Answer to Question #183166 in Economics for Thomas

Question

The ideal outcome for the climate strategy game is one in which a dominant strategy equilibrium is achieved when both groups of countries choose to abate emissions. Explain how a change in the rules of the game could lead to a potential solution to the social dilemma of climate change. [3 marks] [max words: 200]

Answer 1

New US President Joe Biden has already made it clear that the environment will be among the priorities of his administration. This will greatly change the structure of the economies of countries striving for carbon neutrality, which, in turn, will affect the dynamics of supply and demand in the global economy. Climate change will also affect geopolitics: each power will want to offer the world its own model of energy transition in order to gain access to new markets and open up new opportunities for cooperation. Today, China, the United States, and the European Union are leading this race. But in Russia, the basis of the political and economic model is still the export of hydrocarbons.

Along with structural changes, there is another new circumstance. The appointment of former Secretary of State John Kerry as the President's Special Envoy for Climate to the National Security Council shows that Washington is now relegating climate change to a security issue. This means that the United States will consider those states that undermine the fight against climate change as a threat to its own and global stability. This approach cannot but affect Russia.

Formally, Moscow is doing well in fulfilling its obligations under the Paris Agreement. The emission reduction requirements are calculated from the 1990 level, which allows Russia to offset the decline in Soviet industry in the 1990s, not to think about further reductions, and continue to rely on revenues from fossil fuel extraction. Nevertheless, Russia ranks fourth in the world in terms of greenhouse gas emissions, which actually undermines the implementation of the most important Paris Agreement.