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Climate Change as a Collective Action Problem

A recent article by University of Pennsylvania professor Cary Coglianese points out a puzzling fact about inaction on climate change. Despite powerful and overwhelming scientific evidence and a comprehensive toolkit of policy instruments, humanity has in many ways not achieved significant progress on reducing emissions and other environmental harms. Even with current pledges from countries (which largely only exist on paper), the world is still on track to exceed the 1.5°C of global average temperature increase established in the Paris agreement as a critical target. Why is this?

 

As the article points out, part of the reason lies in game theory. Acting on climate change is known as a collective action problem, or collaboration problem. This is when the optimal total outcome requires collaboration, but due to the incentives of individual actors, a suboptimal path is taken.

Collective Action Problem

Figure 1: A collective action problem where A and B prefer cooperation but both betray due to the risk of the other player betraying. Picture from https://en.wikipedia.org/wiki/Collective_action_problem.

 

Figure 1 represents a typical collective action problem because cooperation leads to optimal outcomes for A and B as a whole. However each player is individually incentivized to betray cooperation (because 0 is better than 1), leading to a worse total outcome (2,2 as opposed to 1,1). Similar to the Prisoner’s Dilemma, the players as a whole end up worse off than if they both had cooperated.

 

There are some assumptions about this model that are particular to the specific case of climate change that need to be explained. I’ve outlined them below:

  • Competition

 

Firstly, why are we conceptualizing Players A and B as competitors? In part, this is because many actors and entities with a significant influence on emissions, such as countries, corporations and politicians, care about their relative performance to others in their field. In other words, it makes sense to think about competition because that’s how many parties who have an outsized effect on environmental harms think about it. However, it might make less sense when we move to the level of consumers, for example, since there isn’t really any relevant “competition” between consumers as it relates to how their consumption affects the environment.

  • Costs

 

Another critical question is why the model seems to posit climate action as a cost. Clearly, the model seems to suggest that if one player cooperates (takes climate action) and the other betrays, the one who betrays is better off. This might be confusing, since it isn’t obvious why taking action is negative if others don’t do anything. This is also one of my main critiques of this model, because I personally feel that climate action is not only a moral imperative but also financially beneficial.

 

The issue with climate change, as professor Coglianese points out, is that action often comes with associated costs. On the level of corporations or countries, a common argument against climate action is that it is costly. A famous example of this is the carbon abatement cost curve developed by the consultancy McKinsey, which projects that reducing emissions costs more than any financial benefit from these investments for many materials used in production.

 

In other words, the models sets the payoff as (0,3) for (betray, cooperate) because one company or country would experience potential higher costs and the other wouldn’t, giving it an advantage. Moreover, any environmental benefit would be negligible, since only one party reduced their emissions. Thus, the player who cooperated gets few benefits, at least in this model.

  • Betrayal and Cooperation

 

Given what was mentioned above, it might be confusing why the (1,1) of (cooperate, cooperate) isn’t equal to the lower (2,2) of (betray, betray). Part of the reason is that the relative advantage a corporation or company may have from not incurring a cost that its competitor did is nullified if both incur the same cost. That is, it is only the relative value of one’s competitor incuring costs that is relevant. The second, more important reason, is that it is much more preferable to also contribute to reducing climate impact.

 

Here, we arrive at the core of why solving climate change is a collective action problem. Climate change present concentrated costs, but only create diffuse benefits for the party that took action. Moreover, the benefits are only felt once widespread collaboration occurs because emissions reductions have to happen on a large scale. Therefore, action is difficult without collaboration mechanisms, which are difficult to enforce in a competitive landscape that spans borders.

 

My main personal issue with this model is that it sees climate action as universally costly if it occurs without the cooperation of others. In many instances, taking efforts to reduce emissions can spur innovation and lead to efficiency gains. Moreover, as the moral imperative of tackling climate change is altering consumer preferences, businesses and political leaders increasingly see climate change as vital to their future success.

Works Cited:

 

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