Addressing decarbonization strategies through a game theory perspective

Abstract

The global demand for metals is rapidly increasing due to population growth, technological innovation, and economic growth. To meet this demand, mining firms adopt various strategies, which often lead to increased carbon emissions. Decarbonization efforts could be supported by economic policies that encourage lower emissions. Since mining industries consist of individual stakeholders, policies should consider their competitive behavior rather than the industry-as-a-whole. A game theory framework applied to an oligopoly scenario of four mining firms reveals that firms, acting individually, tend to expand production more than if they considered the industry-as-a-whole. This leads to environmental consequences, price depression, and reduced profitability. This game theory perspective helps identify economic policies that could guide firms toward mining the least damaging ore.