Uncertainty and International Climate Change Negotiations

Yiyong Cai and Warwick McKibbin

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2015, vol. 1, issue 1, 115 pages

Abstract: Because issues associated with climate change are historically unprecedented and thus policymakers do not have a prior distribution over possible outcomes, the usual theoretical approach based on governments maximizing expected utility may not be suitable for analysing climate policy choice. Under an alternative plausible assumption that policymakers act strategically but choose the policy that incurs the highest possible gain in the worst-case scenario, this paper shows how collectivism can be inferior to unilateralism in both carbon mitigation and economic loss minimization. Our proposed approach provides a possible explanation for several paradoxes in the existing literature in relation to uncertainty and climate policy negotiation. It also provides an analytical framework that can be applied to numerical simulations of international climate policy games. Copyright Società Italiana degli Economisti (Italian Economic Association) 2015

Keywords: Climate change; Policy game; International negotiation; Robust optimal control; Maxmin; C70; F51; Q54 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Uncertainty and International Climate Change Negotiations (2013)
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DOI: 10.1007/s40797-015-0010-y

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