Plan B: Finding a seat for the 800 lb. gorillas

Climate change payoff matrix

There's a saying that is often used to describe power dynamics: "Where does the 800-pound gorilla sit? Anywhere he wants." When it comes to climate policy, there are two gorillas - China (801 lbs) and the U.S. (800 lbs). As the largest emitters of carbon dioxide and carbon dioxide equivalents, China and the U.S. have significant power to dictate the success or failure of climate agreements, but only if they act together. The concern is that, should China adopt cap-and-trade, carbon taxes, or some other abatement strategy, the increased cost of electrical generation will inhibit economic growth. The same arguments goes for the U.S. As such, most of the failures on the part of climate talks (Copenhagen, for example) stem from the fact that the U.S. is, for better or worse, extremely wary of committing to binding climate agreements under the specter of China. Economically, this can be explained through elementary game theory. From the figure above, the U.S. and China are faced with two simple decisions: comply with climate agreements, or don't comply. Given the payoff structure of this prisoner's dilemma game, each country has a dominant strategy -- that is, the strategy that they will always choose, no matter what -- of not complying. Their payoffs could both be higher if they both complied, but of course, such an agreement would totally dissolve because there will always be the temptation to shirk the agreement and not comply, earning the higher payoff.

This dynamic of noncooperation has finally forced the rest of the world to throw up their hands in frustration. A report came out today stating that

"European climate policy does little to persuade other countries, especially China and the United States, of the need to sign up to ambitious carbon reduction targets" and that "EU and UK policy should place a greater emphasis on low carbon research, development and demonstration (RD&D) to promote innovation rather than the deployment of chosen low carbon technologies to meet short-term targets." (Environmental Technology)

Referring to this strategy as "Plan B," the report suggests that increasing research and development will lead to cheaper, more appealing carbon abatement technologies that will appeal to other countries -- particularly China and the U.S. -- by reducing the cost of CO2 abatement. In essence, this would lower the costs of compliance from the payoff matrix above, hopefully to the point where the dominant strategies of each country are changed.

Frankly, I don't know why this is considered a "Plan B." Research and development should always have taken the front seat to obviously tenuous and contentious climate agreements. This strategy designs the room around the gorillas, allowing them to sit wherever they want without ruining the feng shui.