Climate Change, Procrastination and Asymmetric Power
This paper argues that policy conclusions of the economics of climate change literature based on “integrated assessment models” (IAM) fails to take into account the intricacies of collective action. Specifically, IAMs do not account for how asymmetric power between developed and undeveloped countries changes the former’s pay off matrix with respect to mitigation and adaptation strategies. Using a simple one-sided prisoner’s dilemma model, the paper illustrates how developed countries’ power to externalize their emissions to the global commons skews their cost-benefit calculation in favor of putting off mitigation efforts into the future. Undeveloped countries on the other hand are incentivized to act in concert to deter developed countries from passing their climate costs onto them in the present. The extent to which they may succeed in doing so also helps developed countries overcome their short-termism on climate change policy.