Climate Change in the context of Game Theory
One of the biggest present-day threats to human livelihood is climate change and the rise of average global temperatures. The consequences of CO2 emissions as a driver for climate change have become readily apparent in modern times with multiple historic fires across individual equatorial regions of the world, and historic flooding in South and East Asian countries. The usage of CO2 makes for a dynamic tradeoff that can be viewed in the context of game theory. A country’s emission of CO2 generally is an indicator of a bustling industry thus positively impacting their economy, however, it comes with the tradeoff of influencing rising global warming. This “game’s” players would technically be every country in the world but we can focus on countries within the Paris accord and the threshold for a 2-degree temperature rise for simplification. With the notion that every country is emitting a certain amount of CO2 right now that maximizes their economic output, we can craft the following strategies: (1) Do nothing (2) lower CO2 emissions.
A research paper by Gabòr Kutasi illustrates this in much more detail and defined the following relationships seen in the figure. Kutasi realized that the biggest character of this game is uncertainty and crafted payoffs accordingly. In his draft of the game, he defined lower CO2 emissions as mitigating and adapting. As such, adapting to non-CO2 technology has a cost of adaption (C) and can hurt economically but if all countries abide by it, no one will be hurt by the “costs” of rising temperature (Tn).
Although there is uncertainty in the exact cost of adaption and damage of temperature rise, we see in the game that we can have a Nash Equilibrium pair to maximize payoffs if T4 > C > T1 which is generally the case in today’s world. If a country mitigates and adapts, then the other country should take no action to maximize its payoff since it pays no mitigation cost and is only dealing with damages of a 1-degree increase. If both countries simply act selfishly and take no action in order to try to reap the most benefit, then both will lose and suffer (T4) damages.
In game theory, people will act in their self-interests and countries are no different. Thus, if we can modify the variables of the game such that the dominant strategy is to mitigate and adapt, we would make substantial progress in lowering global temperatures. Theoretically, this would be done if T4 > T1 > C (The cost of mitigation is lower than the cost of damages). In this case, all country’s best interests would be to adapt and mitigate. This will come from real-world progress and investments in the sustainability and renewable energy sector.
Kutasi, Gábor. (2012). Climate change in game theory context. Interdisciplinary Environmental Review. 13. 42 – 63. 10.1504/IER.2012.046099.
https://www.researchgate.net/publication/264822200_Climate_change_in_game_theory_context