Climate game analyses for CO2 emission trading among various world organizations
Journal
Economic Modelling
Journal Volume
36
Pages
441-446
Date Issued
2014
Author(s)
Abstract
This paper simulates the saving in terms of the total abatement cost of CO2 emission reductions for different trading games reflecting the potential cooperation among organizations including the European Union (EU), the Asia-Pacific Economic Cooperation (APEC) countries, the Union of South American Nations (USAN), and the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC). A game approach is conducted to determine if the cooperation will come into existence among the organizations stated above. A similar idea is applied to the four largest emission countries, China, the United States, Russia, and India, as four individual players in the trading game.Joining the market is the strictly dominant strategy for any organization from the results. The Nash equilibrium shows that, regardless of the organizations that have already existed in the market, joining the market is always the best policy for the remaining organizations which are currently not in the market. Similarly, India likes the organization to which it belongs, i.e. IOR-ARC, to trade with the EU and APEC, and the U.S. wants the organization to which it belongs, i.e., APEC, to cooperate with the organizations USAN and IOR-ARC. However, China and Russia prefer trading with other countries within their own organizations. © 2013 Elsevier B.V.
Subjects
C44; C71; Directional distance function; Emission trading game; Marginal abatement cost; Nash equilibrium; Q48; Q56; Shadow price model
SDGs
Type
journal article