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On cooperative actions to control greenhouse gas emissions: A game theoretic application with five representative countries

Xuanli Liu, University of Nebraska - Lincoln

Abstract

The main objective of this research is to find the possible stable coalitions between developed countries and developing countries in greenhouse gas (GHG) emissions abatement. Five representative countries or regions were carefully chosen based on the debate on the Kyoto Protocol. They are the European Union, the United States, Japan, China and India. ^ Game theoretical models are the major tools of the study. Both non-cooperative games and cooperative games are used in the research. The non-cooperative games include Nash behavior, Nash equilibrium and “Business-as-Usual” models. The cooperative games are designed to study both no utility transfers and Shapley Value utility transfers. Co-integration models and non-linear optimization models are also used in appropriate parts of the study. ^ To develop the relevant payoff structures, the study uses co-integration methods to identify the long-term relationship between GHG emissions and GDP. The results provide estimates of the marginal cost of carbon abatement. In addition, the study estimates the benefit function with reference to the double damage estimation of carbon concentration. The conclusions from these two models provide the foundations for the game theory analysis. ^ The study discovers the existence of stable coalitions under several game theoretical model applications. First, moderate carbon emission reductions can occur even if all the countries behave non-cooperatively and make decisions based only on their own interest. Second, in the case of no utility transfer, there are several stable coalitions. Third, when utility redistribution is made based on the Shapley Value, extensive stable coalitions are available. The study also discovers that the United States, China and other important players do have incentives to play cooperatively. ^ The results of the analysis suggest that it is possible to reach a carbon abatement agreement based on the available coalitions. The international community has the means to bring the global warming problem under control. ^

Subject Area

Economics, Agricultural|Political Science, International Law and Relations|Environmental Sciences

Recommended Citation

Liu, Xuanli, "On cooperative actions to control greenhouse gas emissions: A game theoretic application with five representative countries" (2002). ETD collection for University of Nebraska - Lincoln. AAI3038975.
http://digitalcommons.unl.edu/dissertations/AAI3038975

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