Managing catastrophe-bound industrial pollution with game-theoretic algorithm: The St Peterburg initiative

Abstract

After several decades of rapid technological advancement and economic growth, alarming levels of pollutions and environmental degradation are emerging all over the world. Reports are portraying the situation as an industrial civilization on the verge of suicide, destroying its environmental conditions of existence with people being held as prisoners on a runaway catastrophe-bound train. Though cooperation in environmental control holds out the best promise of effective action, limited success has been observed. Existing multinational joint initiatives like the Kyoto Protocol can hardly be expected to offer a long-term solution because (i) the plans are limited to a confined set of controls like gas emissions and permits which is unlikely be able to offer an effective mean to reverse the accelerating trend of environmental deterioration, and (ii) there is no guarantee that participants will always be better off and, hence, be committed within the entire duration of the agreement.To create a cooperative solution a comprehensive set of environmental policy instruments including taxes, subsidies, technology choices, pollution abatement activities, pollution legislations and green technology R&D has to be taken into consideration. The implementation of such a scheme would inevitably bring about different implications in cost and benefit to each of the participating nations. To construct a cooperative solution that every party would commit to from beginning to end, the proposed arrangement must guarantee that every participant will be better-off and the originally agreed upon arrangement remain effective at any time within the cooperative period for any feasible state brought about by prior optimal behavior. This is a “classic” game-theoretic problem. This paper applies the latest discoveries in cooperative game theory and mathematics by researchers at the Center of Game theory in St.Petersburg State University to suggest solutions and means to solve this deadlock problem of global environmental management. Such an approach would yield an effective policy menu to tackle one of the gravest problems facing the global market economy.