Cooperative game-theoretic perspectives on global climate action: Evaluating international carbon reduction agreements

Raul P. Lejano and Li Li

Journal of Environmental Economics and Policy, 2019, vol. 8, issue 1, 79-89

Abstract: The theory of cooperative n-person games offers a rigorous approach for analysing multilateral real-world agreements, but its practical application is hindered by the exacting data requirements demanded by the fully specified theoretical models. In this article, we demonstrate how the formal analytic can be made more amenable to application. We utilize our approach to model international climate negotiations as an n-person cooperative game, the solution of which allocates carbon reductions across the grand coalition of nations. Using a simplified game to represent the carbon reduction allocation problem, we obtain theoretical solutions using a game-theoretic concept known as the proportional nucleolus. The solution to the game allows us to ideally determine countries’ relative percentage carbon reductions. These theoretical results are compared against actual commitments established in the Paris Agreement of 2015. The paper discusses the implications of the game-theoretic results, including the significant under-commitment of nations such as the United States. More generally, the approach developed herein provides an illustration of how rigorous game-theoretic methods can be adapted to the practical considerations of policy analysis.

Date: 2019
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DOI: 10.1080/21606544.2018.1508373

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