Climate change is the ultimate prisoners’ dilemma

Climate change is the ultimate prisoners’ dilemma

The difficulty in rallying disparate nations to collectively fight against climate change demonstrates that the issue is the ultimate prisoners dilemma.

Global climate change has been on the international agenda since at least 1992 when the United Nations Framework Convention on Climate Change (UNFCCC) was launched in Rio De Janeiro, Brazil.  The last two decades have given rise to periods of great hope, notably COP-3 in Kyoto in 1997 and COP-15 in Copenhagen in 2009. Yet, despite high hopes and a nearly universal recognition that something ought to be done to address the problem, little progress has been made.

Various explanations for this failure have been offered and many of the most compelling point to the logic of game theory. Climate change can be viewed as a particularly nasty prisoners’ dilemma:

Prisoner B stays silent (cooperates)

Prisoner B betrays (defects)

Prisoner A stays silent (cooperates)

Each serves 1 year

Prisoner A: 3 years

Prisoner B: goes free

Prisoner A betrays (defects)

Prisoner A: goes free

Prisoner B: 3 years

Each serves 2 years

The traditional model, illustrated above, can be mapped onto the problem of climate change.  The best individual outcome for any country would be for them to defect (continue to pollute) while other nations cooperate (reduce their emissions). This would give the defecting country a competitive advantage over other nations who had to limit their use of fossil fuels. This is also frequently referred to as a free rider problem.

In a traditional prisoners’ dilemma the Pareto optimum outcome is for all parties to cooperate as this reduces the total amount of prisoner time faced by the two prisoners. The worst collective outcome would be for both parties to defect causing them each to serve to two years in the model above. However, implicit in this model is an assumption of perfect information regarding the payoff structure. If the prisoners were under the impression that by both cooperating they would each receive two years it changes the internal logic of the game and makes cooperating and defecting equally appealing options.

The evidence for climate change is overwhelming and the broad contours of the problem are well established. However, there is significant debate over what exactly a climate model payoff structure should look like. For example, even if all parties cooperated on an agreement there is no guarantee their actions would be bold enough or fast enough to prevent significant warming. In this situation cooperating parties would get the negative effects of climate change and still be forced to reduce their fossil fuel dependence. Similarly, it is not clear exactly what the costs of economic adjustment would be under a climate agreement and how these costs would be distributed.

Distribution is indeed a critical aspect to the climate model of the prisoners’ dilemma. The traditional game assumes that each party faces an identical payoff structure, but in the case of climate negotiations this is not accurate. An emission trading system, like that currently used in the EU, would undoubtedly produce winners and losers as emission credits were bought and sold between the parties. Countries also face different costs when it comes to the effects of climate change itself. Small island nations like Palau could disappear entirely, while some countries like Russia could see small benefits in the form of increased access to sea lanes and oil under the polar ice caps. Finally, the incentive to defect would be higher for some parties than others. Clearly the US, EU, and China would all need to be involved for any comprehensive climate agreement to have a significant impact. The defection of just one of these major parties would likely kill any deal. Yet some smaller, less industrialized nations would add almost nothing to emissions reductions even if they entered into a new arrangement. For these countries free riding seems to be a logical choice since they contribute little to the problem and their efforts to solve it would be negligible.

What all of this adds up to is a particularly complex and intractable prisoners’ dilemma. The general logic of the game still stands with regard to the incentive to defect and cooperation thus being difficult to enforce. Yet, the logic is vastly complicated by a high number of players, a lack of perfect information regarding the payoff structure, and an asymmetric incentive scheme for the negotiating parties.

There is no doubt about the severity of climate change and the immediate need for countries to address it. Unfortunately, given the game theory highlighted above, the odds of solving this problem in time to prevent its worst effects seem to be low.

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Evan Abrams
