Game Theory in Climate Negotiations

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.

21 thoughts on “Game Theory in Climate Negotiations

  1. What trump is doing will have looooong term effects. America will curse him at end of 4 yr term. New president will have lot to undo than new to be done. Even internationally future generations will curse him for what he has sacrificed for short term goals.

    Liked by 1 person

    1. Thanks Sharat. President Trump has to come to renegotiate the terms of Paris accord. The U.S. always had its concerns. President Obama signed an executive order confirming the US’s adoption of the agreement, but he didn’t submit it to Congress for approval. That’s how President Trump is able to “cancel” the US’s commitment to the accord. But President Trump simply cannot isolate the U.S. from any world forum. Climate and environment must be preserved for our future generations. The U.S. government and other governments must find a new solution with shared responsibilities.

      Liked by 1 person

  2. Dilemma of rest of the world, very well explained. Interestingly, lot of people and corporations in US are against the President’s stand on the subject and has pledged to continue with the effort in minimising the greenhouse gas phenomenon. It would be interesting to see how it works out.

    Liked by 1 person

    1. Thanks Aranjit. You’re right. The planet is moving towards a low-carbon future, with or without President Trump. China now leads the world in renewable energy. Much of America remains committed to fighting climate change. Global investors are betting their money on a low-carbon future. The U.S. is already moving away from coal. Consumers around the world are taking the environmental and social impacts of their buying choices more and more into account.


  3. Leroy

    Roy, thanks for the well-written article. However, the prisoner’s dilemma seems to be a forced fit in this case.

    Who exactly are the prisoners? All the nations who joined the “accord”? Who is ratting on whom? The US seems to be an escapee, so are the rest the prisoners and, without the US, they will cheat on each other?

    In the case of the Paris Accord, there is no enforcement. He can confess or not confess, and the outcome is the same. The prisoner has nothing to fear other than some possible unknown punishment in the future. Isn’t more like going to confession to avoid punishment by God (nature in this case)?

    Perhaps you mean that leaving the agreement is tantamount to confessing. The US leaves first gaining some benefit to the detriment of the others. It’s still hard for me to get my head around it being a prisoner’s dilemma. I suppose you can say that the rest are punished worse without the cooperation of the US. Is that the point? But there is no punishment under the accord. The punishment comes from God (nature, in this case) at some indeterminate point in the future. So, wouldn’t a better analogy be religion? We don’t know for sure that nature will punish us. We have to take it on fate.

    And, you have to consider that the US has already made great strides in reducing CO2 with hydroelectric, nuclear, natural gas, solar, and wind, in its effort to reduce CO2 and will like continue to do so without the accord. Being the number 2 “polluter” and being the number 2 in renewables is not such a bad position. And, it is debatable whether or not the US is in second place when it comes to actual use of “green” energy. It’s a lot like being a community volunteer. Maybe what you do has no real impact, but it–at a minimum–makes you feel like you are doing good. When you do it without someone putting a gun to your head, it can feel less like being a prisoner, and you get a lot more cooperation.

    If there is a prisoner analogy, I’d say it is one where the US is the escapee, and the world cop (UN) must capture them and put them back in prison. The rest of the prisoners are doom to pay their penance through higher energy rates. They pay even more because they allowed the US to escape. If they are good, they will achieve an early release (cooler temperatures). If captured, the US will pay a high price.


    1. Thanks Leroy. I have used the game theory of the prisoner’s dilemma in this case to highlight the possible cases here. The US has now decided to play what used to be a cooperative global game in the shape of Paris Accord in an uncooperative manner. Yes there is no punishment clause in the accord and that was the main reason for Nicaragua not to sign the accord. UN cannot punish them. But in this case, the punishment will be in the shape of climate damage, deterioration in our ecological balance. US by deciding to walk out of the agreement can continue with their efforts in reducing the greenhouse gas emissions. But their immediate gain is that they won’t be needed to contribute to the climate change fund for helping the developing countries to switchover to renewable sources of energy. The other countries cannot achieve the desired goal without US support and contributions and hence they have to suffer the increased pollution level, that is their punishment. If both stop negotiating the terms, this will be worst scenario. The best scenario is therefore renegotiations until the Nash Equilibrium is reached.


  4. Thomas Sutrina

    The Paris “Accord” has never been an agreement on ‘climate change’ but if you actually look at what it physically does is redistribute wealth by putting higher burdens on the countries of Europe and North America. So China and India will have a market advantage, thus wealth will be redistributed favoring the products they produce. The reason the Paris “Accord” is not an agreement about climate is that this skewed balance means coal the worst source of carbon dioxide will increase more then if the accord never existed.

    Do you liberal get this. The Paris “Accord” actually increases the pollution you think is causing climate change.

    The simple fact is that the climate was changing trillion years ago and will be changing until the sun goes supernova and consumes the earth. And guess what man has only been around in minute portion of the earth’s existence. I would like to see just one of the climate change scientist first define the range of climate change naturally occurred before adding on the green house gases added to the atmosphere by the industrial age. So let me get you started.

    Scientists have estimated that the Greenland ice sheet is between 400,000 and 800,000 years old. This means that the island today is unlikely to have been markedly different when Europeans settled there. However, there is evidence that the settled areas were warmer than today, with large birch woodlands providing both timber and fuel. This warmth coincided with the period known as the Medieval Climatic Anomaly, also known as the Medieval Warm Period, During the Medieval Climatic Anomaly, some areas, most notably in the North Atlantic and parts of Europe, were at least as warm as today, if not warmer. However, other areas were colder, and overall evidence suggests that global temperatures during this period were similar to those at the beginning or middle of the 20th century, and colder than today.

    Early 1800s, the situation was in diametric contradiction with everybody being worried about a global cooling that seemed to come out of nowhere.
    It all peaked in 1816, when in most places of the world there was actually no summer at all ! That year’s chill was blamed by climatologists on the eruption of the Indonesian volcano called Tambora, but why the few years before 1816 were also way colder than usually remained a mystery. However, newly uncovered evidence from the ice of Antarctica and Greenland suggests that another volcanic eruption was probably responsible for it.

    There is a good graph in the article that shows the Medieval Warm Period. Ice core samples I believe is the major source of the data. Carbon dating and measuring the mixture of gases trapped in air bubbles are used to determine the age and atmospheric conditions. Thus a volcano created dust and gases would be trapped in the pole ice.


    1. Doug Plumb

      Re “Do you liberal get this. The Paris “Accord” actually increases the pollution you think is causing climate change.”

      No one should be surprised if this is true. We see it in other things the Green left do such as in windmills and solar farms.


  5. Mike Haluska

    Here’s what is going to happen to the Paris Accord since the US dropped out. The US was the tip of the pyramid and will be replaced by China – who will bow out now that they are the one being fleeced. Then Japan, Germany, UK, France will fall like dominos and this farce will be exposed for what it really is – a Pyramid Scam.


    1. Leroy

      Let’s be honest. Aren’t the payments to poorer nations a bribe to get them to go along? Isn’t that why they enthusiastically support the accord, because they receive money? Do you really think they are interested in fighting climate change? It will get straight to the banks in Switzerland. Why does it make sense to invest in poor countries? Would it be better to focus on the worst “polluters”? Since China and the US make of 45%, if you want to get the most bang for the buck, shouldn’t the rest of the world funnel money to them? And when they are 100% “green”, then focus on the next top three and so forth. Focusing on the bottom tier would seem to make little impact.


      1. Mike Haluska

        Did the author ever consider the following?
        The entire stated (not actual) premise of the Paris Accord is fictional. NOBODY has established ANY causality between human CO2 and the Earth’s temperature. EVEN IF 25,000,000 studies show a “correlation” between CO2 and Earth temperature, that is insufficient evidence of causality.


        1. Thomas Sutrina

          Mike H and Roy C., carbon dioxide make up by volume 0.04% and is the major non-water green house gas. Water vapor can go up to 5%. Both are green house gases. The amount of water vapor in the air thus has two orders of magnitude bigger effect, about 95% and 71% our planet surface is water so the sun energy is the major driving force to evaporate water. Thus man has a insignificant effect. “Over the past 250 years, humans have added just one part of CO2 in 10,000 to the atmosphere. One volcanic cough can do this in a day.” And a volcano may continue this level of release for days and to a lesser extent for months. The solid particles put into the air by a volcano have the opposite effect of reflection sun rays back into space. An it takes years for them to fall down to the earth.

          We need to understand our real importance to this planet and the solar system is insignificant.


  6. Bill Kamps

    Who is going to make sure the poorer nations actually spend the money they are given on renewable resources ? In many poor countries, money given as aid, winds up in the pockets of the rulers. Why should this time be different ?

    Why are China and India exempt for more than 10 years ?

    Just because the Paris accord says it is about preventing climate change, does not mean it is. Usually government named programs do not do what their title says. For example the Affordable Care Act, only moves costs around, it does not make health care more affordable. Neither does the Trump plan for that matter.

    Politicians like to APPEAR they are doing something, but they almost never SOLVE the problem at hand. They move money around, that is about all they ever do.


  7. Doug Plumb

    Both prisoners should confess that no crime has been committed. AGW is a total fraud. Too many actual climate scientists are coming out. The edited IPCC reports cannot stand up to that.


  8. Douglas Proudfoot

    CO2 models used to justify belief in man made CO2 causing global warming have a history of inaccuracy.  Models based on the total amount of radiation earth receives from the sun predict climate much better than any CO2 models do. Please see the following links:
    Please notice that these known climate cycles last thousands of years.  Even the Medieval Warm Period (950 CE to 1250 CE) and the Little Ice Age (1300 CE to 1850 CE) that followed it both lasted hundreds of years.  The global warming enthusiasts base all of their hysteria on the last 50 to 100 years of temperature data.  This time frame for observations isn’t long enough to get a statistically viable pattern.
    Global warming “scientists” use models that are less than 30 years old.  The models are computationally very complex.  They are also new and largely untested because the computational capacity it takes to solve large systems of difference equations, which is what these models are, has only been available in the last 30 years.  The temptation to oversimplify is overwhelming because the time it takes to run the models grows exponentially with the number of variables that are accounted for.  Also, the effects of some of the variables aren’t really understood, so the model builders have to guess how they work if they include these variables.
    There was no statistically significant global warming in the 23 year period from May, 1993, to February, 2016.  During this time, man-made CO2 emissions increased constantly.  If the anthropomorphic global warming hypothesis was correct, this outcome would have been impossible.  Therefore, the CO2 link to climate change is false based on observed temperatures in recent history.
    I think the whole global warming theory is based on extrapolation from a relatively narrow time period of statistical noise.  For real science, it’s a gigantic case of hubris.  In actuality, AGW is the cover story for a political program of increasing the central government power over every day life by controlling all energy generation and consumption.  Due to the “urgency” of the earth’s imminent destruction, no checks and balances can be allowed to continue.  The bureaucrats and their “scientific” backers are asking you to trust them with unchecked power so they can “save the planet.”  They also want you to buy a bridge, perhaps in Brooklyn, which they call an investment in infrastructure.
    The Prisoners’ Dilemma does not apply here at all, because the earth is not on the eve of destruction.  There are elements of society trying to remove the checks and balances required to keep us free from an overbearing government.  However, we don’t need to believe all of the lies they tell.  Remember, even if we liked our doctor and our plan, we didn’t get to keep them.   


    1. Thanks Douglas for the details. You have highlighted a good point here on the period of study. I am not an expert to comment on this. But we all agree that there should be conservation of nature as unplanned and unconstrained exploitation is harming our ecosystem.
      My article is not on Anthropogenic Global Warming (AGW) hypothesis rather on the climate negotiations and application of a well-known game theory nicknamed as prisoner’s dilemma. It is probably the most widely used concept in game theory. Its use has transcended Economics, being used in fields such as business management, psychology or biology, to name a few. 

      The prisoner’s dilemma is not always presented in a game as we have seen in the analogy in the article. Payoffs for each set of strategies vary, depending on each person or group and the case. A game (in strategic or normal form) consists of the following three elements: a set of players, a set of actions (or  pure-strategies)  available  to  each  player,  and  a  payoff (or utility) function for each player. The payoff functions represent  each  player’s  preferences  over  action  profiles, where an action profile is simply a list of actions, one for each player.

      In game theory, betraying your partner, or “defecting” is always the dominant strategy as it always has a slightly higher payoff in a simultaneous game. However, on an overall basis, the best outcome for both players is mutual cooperation.

      The iterated prisoner’s dilemma asks whether continual betrayal is inevitable or whether you can devise a strategy that will change your opponent’s behaviour, eliciting cooperation. Should you start off by cooperating? How should you respond if your opponent betrays you? 

      The paradox that individually rational strategies lead to collectively irrational outcomes seems to challenge a fundamental faith that rational human beings can achieve rational results.

      Liked by 1 person

  9. Douglas Cotton

    President Trump has done the right thing. My response to climate alarmists (like yourself, Roy Choudhury) is based on correct physics and copious evidence on Earth and throughout the Solar System. The claim that carbon dioxide warms us is the biggest deception in history – a scam causing immeasurable poverty, starvation and death especially due to the reallocation of funds that would otherwise have been spent on humanitarian aid. But even the use of corn for ethanol uses up some of the food supply. There are hundreds of billions of dollars being wasted on pointless research when the whole conjecture is so easily proven wrong with a simple analysis showing that the “greenhouse gas” water vapor cools us. There will be no catastrophe. For those who wish to learn about the 21st century breakthrough in our understanding of the role of so-called “greenhouse gases” in cooling the Earth, see my article and papers. Also see my article “Understanding Natural Climate Cycles.”

    Douglas Cotton, (Independent Researcher into atmospheric and sub-terrestrial physics and author of:

    Liked by 1 person

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