Game Practice and the Environment

Game Practice and the Environment

The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Edited by Carlo Carraro and Vito Fragnelli

This book summarises the latest achievements of researchers involved in the application of game theory to the analysis of environmental matters. It provides an overview of different methods and applications, and gives the reader new insights on the solutions to complex environmental problems. The authors investigate various game theoretic approaches, including cooperative and non-cooperative game theory, and analyse both dynamic and static games. They illustrate the application of these approaches to global and local environmental problems, and present novel but effective tools to support environmental policy making. In particular, they focus on three important issues; climate negotiations and policy, the sharing of environmental costs, and environmental management and pollution control.

Chapter 2: Can Equity Enhance Efficiency? Some Lessons from Climate Negotiations

Francesco Bosello, Barbara Buchner, Carlo Carraro and Davide Raggi

Subjects: economics and finance, environmental economics, game theory, environment, environmental economics


2. Can equity enhance efficiency? Some lessons from climate negotiations Francesco Bosello, Barbara Buchner, Carlo Carraro and Davide Raggi 1. INTRODUCTION In the last decades, the importance of international and global environmental problems, such as acid rain, the depletion of the ozone layer and the greenhouse effect, has increased continually. In the absence of a supranational authority which enforces environmental policies and regulations, emission reductions can only be achieved via voluntary initiatives and international cooperation. Given the global nature of the above environmental problems, an effective international agreement which implements these emission reductions has to involve as many countries as possible, or at least a number of countries which account for a large share of total emissions. This is particularly true for global warming whose effects and the mitigation policies subsequently required are pushed to an unprecedented spatial and time scale. Unfortunately, broad participation is difficult to achieve (Carraro and Siniscalco, 1993). Given that emission control is costly and a ‘clean’ atmosphere is a public good, countries hardly have incentives to sign an agreement on greenhouse gases (GHG) emission control (the well known free-riding problem). Moreover, structural differences among countries (polluters most often do not suffer the highest damages) imply the difficulty of sharing the burden of emission reductions in a way that makes it convenient for most countries to sign the agreement (in some countries, abatement costs may not be smaller than the benefits from avoided damages). These considerations lead...

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