Shipping’s Decarbonization: Prisoner’s Dilemma in Sustainable Development
Shipping’s Decarbonization: Prisoner’s Dilemma in Sustainable Development
We discussed Prisoner’s dilemma when we first encountered game theory. The results of the game depend on the balance of detriment and altruism of each player. In real life, it has many applications, from business to politics. I recently read an article about the connection between the prisoner’s dilemma and shipping decarbonization, named “Shipping’s decarbonisation: a real prisoner’s dilemma”. It also offers some suggestions on how to encourage collaboration to achieve greater social good.
Shipping decarbonization means lowering CO2 emissions for marine shipping as much as possible. It involves the shipping company using low-zero carbon fuels and supporting research and development of decarbonization. As learned in class, confession is the strictly dominant strategy for each player. Thus both confessing is the Nash equilibrium. In the case of shipping decarbonization, it refers to both companies collaborating to reduce carbon emissions in shipping. In that way, regulation (to avoid detriment) and collaboration (to highlight altruism) are very important.
There are already some efforts in regulation. For example, the Decarbonization-Paris Agreement in 2015 outlines cooperative strategies for carbon emissions reductions. In 2021, 197 countries agreed on the Glasgow Climate Pact to reduce global carbon dioxide emissions by 45% relative to the 2010 level by 2030. However, for the shipping industry, the International Maritime Organization hasn’t formalized a target reduction. As the target is not clear, it’s hard for companies to know how much carbon emission is not acceptable, and they may continue the original carbon emission as the past. So we are looking for other ways for promoting decarbonization.
In analyzing the method of collaboration, it should be noticed that collaboration is voluntary, and it may involve some betrayal and detriment if one side chooses to give up on collaboration. In fact, there are several scenarios, in terms of the Prisoner’s dilemma:
| Collaboration | Not Collaboration | |
| Shipping Company A | Scenario 1 | Scenario 2 |
| Shipping Company B | Scenario 3 | Scenario 4 |
Scenario 1: It’s the dominant strategy and brings the greatest social good. If two shipping companies agree to reduce carbon emissions, the environment will have less pollution and the climate issue will be better solved. However, it brings the side-effect of fewer cargos being shipped each time, and lower company revenue.
Scenarios 2 and 3: One company keeps the promise of collaboration by reducing carbon emissions, while another company betrays. The company that believes in collaboration contributes to a better environment but receives slower company growth. The company that gives up collaboration has a higher revenue growth, since it can ship more cargo, use cheaper fuel that may still pollute the air and enjoy the benefit that the other company brings in reducing carbon emissions.
Scenario 4: If both companies choose to not collaborate. They will have better economic revenue, but the climate issue will never be resolved.
Learning from the analysis above, there are incentives to betray for each company. Thus the rewarding of collaboration is extremely important. In the prisoner’s dilemma, it means changing the payoff. If we change the payoff by bringing more benefits for the companies who support decarbonization, the reward it brings will make the company more firm in collaboration in the game. For example, the carbon credit mentioned in the article is allowed for sale. In that way, the companies are incentive to reduce carbon emissions and gain revenue from selling the carbon credit.
But this scenario is also different from the prisoner’s dilemma: for the players in the prisoner’s dilemma, it’s impossible for them to collaborate (confess at the same time) because they cannot talk to each other as they are isolated. In fact, in real life, while learning the strategies in prisoner’s dilemma and using them to analyze our decision, we can also step out of the game and look for other external strategies or resources to promote collaboration, such as summits, meetings, and contracts.
Sources:
- Primary: https://www.lr.org/en/insights/articles/shipping-decarbonisation-real-prisoners-dilemma/
- https://unglobalcompact.org/take-action/ocean/communication/decarbonizing-shipping
- https://en.wikipedia.org/wiki/2021_United_Nations_Climate_Change_Conference
- https://en.wikipedia.org/wiki/Paris_Agreement#Mitigation_provisions_and_carbon_markets