ed776d..fb080fd7 100644
--- a/src/cli/config_merge.rs
+++ b/src/cli/config_merge.rs
@@ -16,6 +16,7 @@ use std::borrow::Cow;
 use std::io;
 use std::path::{Path, PathBuf};
 use std::sync::Arc;
+use tracing::{debug, debug_span, trace, warn};
 
 use crate::localization::{self, keys};
 
@@ -45,9 +46,11 @@ fn env_config_path<F>(var_os: F, var_name: &str) -> Option<PathBuf>
 where
     F: Fn(&str) -> Option<std::ffi::OsString>,
 {
-    var_os(var_name)
+    let path = var_os(var_name)
         .filter(|value| !value.is_empty())
-        .map(PathBuf::from)
+        .map(PathBuf::from);
+    trace!(var_name, found = path.is_some(), path = ?path, "read config path variable");
+    path
 }
 
 #[expect(
@@ -58,11 +61,21 @@ fn resolve_config_path<F>(cli: &Cli, var_os: F) -> Option<PathBuf>
 where
     F: Fn(&str) -> Option<std::ffi::OsString>,
 {
-    cli.config
-        .as_ref()
-        .cloned()
-        .or_else(|| env_config_path(&var_os, CONFIG_ENV_VAR))
-        .or_else(|| env_config_path(var_os, CONFIG_ENV_VAR_LEGACY))
+    let (selector, resolved_path) = cli.config.as_ref().cloned().map_or_else(
+        || {
+            env_config_path(&var_os, CONFIG_ENV_VAR).map_or_else(
+                || {
+                    env_config_path(var_os, CONFIG_ENV_VAR_LEGACY)
+                        .map_or(("none", None), |path| (CONFIG_ENV_VAR_LEGACY, Some(path)))
+                },
+                |path| (CONFIG_ENV_VAR, Some(path)),
+            )
+        },
+        |path| ("cli_flag", Some(path)),
+    );
+
+    debug!(selector, path = ?resolved_path, "resolved config path");
+    resolved_path
 }
 
 fn load_layers_from_path(path: &Path) -> OrthoResult<Vec<MergeLayer<'static>>> {
@@ -72,14 +85,21 @@ fn load_layers_from_path(path: &Path) -> OrthoResult<Vec<MergeLayer<'static>>> {
             .into_iter()
             .map(|(value, layer_path)| MergeLayer::file(Cow::Owned(value), Some(layer_path)))
             .collect()),
-        Ok(None) => Err(Arc::new(OrthoError::File {
-            path: path.to_path_buf(),
-            source: Box::new(io::Error::new(
-                io::ErrorKind::NotFound,
-                "explicit configuration file not found",
-            )),
-        })),
-        Err(err) => Err(err),
+        Ok(None) => {
+            let error = Arc::new(OrthoError::File {
+                path: path.to_path_buf(),
+                source: Box::new(io::Error::new(
+                    io::ErrorKind::NotFound,
+                    "explicit configuration file not found",
+                )),
+            });
+            warn!(path = ?path, error = %error, "explicit config load failed");
+            Err(error)
+        }
+        Err(error) => {
+            warn!(path = ?path, error = %error, "explicit config load failed");
+            Err(error)
+        }
     }
 }
 
@@ -148,10 +168,14 @@ fn diag_json_from_layer(value: &serde_json::Value) -> Option<bool> {
 /// load failures so startup diagnostic-mode selection reports the same
 /// configuration errors as the full merge path.
 fn collect_diag_file_layers(cli: &Cli) -> OrthoResult<Vec<MergeLayer<'static>>> {
+    let _span = debug_span!("collect_diag_file_layers").entered();
+
     if let Some(path) = resolve_config_path(cli, |name| std::env::var_os(name)) {
+        debug!(path = ?path, "using explicit config path");
         return load_layers_from_path(&path);
     }
 
+    debug!("using config discovery");
     let discovery = config_discovery(cli.directory.as_deref());
     let file_layers = discovery.compose_layers().value;
     let project_file = project_scope_file_str(cli.directory.as_deref());
@@ -160,8 +184,10 @@ fn collect_diag_file_layers(cli: &Cli) -> OrthoResult<Vec<MergeLayer<'static>>>
             .is_some_and(|p| project_file.as_deref() == Some(p.as_str()))
     });
     if first_pass_found_project {
+        debug!(project_file = ?project_file, "discovery included project-scope layers");
         Ok(file_layers)
     } else {
+        debug!(project_file = ?project_file, "appending project-scope layers");
         project_scope_layers(cli.directory.as_deref())
             .map(|project_layers| file_layers.into_iter().chain(project_layers).collect())
     }
@@ -243,10 +269,12 @@ fn push_file_layers(
     cli: &Cli,
 ) {
     if let Some(path) = resolve_config_path(cli, |name| std::env::var_os(name)) {
+        debug!(path = ?path, "using explicit config path");
         push_layers_result(composer, errors, load_layers_from_path(&path));
         return;
     }
 
+    debug!("using config discovery");
     let discovery = config_discovery(cli.directory.as_deref());
     let mut file_layers = discovery.compose_layers();
     errors.append(&mut file_layers.required_errors);