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Game Practice and the Environment

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.
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Chapter 4: Kyoto and Beyond Kyoto Climate Policy: Comparison of Open-Loop and Feedback Game Outcomes

Juan Carlos Císcar and Antonio Soria


Juan Carlos Císcar and Antonio Soria 1. INTRODUCTION From the start of the industrial revolution human-induced activities have warmed the Earth’s atmosphere. The combustion of fossil fuels and changes in land use have gradually increased the concentration of greenhouse gases (GHG) in the atmosphere, which has altered the global climate.1 The 1997 Kyoto Protocol on climate change2 sets for the first time binding GHG emission reduction targets to developed countries (known in the protocol as Annex B countries). GHG emissions in the Annex B countries are to be reduced by 5.2% in 2010, with respect to the 1990 emission levels. Developing countries (the non-Annex B countries) do not have mitigation goals. Most studies assessing climate policies, and in particular the Kyoto Protocol, have considered a static framework in the sense that countries act once and at the same time deciding their policies for all future periods (the Kyoto commitment period and the beyond Kyoto decades). The information structure of this simultaneous game is known in the literature as openloop, and leads to the open-loop Nash equilibrium. Such a static approach has been predominant in the numerical economic literature dealing with climate change policy. OECD (1999), Nordhaus and Boyer (2000), Peck and Teisberg (1999), and Manne and Richels (1999) study the ‘Kyoto forever’ hypothesis. This scenario assumes that the climate policy beyond Kyoto keeps constant the Kyoto emission target of the Annex B region forever, while the non-Annex B region does not reduce emissions at all in the foreseeable future....

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