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Which coalitions will players form? Jobst Heitzig

Which coalitions will players form? Jobst Heitzig

Ahead of COP21, new game theories shed light on how to reach international environment agreements

201507-08

By Jobst Heitzig, Potsdam Institute for Climate Impact Research


To an outsider, the process of reaching international environmental agreements may seem like a poker game, with countries bargaining for better positions by delaying or denying action. In fact, this also happens to be the predominating view of game theoretical models. 

But new models that take into account the time dimension and the network of international relations are showing that even purely selfish players (in this case negotiating countries) will eventually join forces to gain from the benefits of a global regime. It just may take a smaller coalition to start, with the rest of the world joining in later. 

If we assume that nations - even if they are selfish or altruistic - are still rational, a stalemate before reaching global consensus would be contradictory. If nations expect a stalemate, then no one could hope to gain from not signing a global treaty right away. Hence a treaty would be signed after all, instead of the assumed stalemate. 

There’s an important caveat here: Our models show that there is a risk that the international trust network does not break down or nations fail to converge to common expectations about the process.

Some nations actually prefer to be seen as reluctant or as hindered by domestic politics so as to be allowed some hold-off. This then becomes a self-fulfilling prophecy - if all nations expect some to act earlier than others, then indeed some nations will act earlier than others.

Similar positive feedback loops between expectations and behaviour may make divestment movement take off in a non-linear fashion sooner or later: the more investors become green, the easier politicians can implement ambitious climate policies, and the likelier ambitious climate policy becomes, the more investors will realize that their dirty assets are worth less than they thought and will sell them.

Regarding which nations will first form a coalition of the willing before the others join and what the resulting cost sharing and effects on global inequality will be, this may depend somewhat on chance, or rather on which set of common expectations players will converge to. This is where ethical reasoning may point to the right set of common expectations, thus forming what Schelling called a “focal” point. 

Novel, well-designed consensus voting methods that give all nations a fair share of real decision power may help converge expectations instead of tempting individual parties to forever block consensus, or tempting chairs to fall back to decisions serving those that hold the majority of power. 

The rational prison break

But wait a minute! Didn't they tell us emissions reductions were like a prisoners' dilemma with ample incentives to free-ride, and that ambitious agreements would usually not be enforceable due to a lack of global institutions? 

What is the prisoner’s dilemma?
A game theory showing that two purely "rational" individuals might not cooperate, even if it appears that it is in their best interests. Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of speaking to or exchanging messages with the other. The prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to: betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. More at https://en.wikipedia.org/wiki/Prisoner's_dilemma

Well, unlike the eponymous prisoners, countries can talk and negotiate with each other. For example, they could  improve compliance with agreed emissions reductions by using a simple but well designed scheme to temporarily redistribute liabilities to compensate for any noncompliance. 

So the main dilemma left is rather like a prison break: which nation will go first and both take more risk and earn more glory, before all join in eventually?

No exit clause

Another important lesson from the newer models is that if a treaty contains an “exit clause” that allows a signatory to leave the coalition without breaking up the coalition completely, nations will probably do so, causing cycles of exit cascades and subsequent reformation of cooperation. 

Treaties are meant to be stable should therefore remove the free-riding incentive by allowing each signatory to unilaterally terminate the whole agreement at a later point, making the coalition break down completely. 

While this may sound paradoxical, this potential consequence of leaving the coalition is crucial for stability since then the leaving member cannot take a free ride on the efforts of the remaining coalition. 

Of course, the coalition may then reform but its members will require the runaway to come back first. Anticipating this, the potential runaway will not leave in the first place.

Putting it all together, it seems we are allowed to be cautiously optimistic that the international community will indeed form a global climate protection coalition bottom up, maybe in several steps. 

But this year's negotiations in Paris in December must bring the process a big step forward since some of the Earth's tipping points draw near and further climate change may become irreversible soon. Politicians must now converge on common expectations, guided by ethical reasoning, and must design the treaty well to remove temptations to free-ride.
 
Jobst Heitzig is a senior researcher at the Potsdam Institute for Climate Impact Research working on models of political and social interactions.

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