An oracle based method to compute a coupled equilibrium in a model of international climate policy

This paper proposes a computational game-theoretic model for the international negotiations that should take place at the end of the period covered by the Kyoto protocol. These negotiations could lead to a self-enforcing agreement on a burden sharing scheme given the necessary global emissions limit that will be imposed when the real extent of climate change is known. The model assumes a non-cooperative behavior of the parties except for the fact that they will be collectively committed to reach a target on total cumulative emissions by the year 2050. The concept of normalized equilibrium, introduced by J.B. Rosen for concave games with coupled constraints, is used to characterize a family of dynamic equilibrium solutions in an m-player game where the agents are (groups of) countries and the payoffs are the welfare gains obtained from a Computable General Equilibrium (CGE) model. The model deals with the uncertainty about climate sensitivity by computing an S-adapted equilibrium. These equilibria are computed using an oracle-based method permitting an implicit definition of the payoffs to the different players, obtained through simulations performed with the global CGE model GEMINI-E3.