E1 : Mitigation as a social dilemma

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Overall, the United States is the second largest emitter of carbon dioxide, accounting for 14 percent of the global total. China is the largest emitter and is responsible for 29 percent of global carbon dioxide emissions.

295
 
There have been efforts to address greenhouse gases on an international scale. Most notably, the Paris Agreement is a United Nations-brokered agreement that is intended to reduce hazardous emissions worldwide and slow global warming. It was signed by 194 countries and the European Union. As of July 2017, it has been ratified by 153 of those parties. Currently, the United States, under President Trump, is set to withdraw from the agreement though several states have promised that they will still abide by the agreement.

67

Regularly, at international climate meetings—such as the one in Paris in 2015—government officials, environmentalists, and economists from around the world argue strongly for an increase in the tax on gasoline and other fuels (or, equivalently, on carbon) to retard global warming.

625

China and the United States are by far the largest producers of CO2 from industrial production, as Table 18.1 shows. The amount of CO2 per person is extremely high in Australia, Canada, Russia, and the United States. China and Russia have a very high pollution to gross domestic product (GDP) ratio. The last column of the table shows that China and India at least doubled their production of CO2 since 1990, while only a few countries—such as France, Germany, Russia, and the United Kingdom—reduced their CO2 production. China produces 27% of the world’s CO2, the United States spews out 17%, and India and Russia are each responsible for 5%. Thus, these four countries are responsible for half of the world’s CO2.

626

The one bright spot is that the 195 countries that attended an international meeting on climate change in Paris in 2015 agreed to national goals to restrict emissions. The agreement was ratified in 2016. However, with the election of President Trump, the participation of the United States is in doubt.

95

Perhaps the greatest externality in human history is the challenge of climate change.

425

The issue of global warming, more accurately described as climate change, has been called “the greatest market failure the world has ever seen.” Developing an adequate policy response to climate change brings together much of our discussion over the last two chapters regarding externalities, environmental issues, and common property resources and public goods.

429

According to most scientists, however, an adequate policy response to climate change will require actions at the international level. Each individual country has very little incentive for reducing its emissions if other countries do not agree to similar reductions. Action to reduce climate change can be regarded as a public good that also generates a positive externality. As we have noted, in the case of public goods, the problem of free riders means that they will not be provided effectively without collective action.
The 2015 Paris climate agreement provides the framework for an international response to climate change. As mentioned above, the goal of the agreement is to limit eventual warming to below 2 degrees Celsius, or even better to below 1.5 degrees Celsius. Rather than imposing universal climate policy mechanisms, such as a global carbon tax, or legally binding emissions targets, the Paris agreement is built upon voluntary “nationally determined contributions” (NDCs). Each participating country is free to set its own emissions targets, with some targets being relatively ambitious while others are comparatively modest. For example, Costa Rica has set strong interim targets along a path to become fully carbon neutral (no net carbon emissions) by 2085. Other countries’ NDCs have been rated “critically insufficient” by the nonprofit organization Climate Action Tracker, including Russia, Chile, and Saudi Arabia.
As of late 2018, a total of 174 countries have submitted their NDCs to the United Nations. While the United States signed the Paris agreement in 2015, in June 2017 President Donald Trump announced that the country was withdrawing from the treaty, although under the terms of the agreement it cannot officially withdraw until 2020. Despite the lack of current policy action on climate change at the federal level in the United States, numerous states and municipalities continue to pursue aggressive policies. A group of at least 20 states and 50 major cities have pledged to continue efforts to meet the country’s Paris climate targets.
Each country is free to set its own national policies to meet its NDC, and there are no penalties for countries that fail to meet their targets. Still, the Paris agreement represents the most comprehensive international climate framework so far; the 1997 Kyoto Protocol only included developed nations. The agreement calls for developed nations to contribute $100 billion per year to help developing countries transition away from fossil fuels and adapt to the impacts of climate change. Every five years participating countries will meet to reevaluate their NDCs, with the intention of setting more ambitious targets to reflect each country’s “highest possible ambition.”
More ambitious NDCs will be needed in order to meet the objective of limiting eventual warming to 2 degrees Celsius or less, as shown in Figure 13.5. Prior to the Paris agreement, under existing national policies global greenhouse gas emissions were projected to continue to increase until at least 2050 and potentially until 2090 (the top gray-shaded range of emissions), with an expected global temperature increase between 3.1 and 3.7 degrees Celsius. If all countries meet their Paris NDCs, then global emissions will peak sooner, and will be between 39 percent lower and 6 percent higher than current emissions in 2100 (the higher blue-shaded range of emissions). But the global average temperature will still increase between 2.6 and 3.2 degrees Celsius if all countries meet their NDCs. We see that in order to meet the 2 degrees Celsius target, global emissions will need to begin to decline essentially immediately, and be between 80 percent and 106 percent lower than current emissions in 2100. (Negative net emissions are possible if large amounts of carbon are removed from the atmosphere through expansion of forests or other methods.) Even more dramatic emissions reductions are necessary to achieve the 1.5 degree Celsius target, as shown by the bottom blue-shaded emissions range.

46

Climate change, and the conservation of oceans and some rivers, requires not only individual government action, but international agreement.

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But national governments disagree on which policies to adopt, and who should bear the costs. Countries’ interests differ according to their stage of economic development, possession and use of natural resources, and vulnerability to the impacts of climate change. The 2015 Paris Agreement made progress: countries would adopt domestic mitigation measures to achieve ‘nationally determined contributions’ to emissions reduction, with the goal of limiting the temperature rise to 1.5°C by the end of the century and avoiding the worst impacts of climate change.

[...]

The problem of climate change is extreme, but far from unique. It is an example of a social dilemma. Social dilemmas occur when people do not take adequate account of the effects of their actions on others, whether these are positive or negative.

[...]

Humanity would be better off emitting less pollution, but if you as an individual decide to cut your consumption or your carbon footprint, you will hardly affect the global levels.

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Altruistic motivations can help to address social dilemmas—because our altruism means that we care about how our actions affect others—but for global challenges like climate change, altruism will not be sufficient: new government policies will have to be involved.

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For example, one person’s choice of how much to heat their home will affect everyone’s experience of global climate change.

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When people engage in a common project—whether pest control, irrigation, or reducing carbon emissions—everyone has something to gain if they cooperate, but also something to lose when others free-ride.

208

Reducing carbon emissions requires much greater changes, across many industries and affecting all members of society. One of the obstacles at the United Nations’ annual climate change negotiations has been disagreement over how to share the costs and benefits of limiting emissions between countries—and in recent years, the heavy costs some countries now face from the effects of past emissions elsewhere. To explore the possible situations facing climate negotiators, we will model them as a game between two large countries, hypothetically labelled China and the US, each considered as if it were a single individual. First, we identify possible equilibria when each country behaves strategically; then we can think about how an agreed outcome might be achieved.

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Figure 4.23a shows the outcomes of two alternative strategies: Restrict (taking measures to reduce emissions, for example by regulating or taxing the use of fossil fuels) and BAU (continuing with ‘business as usual’). What we can expect to happen depends on the pay-offs in each outcome. The essential features of the problem can be captured using an ordinal scale from Best to Worst: it is the order of the pay-offs, not the size, that matters. Figure 4.23b shows two games, corresponding to different sets of hypothetical pay-offs.
 
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If you work out the best responses and find the Nash equilibria in each case, you will realise that these two games are similar to cases we have already analysed. The left-hand one is a prisoners’ dilemma, in which BAU is a dominant strategy for each country, leading to a Bad outcome for both. The game on the right is a coordination game, [...] except that the players would like to coordinate on the same strategy, rather than the opposite one. There are two Nash equilibria: one is the Best outcome, in which both countries restrict emissions. But the Bad outcome in which neither do so is also an equilibrium, and if each country expects the other to choose BAU following their past behaviour, we can predict that they may be stuck in the (BAU, BAU) equilibrium. In each case, negotiation may be able to improve the outcome.

[...]

Figure 4.23c presents a third model. It also shows the players’ best responses, and hypothetical numerical pay-offs indicating the value of each possible outcome to the citizens of each country. The worst outcome for both countries is that both persist with BAU, thereby running a significant risk of human (and many other species’) extinction. The best for each is to continue with BAU and let the other one Restrict. The only way to moderate climate change significantly is for both to Restrict. This is another coordination game with two equilibria, but now [...] there is a conflict of interest between the players. This game is what is termed a hawk–dove game: players can act like an aggressive and selfish Hawk, or a peaceful and sharing Dove. In the climate change version, Doves Restrict and Hawks continue with BAU. The conflict of interest is that each country does better if it plays Hawk while the other plays Dove. It captures a situation that is different from the previous two. Both countries have incentives to avoid catastrophic climate change. But they strongly prefer that the other should bear the costs of reducing emissions: each would like to wait to determine if the other will move first.

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The Pareto-efficient allocation in which both countries restrict emissions also has the highest joint pay-offs. We can think of this as the best outcome for the world as a whole. But it is not an equilibrium.

Applying the hawk–dove game to climate policy

How do you think the hawk–dove game would be played in reality? Can the conflict of interest be resolved? If one country could commit itself to BAU so that the other was certain that it would not consider any other strategy, then the other would play Restrict to avoid catastrophe. But this is true for both countries. Negotiations are bound to be difficult, since each country would prefer the other to take the lead on restricting carbon emissions. The real climate negotiations are of course more complex—virtually all countries in the world are involved. Pay-offs may be different for these varied players. For example, in 2021 China produced 31% of the world’s total carbon emissions, the US was second with 44% of China’s level, followed by India. On a per-capita basis, China produced 55% of the emissions that the US did, and India produced 13% of US emissions.
 
211-212

How could the global social dilemma of climate change policy, as represented in this game, be solved? Could the governments of the world simply prohibit or severely limit emissions that contribute to the problem of climate change? This would amount to changing the game by altering available strategies by making BAU illegal. But who would enforce this law? There is no world government that could take a government that violated the law to court (and lock up its head of state!). If the climate change social dilemma is to be addressed, Restrict must be in the interests of each of the parties. Consider the bottom-left corner (China plays BAU, US plays Restrict) equilibrium. If the pay-offs to China for playing Restrict were higher, when that is what the US is doing, then (Restrict, Restrict) might become an equilibrium. Indeed, in the eyes of many climate change scientists and concerned citizens, the aim of global environmental policy is to change the game so that (Restrict, Restrict) becomes a Nash equilibrium.

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Following the 2015 Paris Agreement, almost all countries submitted individual plans for cutting emissions. Although there is no way that the agreement could be enforced, and these plans are not yet consistent with the goal of limiting the global temperature rise to 1.5°C, it is widely considered as a basis for further international cooperation. The Paris Agreement should:
• allow countries to better understand the costs of restricting emissions
• encourage economic players to innovate in order to further lower the costs
• strengthen norms that reduce the attractiveness of BAU
• establish a base of trust to share some of the costs of Restrict and negotiate more ambitiously in the future.

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Addressing the challenge of climate change requires understanding conflicting as well as common interests.

214

Game theory—including the hawk–dove game—provides alternative ways of representing the challenge of climate change, and means of addressing it.

504

People throughout the world make decisions resulting in carbon dioxide emissions without considering how their decisions contribute to climate damage.

505

The price of fossil fuels typically reflects the suppliers’ costs of extracting and distributing them, but not the costs of global warming which affect all of us.

525

A country that invests in reducing carbon emissions lowers the risks of climate change for other countries.

527

If one farmer contributes to the cost of an irrigation scheme, or one country takes measures to reduce carbon emissions, all farmers or all countries benefit. The irrigation scheme is a public good for the community where it is located. Reductions in atmospheric CO2 are a global public good.

532

We can define public bads: air pollution, for example, is a bad that affects many people simultaneously. It is non-rival in the sense that one person suffering its effects does not reduce the suffering of the others. Atmospheric CO2 is a global public bad.

148-149

Le développement durable implique une concertation internationale pour agir efficacement, et c'est particulièrement le cas en ce qui concerne le changement climatique puisque ses causes, l'émission des GES étant la principale, comme ses conséquences, telles que la montée du niveau des océans, sont mondiales.
C'est ainsi que des sommets internationaux ont rythmé l'avancée sur le chemin du développement durable depuis les années 1980 - par exemple celui de 1987, qui a été marqué par la publication du rapport Brundtland. C'est lors du premier « Sommet de la Terre » en 1992 qu'une prise de conscience a véritablement émergé au niveau international quant aux dangers du réchauffement climatique. Elle a été favorisée par les travaux du Giec (Groupement intergouvernemental d'experts sur le climat), créé en 1988 afin d'établir un diagnostic fiable et neutre sur la question. Le sommet de Rio 1992 a établi un principe dit « de responsabilité commune différenciée » qui établit que tous les pays de la planète doivent s'impliquer, mais différemment selon leurs moyens. Ce souci d'équité, constitutif du développement durable, implique que les efforts doivent dépendre du niveau de développement. Le résultat en a été le protocole de Kyoto, décidé en 1997, qui a créé des engagements contraignants pour les seuls pays les plus développés, validant l'idée que les pays du Nord doivent agir prioritairement et solidairement des pays du Sud.
Ces beaux principes ont toutefois débouché sur une réalisation limitée, les espoirs ayant été vite déçus par le retrait des États-Unis du protocole de Kyoto, leur président de l'époque, George Bush Sr., déclarant très explicitement alors que « le mode de vie américain n'est pas négociable ». Cela a beaucoup restreint la portée du protocole de Kyoto, qui n'a jamais régulé que 40 % des émissions mondiales de GES, part tombée même à 17 % en 2010, car entretemps les pays émergents sont devenus les plus gros émetteurs de GES, la Chine en tête. C'est ce que montre la figure 6.5, qui prolonge cette tendance jusqu'en 2050.
 
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On est longtemps allé d'échec en échec lors des grandes réunions internationales sur ce thème, la conclusion du sommet de Copenhague de 2009 étant particulièrement décevante et celle de Rio+20 en 2012 tout aussi médiocre. En fait, c'est toute la difficulté de parvenir à s'entendre au niveau international qui est illustrée par la lenteur des progrès réalisés dans la lutte contre le réchauffement climatique. Ces négociations internationales sont le lieu d'affrontements entre les pays, en particulier entre le Nord et le Sud. Les pays en développement sont réticents à agir, arguant le fait que les pays anciennement industrialisés ont une « dette écologique » puisque les 4/5 des GES accumulés dans l'atmosphère sont le legs de leur développement économique depuis la révolution industrielle. Les pays non développés ont beau jeu de les renvoyer à leur responsabilité passée et de refuser de porter un poids que les pays développés n'ont pas eu à subir au cours de leur propre histoire. D'autant plus qu'ils soupçonnent que le Nord utilise le prétexte environnemental pour pratiquer un protectionnisme déguisé vis-à-vis d'eux. Friedrich List, économiste allemand du XIX siècle, dénonçait déjà à son époque des pratiques protectionnistes consistant, pour les puissances dominantes, sous de mauvais prétextes, à «tirer l'échelle » aux autres pays pour les empêcher de les rattraper.

Mais la COP21 qui s'est tenue à Paris à la fin de l'année 2015 a semblé rompre avec cette logique de paralysie. Réunissant 195 pays, elle a débouché sur un accord historique visant à limiter le réchauffement climatique à seulement +1,5°C et à financer une aide aux pays en développement d'au minimum 100 milliards de $ par an. Ce qui est au cœur de cet accord de Paris est surtout l'engagement de renégocier régulièrement les montants d'aide et les objectifs de contributions à la réduction d'émission de GES fixés par chaque pays. Même si pour l'instant, ces efforts sont loin d'être suffisants, il y a un pari sur le renforcement de la discipline que les États vont s'imposer dans cette lutte contre le changement climatique. C'est un pari sur l'avenir qui repose plus sur l'espoir des effets de l'émulation entre États et de la prise de conscience de la nécessité de leur action que sur des mécanismes de sanction qui sont absents de l'Accord de Paris. Mais, on peut avoir aussi une vision plus pessimiste en pointant la fragilité de son efficacité puisque rien n'empêche les défections des États et les retours en arrière dans les efforts consentis. Le discours de Donald Trump, élu en 2016 nouveau président des États-Unis, n'est pas très encourageant de ce point de vue.
La réussite de la COP21, malgré les vicissitudes dont risque d'être victime sa mise en œuvre, est toutefois le signe clair d'une préoccupation croissante pour le développement durable partout dans le monde.

93

[Les caractères 1 et m sont originellement en indice dans P1,q1, CmS, Cm]

Une externalité est la conséquence d'une action d'un agent (produire, consommer, etc.) sur un autre agent, sans que cette conséquence ne transite par le système des prix. La production d'électricité par une centrale à charbon, par exemple, entraîne une pollution liée à l'émission importante de CO2, qui pénalise toute la population avoisinante : c'est une externalité négative. Parce que le marché ou le système des prix ne prend pas en compte les externalités, cela peut conduire à des défaillances de marché.
 
Reprenons l'exemple de la centrale électrique à charbon. L'entreprise étant en situation de concurrence, elle est price taker et le prix de l'électricité s'impose à elle. Ce prix P1 est donc aussi la recette moyenne et marginale. L'optimum privé du producteur est atteint quand le coût marginal est égal à la recette marginale. Cela correspond au point d'intersection d'une quantité q1, à un prix P1, sur le graphique. Cet optimum privé correspond-il à l'optimum social ? La production d'électricité par ce type de centrale conduit à émettre des émissions importantes de CO2, qui pénalisent l'ensemble des riverains sans que cette nuisance soit facturée à l'entreprise (elle n'est pas intégrée dans sa courbe de coût). La courbe de coût marginal externe (CmE) représente justement la nuisance sur les riverains liée à la production d'une unité supplémentaire d'électricité. Elle est croissante dans la mesure où le préjudice croît plus rapidement que les quantités émises. La courbe de coût marginal social (CmS) est donc la somme du coût marginal de l'entreprise plus celle des riverains: CmS = Cm + CmE. On constate qu'au niveau de prix P1, l'optimum social n'est pas q, mais q*: en d'autres termes, en situation d'externalités négatives, la firme a tendance à surproduire par rapport à l'optimum social.