Abstract

A look at how game theory is being used for studying the current problem of climate change and how this can shape policy.

After a summary presentation of the relevant features of the Protocol, followed by the sketching out of a simple economic model serving as support for theoretical thinking, we consider a series of its components (such as reference emissions, efficiency and stability, competitive trading, desirability of free trade in emissions and the clean development mechanism) — not to defend it and independently of the subsequent developments, but rather to show how classical economic theory, supplemented by some recent concepts of cooperative game theory, can help understanding the internal logic of the treaty.

An appraisal of the situation of the world climate regime that is currently prevailing, since the Protocol has entered into force in 2005, will follow. Finally, we discuss four aspects of the regime that is likely to prevail after the expiry of the Kyoto commitment period 2008-2012.

The policy message is a non-conventional one, compared with the common wisdom of comments on Kyoto.