An oracle based method to compute a coupled equilibrium in a model of international climate policy

This paper proposes a computational game-theoretic model for the international negotiations that should take place at the end of the period covered by the Kyoto protocol. These negotiations could lead to a self-enforcing agreement on a burden sharing scheme given the necessary global emissions limit that will be imposed when the real extent of climate change is known. The model assumes a non-cooperative behavior of the parties except for the fact that they will be collectively committed to reach a target on total cumulative emissions by the year 2050. The concept of normalized equilibrium, introduced by J.B. Rosen for concave games with coupled constraints, is used to characterize a family of dynamic equilibrium solutions in an m-player game where the agents are (groups of) countries and the payoffs are the welfare gains obtained from a Computable General Equilibrium (CGE) model. The model deals with the uncertainty about climate sensitivity by computing an S-adapted equilibrium. These equilibria are computed using an oracle-based method permitting an implicit definition of the payoffs to the different players, obtained through simulations performed with the global CGE model GEMINI-E

Coupling climate and economic models in a cost-benefit framework: A convex optimisation approach

In this paper, we present a general method, based on a convex optimisation technique, that facilitates the coupling of climate and economic models in a cost-benefit framework. As a demonstration of the method, we couple an economic growth model à la Ramsey adapted from DICE-99 with an efficient intermediate complexity climate model, C-GOLDSTEIN, which has highly simplified physics, but fully 3-D ocean dynamics. As in DICE-99, we assume that an economic cost is associated with global temperature change: this change is obtained from the climate model, which is driven by the GHG concentrations computed from the economic growth path. The work extends a previous paper in which these models were coupled in cost-effectiveness mode. Here we consider the more intricate cost-benefit coupling in which the climate impact is not fixed a priori. We implement the coupled model using an oracle-based optimisation technique. Each model is contained in an oracle, which supplies model output and information on its sensitivity to a master program. The algorithm Proximal-ACCPM guarantees the convergence of the procedure under sufficient convexity assumptions. Our results demonstrate the possibility of a consistent, cost-benefit, climate-damage optimisation analysis with a 3-D climate mode

Coupling climate and economic models in a cost-benefit framework: a convex optimization approach

In this paper we present a general method, based on a convex optimisation technique, that facilitates the coupling of climate and economic models in a cost-benefit framework. As a demonstration of the method, we couple an economic growth model à la Ramsey adapted from DICE-99 with an efficient intermediate complexity climate model, C-GOLDSTEIN, which has highly simplified physics, but fully 3-D ocean dynamics. As in DICE-99 we assume that an economic cost is associated with global temperature change: this change is obtained from the climate model which is driven by the GHG concentrations computed from the economic growth path. The work extends a previous paper in which these models were coupled in cost-effectiveness mode. Here we consider the more intricate cost-benefit coupling in which the climate impact is not fixed a priori. We implement the coupled model using an oracle-based optimisation technique. Each model is contained in an oracle which supplies model output and information on its sensitivity to a master program. The algorithm Proximal-ACCPM guarantees the convergence of the procedure under sufficient convexity assumptions. Our results demonstrate the possibility of a consistent, cost-benefit, climate-damage optimisation analysis with a 3-D climate model

Global emission ceiling versus international cap and trade: What is the most efficient system when countries act non-cooperatively?

We model climate negotiations as a two-stage game. In the first stage of the game, players have to agree on a global emission cap (GEC). In the second stage, they non-cooperatively choose either their emission level or their emission quota, depending on whether emission trading is allowed, under the cap that potentially binds them together. A three heterogenous player quadratic game serves as a base for the analysis. In this framework, when the cap is non-binding, there exists a unique Nash equilibrium. When the emission cap is binding, among all the coupled constraints Nash equilibria, we select a normalized equilibrium by solving a variational inequality, which has a unique solution. In both scenarios – with and without emission trading – we show that there exists a non-empty range of values for which setting a binding cap improves all players’ payoff. It also appears that for some values of the cap, all players get a higher payoff under the GEC system alone than under the international cap and trade (ITC) system alone. Thus, the introduction of a GEC outperforms the ITC system both in terms of emission reduction and of payoff gains.environmental game, climate change, international cap and trade system, national emission quotas, global emission cap, normalized equilibria, variational and quasi-variational inequalities.

How to use Rosen's normalised equilibrium to enforce a socially desirable Pareto efficient solution

We consider a situation, in which a regulator believes that constraining a complex good created jointly by competitive agents, is socially desirable. Individual levels of outputs that generate the constrained amount of the externality can be computed as a Pareto efficient solution of the agents' joint utility maximisation problem. However, generically, a Pareto efficient solution is not an equilibrium. We suggest the regulator calculates a Nash-Rosen coupled-constraint equilibrium (or a “generalised” Nash equilibrium) and uses the coupled-constraint Lagrange multiplier to formulate a threat, under which the agents will play a decoupled Nash game. An equilibrium of this game will possibly coincide with the Pareto efficient solution. We focus on situations when the constraints are saturated and examine, under which conditions a match between an equilibrium and a Pareto solution is possible. We illustrate our findings using a model for a coordination problem, in which firms' outputs depend on each other and where the output levels are important for the regulator.

Energy policies avoiding a tipping point in the climate system

Paleoclimate evidence and climate models indicate that certain elements of the climate system may exhibit thresholds, with small changes in greenhouse gas emissions resulting in non-linear and potentially irreversible regime shifts with serious consequences for socio-economic systems. Such thresholds or tipping points in the climate system are likely to depend on both the magnitude and rate of change of surface warming. The collapse of the Atlantic thermohaline circulation (THC) is one example of such a threshold. To evaluate mitigation policies that curb greenhouse gas emissions to levels that prevent such a climate threshold being reached, we use the MERGE model of Manne, Mendelsohn and Richels. Depending on assumptions on climate sensitivity and technological progress, our analysis shows that preserving the THC may require a fast and strong greenhouse gas emission reduction from today's level, with transition to nuclear and/or renewable energy, possibly combined with the use of carbon capture and sequestration systems

The MESSAGEix Integrated Assessment Model and the ix modeling platform (ixmp)

The MESSAGE Integrated Assessment Model (IAM) developed by IIASA has been a central tool of energy-environment-economy systems analysis in the global scientific and policy arena. It played a major role in the Assessment Reports of the Intergovernmental Panel on Climate Change (IPCC); it provided marker scenarios of the Representative Concentration Pathways (RCPs) and the Shared Socio-Economic Pathways (SSPs); and it underpinned the analysis of the Global Energy Assessment (GEA). Alas, to provide relevant analysis for current and future challenges, numerical models of human and earth systems need to support higher spatial and temporal resolution, facilitate integration of data sources and methodologies across disciplines, and become open and transparent regarding the underlying data, methods, and the scientific workflow. In this manuscript, we present the building blocks of a new framework for an integrated assessment modeling platform; the \ecosystem" comprises: i) an open-source GAMS implementation of the MESSAGE energy++ system model integrated with the MACRO economic model; ii) a Java/database backend for version-controlled data management, iii) interfaces for the scientific programming languages Python & R for efficient input data and results processing workflows; and iv) a web-browser-based user interface for model/scenario management and intuitive \drag-and-drop" visualization of results. The framework aims to facilitate the highest level of openness for scientific analysis, bridging the need for transparency with efficient data processing and powerful numerical solvers. The platform is geared towards easy integration of data sources and models across disciplines, spatial scales and temporal disaggregation levels. All tools apply best-practice in collaborative software development, and comprehensive documentation of all building blocks and scripts is generated directly from the GAMS equations and the Java/Python/R source code

A dynamic Game Model of Strategic RD&D Cooperation and GHG Emission Mitigation

This report describes the game structures implemented in the TOCSIN project to find self-enforcing and stable international environmental agreements. It presents the first results obtained with the use of these models. The document starts with a review of the different approaches that have been proposed in the literature to represent in a game theoretic framework the concept of self-enforcing or stable international environmental agreement

Access to financial services: the case of the ‘Mzansi’ account in South Africa

The presence of rationing of financial services in the developing countries is a major obstacle to achieving sustainable growth. In recent years there have been co-ordinated efforts to increase the level of financial inclusion, i.e. to reduce the supply-side constraints restricting access to finance. This paper aims to understand household’s latent behaviour decision making in accessing financial services, by analysing an entry level Mzansi account in South Africa. The willingness to access financial services is not taken as given, but it is instead defined by perceptions and attitudes. The Mzansi intervention is appealing to individuals with basic but insufficient financial education. Aspirations seem to be very influential in revealing the choice of financial services and to this end, Mzansi is perceived as a pre-entry account not meeting the aspirations of individuals aiming to climb up the financial services ladder