Differential Climate Games with Heterogenous Players

Raouf Boucekkine (), Giorgio Fabbri, Salvatore Federico, Fausto Gozzi, Ted Loch-Temzelides and Cristiano Ricci

Working Papers from Grenoble Applied Economics Laboratory (GAEL)

Abstract: In order to investigate strategic interactions between a "global north" and a "global south" we introduce a two-country extension of the model in Golosov et al. (2014). We consider different transfers between the two regions, including transfers that can improve the abatement technology. Our model can accommodate several kinds of heterogeneity, including in preferences, time discount rates, and damages resulting from the stock of accumulated GHG. We solve for both planner’s solutions and non-cooperative equilibria. We then calibrate our model in order to study quantitative differences between these solutions and to quantitatively explore the role of heterogeneity and Knightian uncertainty. We characterize emissions, damages, consumption, transfers, and welfare by computing the Nash equilibria of the associated dynamic game. We then compare these to efficiency benchmarks. Further, we investigate how (deep) uncertainty affects climate outcomes. We develop a general model for the study of optimal control and differential games that are linear-in-state, which we term the Integral Transformation Method (ITM), which encompasses several existing models as special cases.

Keywords: Integral Transformation Method; Analytical Integrated Assessment Model; Differential Game; Climate Policy; Robust Control (search for similar items in EconPapers)
JEL-codes: C7 D62 H23 Q5 Q54 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2025-09
New Economics Papers: this item is included in nep-dge and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:gbl:wpaper:2025-04

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