Novel Insights and Mechanisms for the International Cooperation on Climate Change and the Avoidance of Global Risks (NIMICAR)
A five year project that aims to develop new mechanisms to engage global cooperation on climate change mitigation and reduction of global risks, funded by the Research Council of Norway.
The project develops new mechanisms to engage global cooperation on climate change mitigation and reduction of global risks. We develop new insights and tools for the provision of these important public goods. The project provides three complementary approaches to international agreement formation.
First, we introduce a new (and simple!) equilibrium concept. It builds on the idea that countries form long-term beliefs about possible outcomes of international agreements such as climate change agreements. We thereby introduce to games with externalities, i.e., situations where a country’s self-centered choice harms global well-being, insights related to farsightedness and (von Neumann Morgenstern-) stability that have been explored in other classes of games and better describe the coalition formation challenges at hand.
Second, we explore a new self-enforcing mechanism to implement the best possible outcome in a heterogeneous world at minimal cost. These mechanisms rely on countries providing a collateral and participating in redistribution schemes rewarding the ambitious and punishing countries who try to free-ride.
Third, we introduce a detailed dynamic structure to these games. Focusing on climate change, we build a realistic analytic stochastic regional model of climate change, economic production, energy sectors, and regional trade to implement and quantify the strategies and mechanisms developed in the earlier part of the project. This modeling approach has been pre-tested and will permit us to build the first such model with strategic interactions between regions. The analytic structure allows us to gain deeper insights into the challenges and opportunities of cooperation in a heterogeneous world. Such heterogeneity in economic well-being, climate impact, and mitigation opportunity is representative for most global public good provision and risk reduction problems.
The project delivers academic insights and policy designs. Governing insights into game-theory, we develop a new equilibrium description of coalition formation. It will impact the literature more widely as it simplifies and expands the applicability for farsighted equilibria.
Governing applied academic insights, we develop a new mechanism and incentive structure to support large, ambitious, and stable coalitions. We create a novel tool for the discipline, a first-of-its-kind analytic model of strategically interacting heterogeneous regions. This tool is crucial for bridging the gap between academic insights and designs helpful to promote and improve real-world coalition formation. We use this model to test and refine our designs of international agreements and, in particular, climate change agreements to follow the Kyoto and the Paris accord.
In the medium-run, our results contribute to improving international agreement formation and the reduction of global risks and climate change.
The project is funded by the Research Council of Norway under the FRIPRO program with NOK 12 million over a five year period from January 2021 until December 2025.