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Uncertainty and International Climate Change Negotiations

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  • Yiyong Cai
  • Warwick McKibbin

Abstract

Because issues associated with climate change are historically unprecedented and thus policymakers do not have a prior distribution over possible outcomes, the usual theoretical approach based on governments maximizing expected utility may not be suitable for analysing climate policy choice. Under an alternative plausible assumption that policymakers act strategically but choose the policy that incurs the highest possible gain in the worst-case scenario, this paper shows how collectivism can be inferior to unilateralism in both carbon mitigation and economic loss minimization. Our proposed approach provides a possible explanation for several paradoxes in the existing literature in relation to uncertainty and climate policy negotiation. It also provides an analytical framework that can be applied to numerical simulations of international climate policy games. Copyright Società Italiana degli Economisti (Italian Economic Association) 2015

Suggested Citation

  • Yiyong Cai & Warwick McKibbin, 2015. "Uncertainty and International Climate Change Negotiations," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(1), pages 101-115, March.
    • Handle: RePEc:spr:italej:v:1:y:2015:i:1:p:101-115
    DOI: 10.1007/s40797-015-0010-y
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    1. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2022. "Financial spillovers, spillbacks, and the scope for international macroprudential policy coordination," International Economics and Economic Policy, Springer, vol. 19(1), pages 79-127, February.

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    More about this item

    Keywords

    Climate change; Policy game; International negotiation; Robust optimal control; Maxmin; C70; F51; Q54;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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