Australia and international climate change mitigation commitments: applying game theory

Strong global climate change mitigation is widely considered to be in Australia’s interest. It has been argued that Australia through its policies and commitments could influence the global mitigation outcome, even though Australia is a relatively small emitter. Classic game theory, in its analysis of political and economic policy strategies, suggests that such an outcome might be achieved through the help of binding unilateral pre-commitments to stronger action, as well as the threat of mutually painful action in case of failure of agreement. 

This project will apply relevant game theoretic approaches to various options to promote strong mitigation. These include arrangements with third parties as mechanisms for unilateral binding, as well as imposing coal export taxes and other possible threat mechanisms in case of failure of an international agreement.

The project will apply techniques from game theory to analyse how Australia should bargain for a desirable outcome (such as an appropriate stabilisation target) in international climate negotiations. This will include an analysis of how different bargaining techniques and climate change outcomes will affect the payoffs of participants in the negotiations. One promising area of investigation is the application of implementation theory – this approach models the bargaining process as a game. If the game has an equilibrium that corresponds to a socially optimal outcome, then the prospects for strong mitigation are much greater.

• Wood, P.J.,Climate Change and Game Theory [PDF, 415KB], EERH Research Report No.62, (2010)
• Wood, P.J., Jotzo, F.,Price Floors for Emissions Trading [PDF, 140KB], EERH Research Report No.36, (2009)
• “Yes we can …”: Carbon pricing through emissions trading with a price floor [PDF, 180KB], Peter John Wood and Frank Jotzo, EERH Policy Brief, June 2010

• Climate Change and Game Theory, AARES 2010, Adelaide, February 10, 2010.
• Mitigation Commitment Games at Copenhagen, Environmental Economics Research Hub workshop in conjunction with AARES 2010, Adelaide, February 9, 2010.
• Climate Change and Game Theory, Department of Basic Sciences and Environment, Faculty of Life Sciences, University of Copenhagen, December 4, 2009.
• Global climate change architecture: comparing blueprints from Australia and China from a game theory perspective, Australian National University, June 2009

• Pickering, J., and Wood, P.J., 2010, box on 'Climate Finance for developing countries'. This will appear in a book proceeding from the Copenhagen Climate Congress.
• Wood, P. J. (October 2009), Timing Essential in CPRS Targets, Opinion Piece, The Canberra Times, October 28, 2009.

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