The Kyoto Protocol
http://www.guardian.co.uk/environment/2011/mar/11/kyoto-protocol
The article above discusses the Kyoto Protocol, which was a UN-led agreement finalized in 1997 to reduce the world’s combined greenhouse gas emissions. It officially went into effect in 2005 and has been ratified by nearly all countries except the United States. Countries that have adopted Kyoto must abide by it in that they must pledge to reduce their total emission of carbon. So far, several small countries have succeeded in doing so, but the tremendous amounts of gases released by larger, richer countries (most notably the United States and China) have “canceled out” these positives. Consequently, global emissions have risen, entirely defeating the purpose of the treaty.
The Protocol facilitates the game of Prisoner’s Dilemma. Here, the Nash solution would be the ideal circumstance in which all countries reduced their emissions. However, certain countries such as the United States are not willing to reduce (and hence sacrifice the benefits they receive) for the advantage of all. It is interesting to see how this game changes if greenhouse emissions are precisely measured and a universal price is attached to the amount. In this case, the game would become even more complex in that the “right” price would be difficult to determine given a country’s economic status, population size, etc. Poorer countries would want a lower price attached- if the price is too high, they will (theoretically) have zero emissions and suffer. Richer countries wouldn’t mind a higher price, but if the price is too low, they will continue to emit large amounts of greenhouse gases. Hence, in this case, a Nash price must be sought after in which countries collaboratively reduce their emission, but can still maintain economies that function.