President Donald Trump on Thursday, June 1 announced that the U.S. was withdrawing from the Paris climate agreement. The 2015 Paris agreement established a global target for lowering greenhouse-gas emissions — aimed at keeping the atmosphere from warming by 2 degrees Celsius. One hundred and ninety-four countries have signed the treaty, which means that they have agreed to continue the process of the treaty on climate change mitigation. Nearly all the world’s countries agreed to create a system to measure their progress, and to continually strengthen their efforts.
President Trump said it would cost the U.S. millions of jobs and trillions of dollars in lost GDP over the next decade. In accordance with Article 28 of the Paris Agreement, the earliest possible effective withdrawal date by the U.S. cannot be before November 4, 2020, four years after the Agreement came into effect in the U.S. and coincidentally one day after the 2020 U.S. presidential election. Until the withdrawal takes effect, the U.S. may be obligated to maintain its commitments under the Agreement, including the requirement to continue reporting its emissions to the United Nations. The withdrawal would come not just at the risk of longer-term damage, but would also undermine an overall global construct that has served it well and could still do so over time.
President Trump’s decision to withdraw the U.S, from the Paris Climate Agreement has been met with dismay and anger from political and business leaders around the world. It is shaping up into a “Prisoner’s Dilemma”-esque nightmare that benefits none. The prisoner’s dilemma is the best-known game of strategy in social science. It is a paradox in decision analysis in which two individuals or parties acting in their own self-interest pursue a course of action that does not result in the ideal outcome. It helps us understand what governs the balance between cooperation and competition in business, in politics, and in social settings. Think of the U.S. as now having decided to play what used to be a cooperative global game in an uncooperative manner.
In the traditional version of the game, the police have arrested two suspects and are interrogating them in separate rooms. Each can either confess, thereby implicating the other, or keep silent. No matter what the other suspect does, each can improve his own position by confessing. If the other confesses, then one had better do the same to avoid the especially harsh sentence that awaits a recalcitrant holdout. If the other keeps silent, then one can obtain the favorable treatment accorded a state’s witness by confessing. Thus, confession is the dominant strategy for each. But when both confess, the outcome is worse for both than when both keep silent. The concept of the prisoners’ dilemma was developed by RAND Corporation scientists Merrill Flood and Melvin Dresher and was formalized by Albert W. Tucker, a Princeton mathematician.
In the particular case of the Paris accord, for example, the possible short-term benefits come from the notion that the U.S. can free-ride on the climate commitments of others, while minimizing its own financial contributions and retaining wide flexibility on how it promotes and uses its energy resources. Over the longer term, however, the absence of the U.S. would severely undermine the beneficial impact of the agreement. And since the U.S. cannot insulate itself from the effects of global climate change, it would also face an array of environmental and environment-related threats.
This situation also puts other participants in a tough position. While other nations can collude and try to go it alone, their collective action is unlikely to be sufficient to meet the objectives of the accord, which was meant to be a building block rather than a destination. The U.S. is the world’s second-largest carbon emitter, after China. Together, the countries accounted for 45% of the world’s carbon dioxide emissions in 2014.
Cooperation among prisoners under interrogation makes convictions more difficult for the police to obtain. One must understand the mechanism of cooperation before one can either promote or defeat it in the pursuit of larger policy interests. Can “prisoners” extricate themselves from the dilemma and sustain cooperation when each has a powerful incentive to cheat? If so, then how?
The cheater’s reward comes at once, while the loss from punishment lies in the future. If players heavily discount future payoffs, then the loss may be insufficient to deter cheating. Thus, cooperation is harder to sustain among very impatient players.
Punishment will not work unless cheating can be detected and punished. Therefore, players cooperate more when their actions are more easily detected and less when actions are less easily.
In the interim, the potential damage would not be limited to the environment. Given the deep nature of cross-border interconnections and interdependencies, such episodes erode the integrity and effectiveness of the global system, threatening costly fragmentation that reduces win-win outcomes, undermines collective action and forces a greater need for self-insurance by individual countries.
Many countries find distasteful the unilateral transactional approach that the U.S. is now willing to adopt on important cross-border interactions. Yet as long as America is dominant in certain areas and pursues tactical gains at the risk of longer-term strategic harm, they have few choices but to realign themselves for now to this new reality.
On the eve of World Environment Day, I hope that leaders of systemically important countries would soon come together, with insight from the game theory, in pursuit of a new collective solution to this problem of climate change, global warming and environmental sustainability with a shared responsibility … Nash equilibrium!
P.S. Interested readers may check this interesting link.