Uncertainty, coordination and climate change

Today I spent a couple hours reading two papers authored by Scott Barrett, an environmental economist. One paper is “Climate treaties and approaching catastrophes” and the other (co-authored with Astrid Dannenberg) is “Sensitivity of collective action to uncertainty about climate tipping points”. The first paper is purely theoretical, and the latter has theory and an economic experiment.

Barrett’s focus in these papers is on climate change treaties. Climate change treaties are a challenge because costs of CO2 pollution are externalized, but countries are inclined to ‘free ride’ since there is no global government to punish non-signatories, or countries that fail to meet their commitments. For this reason, many argue that global-scale climate treaties are doomed to fail.

These papers show that coordination can work to address this climate treaty problem. Coordination occurs when actors work in their self-interest towards a goal that is collectively beneficial. When coordination is possible, there is no need for an enforcement mechanism; the treaties work because adhering to commitments are in the private interests of actors.

A number of conditions must exist to see effective coordination in abating climate change, but the one of Barrett’s focus is the reduction of uncertainty at the threshold which a climate catastrophe would occur. In short, as uncertainty in the threshold gets smaller, the more likely that an actor will follow through with abatement measures–like reducing CO2 emissions. Provided the uncertainty is small enough (in proportion to the damages resulting from climate change, and inversely proportional to the difference between costly abatement and the benefits of climate change) then actors will choose to take measures to avoid catastrophe.

Lucky for you, I wrote some R code that you can use to experiment with the model he proposes!

In addition to demonstrating this theoretically, Barret and his co-author use some hypothetical choice experiments to test this theory in the lab. The experimental results are fairly consistent with their theoretical findings; the authors found that most people would choose to abate when the catastrophic tipping point is certain, and nobody would abate when it is very uncertain.

What this research shows is the importance of reducing scientific uncertainty, and specifically, that reducing uncertainty about thresholds of climate catastrophes may be key to getting useful and effective climate treaties.