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Coalition-building for pricing CO2 could make sense even for egoistic countries

02/26/2018 - Even countries that tend to act in an egoistic way in the long run have an incentive to participate in international climate stabilization pathways and couple CO2 pricing systems, a new game-theoretical study shows. Yet they might only do this if pioneer coalitions for pricing greenhouse gas emissions make the first steps. If this is the case, the egoistic countries temporarily enjoy the benefits of avoided climate change without paying for it, but in the longer term can join the pioneers and link to their already established models of CO2 pricing. Forming larger and larger coalitions always reaps additional benefits of avoided damages from climate change. These benefits, even though unequally distributed across the coalition members, can be distributed via financial transfers. This makes it attractive to join, even for egoistic countries.
Coalition-building for pricing CO2 could make sense even for egoistic countries

Forming larger and larger coalitions always reaps additional benefits of avoided damages from climate change (Source: Heitzig et al 2018)

“Climate change mitigation is a public good – which makes it so difficult to achieve,” says Jobst Heitzig from the Potsdam Institute for Climate Impact Research (PIK), lead-author of the study in Nature Climate Change. “The temptation to free-ride on the efforts of others has often been predicted as to make countries reluctant to join coalitions. But our numerical experiments show that this may only be a temporary effect. Collaborating eventually can be attractive enough to make global climate protection likely. ” The study is the first to employ a game-theoretic model that is both dynamic and assumes at least some degree of farsightedness of the players. “This might seem like a bold assumption, but we think that many policy-makers around the world indeed do try to integrate long-term developments into their decisions.”

“As for the pioneer coalitions for CO2 pricing, this is not a bold assumption – they are already emerging,” says Ulrike Kornek from the Mercator Research Institute for Global Commons and Climate Change (MCC). “In the context of the European Union, members such as France recently started a discussion on implementing a minimum carbon price together with a coalition of like-minded European countries such as, hopefully, Germany. This is closely observed by China, which is building up an emissions trading system of its own. In America, California – the 6th biggest economy in the world – has got a minimum carbon price and has agreed to link their climate policy with Ontario and Quebec. So, this is spreading; and increasing current carbon prices is the next step to adhere to the temperature goals of the Paris agreement.” The new study adds evidence to why forming climate action coalitions actually makes sense.


Article: Jobst Heitzig, Ulrike Kornek (2018): Bottom-up linking of carbon markets under farsighted cap coordination and reversibility. Nature Climate Change [DOI: 10.1038/s41558-018-0079-z]

Weblink to the article: http://dx.doi.org/10.1038/s41558-018-0079-z

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