Climate change will result in uneven impact on countries, and likely result in strategic behavior

Climate change, also known as global warming, is arguably the biggest problem facing mankind in its limited history, with likely temperature rises of up to 5°C by 2100 in absence of coordinated action on greenhouse gas mitigation. It is now well established that climate change is largely caused by greenhouse gas emissions from human actions. While a reasonable goal is a limit to a 2°C rise, current national commitments based on the famous Paris accord target a 3°C rise, and likely implementation appears to be on a 4°C trend.

This temperature rise may result in an uneven impact on countries, with heavy losses for some (e.g., the Maldives and Bangladesh), but may actually benefit some others (e.g., Russia and Canada). This uneven distribution of climate impact may create strategic behavior from these different groups of countries at different levels. In what follows, we outline three different levels of strategic behavior, discuss how this strategic behavior may be modeled, and highlight implications for global climate governance.

This strategic behavior is likely to be at three levels, and may result in unilateral solar geoengineering

The first level strategic behavior may be from the countries that may benefit from global warming, e.g., Russia and Canada. Given that higher warming (i.e., less greenhouse gas mitigation) would result in higher individual benefits, they may simply not want to mitigate as much as recommended by the global treaties, which advocate common but differentiated responsibilities. This would further exacerbate the “tragedy of the commons” issue, where agents acting in self-interest damage a public good, surrounding climate change.

However, a second level strategic behavior is possible from countries that may be harmed a lot by increasing greenhouse gases in the atmosphere, e.g., the Maldives, and Bangladesh. According to some estimates, by 2030 these climate vulnerable countries would need to spend $140-300 billion per year on climate adaptation, and at a higher cost of capital. In absence of adequate collective greenhouse gas mitigation, these countries may want to unilaterally engage in “geoengineering,” i.e. techniques to reduce global warming. In this context, geoengineering a so-called “private good with externalities,” where the benefit is individual (or focused) but the costs are dispersed, similar to what we see under the tragedy of commons.

But what is geoengineering? Geoengineering comes in many forms, including “carbon removal” and “solar engineering.” The former is essentially what trees do naturally. We are interested in the later i.e., solar geoengineering that sprays large particles (e.g., aerosols) in the atmosphere to reflect sunlight. Reflecting solar energy away from the atmosphere has the same effect as achieved by local air pollution or even volcanic activity.

This strategic behavior is possible because solar geoengineering is easy to do, with close to zero costs. Even a poor country can unleash a bunch of particles in air at low cost, e.g., by mimicking a volcanic eruption. So, seemingly rogue behavior is possible from any country hurting from unmitigated climate change, which results in the so-called “free-driver problem,” where anyone can achieve individually desirable outcomes at no or very low cost. At the very least, the threat of doing so can easily become a part of climate negotiations, where developing countries hurting from climate change may demand the developed countries to take a more ambitious stance on climate mitigation.

In fact, if we all believe that geoengineering is a plausible substitute for mitigation, lack of greenhouse gas mitigation compared to required levels may also become a strategy adopted by the world as a whole. That is, availability of geoengineering itself may dampen our collective ongoing efforts to reduce greenhouse gas levels in the atmosphere, which by itself is complicated due to the short-term focus of policymakers and the business community!

However, while it appears easy to do, the downside is that the risks of solar geoengineering are not well known. For example, some solar geoengineering techniques may result in higher ozone depletion via chemical reactions with the sprayed particles, which is already a known problem which the Montreal Protocol is trying to fix. As another example, solar geoengineering may have negative impact on agricultural yields, albeit at different levels of severity depending on crop and geography.

To add to this issue, a third level of strategic behavior is possible from countries that may want to reverse solar geoengineering, for some reason or other. For example, by the first group of countries who may want higher warming. This reversal is called “reverse geoengineering”, where one could target removal of particles sprayed via solar geoengineering via focused chemical reactions. However, reverse geoengineering is even newer than solar geoengineering, with even less-known efficacy as well as risks.

This strategic interaction can be modeled using game theory

So, we have a very interesting potential global climate governance situation, with three levels of strategic behavior by different groups of countries, with each strategic behavior depending on each other. The obvious question is: How do we analyze this strategic interaction, in order to derive insights for countries’ climate actions – mitigation, solar geoengineering, and reverse geoengineering – as well as implications for our climate future.

This interaction may be modeled using game theory, a branch of economics popularized due to John Von Neumann and John Nash, that finds equilibrium outcomes based on strategic agents engaging in behavior that optimizes individual utilities based on assumptions about others’ optimal actions. Simply put, the equilibrium solutions are found when no agent unilaterally deviates from a committed strategy or when committed strategies are mutual best responses. Game theory has been applied to numerous problems in economics, business, political science, biology, and computer science.

In this context, our complex global climate governance problem can be modeled as a sequential three-stage game, where: in the first stage, countries would simultaneously engage in mitigation; in the second stage, they would simultaneously engage in solar geoengineering; and in the third stage, they would simultaneously engage in reverse geoengineering. In this context, earlier stage decisions would anticipate the optimal mutual reactions in later stages, and each stage would be modeled as a different game.

While this can be modeled in some way as discussed above, the bigger issue is that, given the uncertainties and complexities of countries’ actions and utility functions, it may be hard to anticipate the final outcome, which is likely to be inefficient from a global welfare perspective. Finally, this may result in interactions outside the modeled game, via international negotiations, and perhaps even conflict whether direct or indirect (e.g., trade wars).

We live in interesting times, indeed, making climate governance even more complicated than it already is under even the first stage interaction where countries are trying to jointly address the issue of global warming. At the very least, this blog highlights that we require a deeper investigation into the possibilities of solar geoengineering and reverse geoengineering, including a better understanding of surrounding risks and governance issues.

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Gireesh Shrimali is a Precourt Scholar at the Sustainable Finance Initiative (SFI) at Stanford University. His research focuses on the intersection of policy and finance, in climate in general, and energy in particular. At SFI, he is examining the relationship between climate and financial risks, and how effective polices can be designed to address financial risks being brought about due to the changing climate. The controversial topic of solar engineering has brought his attention to global climate change governance issues.