Rethinking Climate Change with Game Theory
Global climate change has in the past few decades become an enormous problem with a myriad of causes that often gets lost in the rambles of political rhetoric. Consequently, countries often hesitate when taking action due the unpredictability of the Earth’s greatest natural (or unnatural) phenomenon.
Two MSU scientists have proposed a form of linear compensation to leverage game theory against climate change on an international level. Game theory tries to predict what are a party’s best options when they know what a second party is going to decide.
Currently, in our modern landscape, countries are given the choice to reduce greenhouse emissions or to do nothing/next to nothing. In one case, if country A decides to reduce emissions, but very few other nations follow suit, then A will lose a substantial amount of money with virtually no benefits in the environment. However in a second case, if a majority of other countries invest in reductions first, that means A can decide to not invest the money into reducing emissions and still reap the benefits. Therefore, the natural equilibrium for any country is not to reduce emissions, because doing so will only provide benefits if a majority of the other countries do it.
The table above demonstrates win-loss scenarios of short-term investments into reducing emissions. All numbers represent hypothetical wins and losses in terms of millions of dollars. Country A always gains $15 million in revenue if other countries invest in reducing emissions, no matter what A does. However, if it chooses to invest, and other countries don’t, it will lose money, while others will not. Furthermore, because country A is more likely to do nothing, that means the natural tendency of a majority of other countries is also to do nothing. Therefore, the equilibrium on the table naturally falls on all parties doing nothing. No one gains anything, but they do not take a loss either, at least in the short-term.
The linear compensation model offers a solution to this natural problem by using a measure of how well country A is doing relative to the average performance of other countries to determine a punishment A should receive. Unlike previous agreements (such as the Kyoto Protocol) with fixed punishments, linear compensation uses peer influence to affect how a country should act. If country A falls extremely behind by not acting, its punishment will be substantial. However, if A manages to decrease the gap between itself and the international investment average, the punishment decreases accordingly. Even though the equilibrium still remains at everyone doing nothing (no one will receive punishment if no one else pulls ahead of the average), the idea is that at least one country out of so many will start to pull ahead for whatever reason. In fact, the process to reduce emissions worldwide has started already, and the punishment will be enough for everyone else to catch up. Linear compensation is a self-propelling phenomenon.
Source
Doyle, Carmel. “Sustainability scientists advise countries on climate change.” SiliconRepublic. 13 09 2011: n. page. Print. <http://www.siliconrepublic.com/clean-tech/item/23565-sustainability-scientists-a>.
-Yechun
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What a Nice post! Thank you!