The collapse of Kyoto Protocol: An analysis based on Game Theory

Abstract

Everyone is a stakeholder in environmental issues. Contemporarily, climate change is incrementally imposing threats to human development, making multilateral cooperation necessary to minimise the impacts of climate-related risks. The Kyoto Protocol was a significant internationally binding agreement that aimed to reduce greenhouse gases emissions, whereas its signatories failed to achieve its target to a large extent. This paper analyzes the reason behind the failure of the Kyoto Protocol through a game-theoretic literature. The main factors that contributed to the collapse of the Kyoto Protocol include the complex nature of the environmental issue and strategic interest in the treaty ratification procedure. The global environment is defined as a public good, therefore, each country has a free-rider incentive to take advantage of others’ actions in pollution reduction, which is analyzed through a single prisoners’ dilemma game. When such a game is extended to a repeated prisoners’ dilemma game with an infinite horizon, there is a possibility that nations adopt a cooperative strategy in the long run. Simultaneously, the ultimatum game provides a representation of the treaty negotiation and ratification process, highlighting the importance of fairness and reciprocity of the treaty for its signatories. Potential solutions include trade sanctions, tax on exports, and the measure of cumulative emission has been evaluated at the end of the paper.