How Cooperation and Competition Arise in Regional Climate Policies: RICE as a Dynamic Game

One of the most widely used models for studying the geographical economics of climate change is the Regional Integrated model of Climate and the Economy (RICE). In this paper, we investigate how cooperation and competition arise in regional climate policies under the RICE framework from the standpoints of game theory and optimal control. First, we show that the RICE model is inherently a dynamic game. Second, we study both cooperative and non-cooperative solutions to this RICE dynamic game. In cooperative settings, we investigate the global social welfare equilibrium that maximizes the weighted and cumulative social welfare across regions. We next divide the regions into two clusters: developed and developing, and look at the social welfare frontier under the notion of Pareto optimality. We also present a receding horizon approach to approximate the global social welfare equilibrium for robustness and computational efficiency. For non-cooperative settings, we study best-response dynamics and open-loop Nash equilibrium of the RICE game. A Recursive Best-response Algorithm for Dynamic Games (RBA-DG) is proposed to describe the sequences of best-response decisions for dynamic games, which indicates convergence to open-loop Nash equilibrium when applied to the RICE game by numerical studies. We also study online receding horizon feedback decisions of the RICE game. A Receding Horizon Feedback Algorithm for Dynamic Games (RHFA-DG) is proposed. All these proposed solution concepts are implemented and open sourced using the latest updated parameters and data. The results reveal how game theory may be used to facilitate international negotiations towards consensus on regional climate-change mitigation policies, as well as how cooperative and competitive regional relations shape climate change for our future

Optimal greenhouse cultivation control: survey and perspectives

Abstract: A survey is presented of the literature on greenhouse climate control, positioning the various solutions and paradigms in the framework of optimal control. A separation of timescales allows the separation of the economic optimal control problem of greenhouse cultivation into an off-line problem at the tactical level, and an on-line problem at the operational level. This paradigm is used to classify the literature into three categories: focus on operational control, focus on the tactical level, and truly integrated control. Integrated optimal control warrants the best economical result, and provides a systematic way to design control systems for the innovative greenhouses of the future. Research issues and perspectives are listed as well

On the Optimal Taxation of Common-Pool Resources

Recent research developments in common-pool resource models emphasize the importance of links with ecological systems and the presence of non-linearities, thresholds and multiple steady states. In a recent paper Kossioris et al. (2008) develop a methodology for deriving feedback Nash equilibria for non-linear differential games and apply this methodology to a common-pool resource model of a lake where pollution corresponds to benefits and at the same time affects the ecosystem services. This paper studies the structure of optimal state- dependent taxes that steer the combined economic-ecological system towards the trajectory of optimal management, and provides an algorithm for calculating such taxes.Differential Games, non-linear Feedback Nash Equilibria, Ecosystems, Optimal State-dependent Tax

Self-Enforcing Climate Change Treaties: A Generalized Differential Game Approach with Applications

Based on recent proposals on non cooperative dynamic games for analysing climate negotiation outcomes, such as Dutta and Radner (2004, 2006a), we generalize a specific framework for modelling differential games of this type and describe the set of conditions for the existence of closed loop dynamics and its relation to adaptive evolutionary dynamics. We then show that the Dutta and Radner (2004, 2006a) discrete time dynamic setup is a specific case of that generalization and describe the dynamics both analytically and numerically for closed loop feedback and perfect state patterns. Our discussion is completed with the introduction of a cooperative differential framework for welfare analysis purposes, within our non cooperative proposal for climate negotiations.Differential Game Theory, Environmental Economics, Evolutionary Dynamics, Climate Change Treaties

Notes from the Greenhouse World: A Study in Coevolution, Planetary Sustainability, and Community Structure

This paper explores coevolution and governance of common goods using models of coevolving biospheres, in which adapting populations must collectively regulate their planet's climate or face extinction. The results support the Gaia hypothesis against challenges based on the tragedy of the commons: model creatures are often able to work together to maintain the common good (a suitable climate) without being undermined by "free riders." A long-term dynamics appears in which communities that cannot sustain Gaian cooperation give way to communities that can. This result provides an argument why a Gaia scenario should generally be observed, rather than a tragedy of the commons scenario. Second, a close look at how communities fail reveals failures that do not fit the tragedy of the commons framework and are better described in terms of conflict between differently positioned parties, with power over different aspects of the system. In the context of Norgaard's work, all these observations can be read as narratives of coevolution relevant to social communities as well as ecological ones, contrasting with pessimistic scenarios about common governance and supporting respect for traditional arrangements and restraint in intervention.Comment: To appear in a special issue of Ecological Economics in honor of Richard B. Norgaar

Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment

Imperfect measurement of uncertainty (deeper uncertainty) in climate sensitivity is introduced in a two-sectoral integrated assessment model (IAM) with endogenous growth, based on an extension of DICE. The household expresses ambiguity aversion and can use robust control via a `shadow ambiguity premium' on social carbon cost to identify robust climate policy feedback rules that work well over a range such as the IPCC climate sensitivity range (IPCC, 2007a). Ambiguity aversion, in combination with linear damage, increases carbon cost in a similar way as a low pure rate of time preference. However, ambiguity aversion in combination with non-linear damage would also make policy more responsive to changes in climate data observations. Perfect ambiguity aversion results in an infinite expected shadow carbon cost and a zero carbon consumption path. Dynamic programming identifies an analytically tractable solution to the IAM.climate policy, carbon cost, robust control, Knightian uncertainty, ambiguity aversion, integrated asssessment

Dynamic Controllability with Overlapping targets: A Generalization of the Tinbergen-Nash Theory of Economic Policy

We generalize some recent results developed in static policy games with multiple players, to a dynamic context. We find that the classical theory of economic policy can be usefully applied to a strategic context of difference games: if one player satisfies the Golden Rule, then either all other players’ policies are ineffective with respect to the dynamic target variables shared with that player; or no Nash Feedback Equilibrium can exist, unless they all share target values for those variables. We extend those results to the case where there are also non-dynamic targets, to show that policy effectiveness (a Nash equilibrium) can continue to exist if some players satisfy the Golden Rule but target values differ between players in the non-dynamic targets. We demonstrate the practical importance of these results by showing how policy effectiveness (a policy equilibrium) can appear or disappear with small variations in the expectations process or policy rule in a widely used model of monetary policy.Policy games, Policy ineffectiveness, Static controllability, Existence of equilibria, Nash feedback equilibrium

The Cost of Ambiguity and Robustness in International Pollution Control

This paper examines robustness in international pollution control emerg- ing from the regulator��s concerns regarding possible misspeci��cation of the natural system that is used to model pollution dynamics. Cooperative and noncooperative robust policy rules are determined along with the cost in terms of value loss of being robust relative to conventional policy rules.Ambiguity, Robustness, Precaution, Di¤erential games, Open Loop and Feedback Nash equilibrium