Cooperation is Essential for 2℃ Target:

1. Cooperation is Essential for 2℃ Target: New Perspective from Dynamic Game Model

2. Contents • 1. Introduction • 2. Theoretical Dynamic Game Model • 2.1. Individual utility • 2.2. Effects of Climate Change Investment (CCI) • 2.3. Non-cooperative and cooperative dynamic game equilibriums • 3. Simulation and Sensitivity Analyses • 4. Conclusions

3. 1. Introduction • Backgrounds: • 2℃increment was “an upper limit beyond which the risks of grave damage to ecosystems, and of non-linear responses, are expected to increase rapidly” (AGGG) • Although it’s intuitively acceptable that there might be a connection between the cooperation failure and the 2℃ target, few researches can effectively prove the relationship. A theoretical model together with simulation and sensitivity analyses are introduced to investigate the relationship: 2℃ Target and Cooperation Strategy from Dynamic Game Perspective

4. 2. Theoretical Dynamic Game Model • 2.1. Individual utility (CRRA) Gross Present Utility for Country i is the discounting ratio Consumption at time t for Country i Utility for Country i at time t Index of relative risk aversion for Country i GDP growth rate at time t for Country i GDP growth rate in the absence of global warming Temperature increment at time t Marginal effect of temperature increment on GDP growth for country i

5. 2. Theoretical Dynamic Game Model • 2.1. Individual utility (CRRA) • Two Uncertainties: • 1). • 2). • Methods: • Based on Integrated Assessment Models with PDF (Probability Density Function)

6. 2. Theoretical Dynamic Game Model • 2.2. Effects of climate change investment (CCI) • Def. invi donates the percentage of CCI to GDP • Positive Effects • Accelerate GDP growth with marginal effect • Negative Effects • Decrease the percent of consumption • Spillover Effects • Temperature increment upper boundary (UBTI)

7. 2. Theoretical Dynamic Game Model • 2.2. Effects of climate change investment (CCI)

8. 2. Theoretical Dynamic Game Model • 2.3. Non-cooperative and cooperative dynamic game equilibriums • Two Country/Group Game Scenario • Backward Induction Method

9. 3. Simulation and Sensitivity Analyses • Initial Parameter for two-country model

10. 3. Simulation and Sensitivity Analyses • Simulation Results • Cooperation is essential for 2℃target. • Cooperation is not self-driven. • It’s still possible and feasible for the implementation of cooperation although it’s not self-driven.

11. 3. Simulation and Sensitivity Analyses • Sensitivity Analyses

12. 4. Conclusions • Firstly, it’s essential for cooperation among countries to deal with global warming and to reach the 2℃target. • Secondly, without effective compensations and benefit transfer mechanisms, cooperation can hardly be realized automatically. • global climate negotiation should put enough attention to the institutional design to avoid the collapse of cooperation • Finally, our research also gives a good signal that there’s still room for generalized Pareto improvement to carry out cooperation

13. Acknowledgement and References

14. Thank you!