Game Theory and the UN Global Climate Talks
A team of researchers at the Potsdam Institute for Climate Impact Research has recently proposed introducing game theory in the United Nations global climate talks. In their study, they found that the problem with the negotiations is that “free-riding” countries are subverting the efforts of countries seeking to improve climate conditions. The study seeks to mathematically prove that the talks would progress if countries could hold each other accountable and institute penalties for failing to meet emissions reduction targets. If one country were to stray from their set targets, then other countries would be allowed to pass those targets in the next period. Presumably, this policy may worsen conditions in the short term, but in the long run the balance of emissions may stabilize as free-riding countries are provided with an incentive to contribute.
While this is not the first time game theory has been proposed in climate talks, the researchers contend that with emissions trading and a “suitable strategy” of setting emissions levels a high level of cooperation could be attained. Their main strategy, known as Linear Compensation (LinC), is to redistribute liabilities to reduce emissions among several countries during one period and then restore them during the next. Under certain conditions, the researchers found that this strategy is self-enforcing in that no player ever has an incentive to deviate from it. This would mean strong Nash equilibrium as each player or country in the scenario would have nothing to gain from following their own climate agenda. The researchers also cite the Prisoners’ Dilemma in their discussion of how to eliminate free-riders. While certain countries may ignore their emissions targets for a period, within the framework of the agreement a country benefits more by renegotiating and ultimately cooperating with the policies.
From a practical standpoint, the application of game theory in this instance may be unwarranted as it assumes that all countries share the goal of climate protection. We know this not to be the case as certain industrialized countries such as the United States and Russia continue to lag behind in environmental standards. In addition, it relies on an incredible amount of cooperation between countries as they seek to hold each other accountable for meeting emissions targets.