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Game theory in UN climate talks

The link below is to The Guardian newspaper’s Environment blog website. The post is by John Vidal, the Environment editor.
http://www.guardian.co.uk/environment/blog/2011/sep/06/game-theory-un-climate-talks
This post is an example of an important application of game theory- game theory in political decision making. It is enriching for we who have studied some basic game theory to see how it can be applied in a much larger and more complicated scale than the problems we worked through in class and on problem sets.
One does not need to have much knowledge of climate talks to understand how game theory is studied in this situation. John Vidal writes, “a group of German academics at the Potsdam Institute for Climate Impact Research has used game theory – the mathematics behind strategic behaviour of countries – to propose a way though the myriad impasses for negotiators.” The topic of the “game” is the UN global climate talks, and the players are countries. Jobst Heitzig, lead author of a study to be published in the National Academy of Sciences, suggests that what is going wrong in the negotiations is that there are “free-riding” countries emitting large amounts of CO2, while other countries are spending large amounts of money to reduce carbon emissions. Vidal explains, “the academics’ theory purports to prove, mathematically, that the talk would move forward faster and more successfully if countries agreed to penalise each other if they missed emissions reduction targets.” So the addition of penalization to this “game” would change the incentives of strategies for the players. As we have learned, players make decisions based on their expected payoff. It would give the earlier mentioned free-riding countries incentive to make their own contributions, to avoid a penalty. And if the countries were to agree to penalize each other, the countries already spending billions would be more likely to continue knowing that “free-riding” countries will no longer be just riding on their contributions. This would lead to countries choosing “strategies” resulting in a sort of equilibrium. This situation obviously has many more than two or three players, with strategies to choose from not as simple as A, B, and C, but it is evident how the concepts we have learned about game theory can be applied to the analysis of this situation.
In the closing paragraphs of his blog John Vidal shares his opinion that the game theory analysis of this situation is unrealistic because it is based on two assumptions: that all countries will act rationally, and that all players share the same goal of climate protection. Not all players believe that CO2 emissions are affecting the climate, and therefore do not want to spend money to reduce them, while other countries may believe it, but will continue to not contribute. Long term agreement is of course difficult to achieve when not all players share the same goals and perspective. Time will tell whether the German academics’ proposed solution will be considered.

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