Malaysia’s climate change: A case of prisoner’s dilemma
KUCHING: The current climate change conundrum is a classic case of prisoner’s dilemma, a scenario where rational individuals who prioritize their own self-interest may choose not to cooperate even though it is in their best interests to do so.
By choosing not to cooperate, the individuals will achieve the worst outcome possible.
According to RHB Investment Bank Bhd (RHB Research), ccording to the recent IPCC report, the world is now on track to warm by more than three degrees Celcius, indicating a lack of progress and failure thus far to achieving the Paris Agreement goals.
“Are countries ready to give up their fossil fuel assets? A 2015 study in Nature suggested that, globally, a third of oil reserves, half of gas reserves and over 80 per cent of current coal reserves should not be extracted from 2010 to 2050 if the world is to meet the Paris Agreement target of limiting any temperature increase to below two degrees Celcius,” it said in a special report.
“For countries that have already taken on large amount of debt with the expectation that the debt will be funded by fossil fuel revenues, these countries will be finding it difficult to fill the revenue gap left behind if they were to transition away from relying on fossil fuel as their revenues.
“As such, while the regulations are still relatively lenient and the consequences of not abiding to the Paris Agreement are still not punitive enough, fossil-fuel reliant nations are likely to continue (or even expedite) tapping in to their fossil fuel reserves as the reward to the nation are perceived to far outweigh the risks for doing so.”
This was especially true in developing nations where some of these countries have yet to develop a framework and roadmap in achieving net zero and there are no regulations in place that create disincentive for carbon-intensive companies to decarbonise,” the research house said.
RHB Research added that the lack of shareholders scrutiny and the lack of stringent loan financing standards allow these companies to continue to invest and expand their capacities capitalising on the regulatory and ESG standard shortfall.
“The protracted Russian-Ukraine war further escalated oil price. The geopolitical tension and its lingering effects (including elevated oil price) are likely to outlast the war itself,” it noted.
“With sustained elevated oil price, it is not far-fetched to imagine that another similar ESG arbitrage opportunity may be on the horizon as upstream oil companies, especially in the developing nations are incentivized to expand their capacities to capitalize on the lucrative oil revenues.
“As the recent IPCC report highlighted, the world is now grossly misaligned with the Paris Agreement goals. It is an uphill and almost impossible task to coordinate a global effort to achieve the Paris Agreement goals as nations continue to prioritize selfinterest over the greater good.
“Much of the climate change impacts warned by the scientists (no matter how grim and dire the picture is painted) are perceived as distant risks that when discounted to the present, are risks that underweigh the reward of pursuing economic gains from carbon intensive activities.
“Where then is the tipping point that would finally trigger the world in for joint action? To delve in to this, we draw parallel similarities to the global pandemic Covid-19.
“As the saying goes, “necessity is the mother of invention” – in under a year since the outbreak of Covid-19, a vaccine was developed, which would typically take up to 10-15 years under normal circumstances.
“Today we are finally getting a preview of climate change impacts through the increased frequency and severity of extreme weather events, including floods, drought, wildfires, heat waves and more.
“What we are experiencing today is a result of what has already been “baked-in” to the climate system and it will only get worse from here onwards.
“Perhaps a global scale of extreme weather event (or series of events) similar to the scale and magnitude of Covid19 is the ‘necessity’ that it takes to move the needle in the riskreward equation of climate change for an urgency in global action.”