Tuesday, January 10, 2012

Steel Bars and the Prisoner's Dilemma

The Financial Times recently ran an interesting article on the non-participation of Chinese steel manufacturers in an international voluntary emissions reporting scheme sponsored by the World Steel Association (WSA).  The collaboration is aimed at improving energy efficiency across the industry (and as the hope went, thereby helping to ward off costly regulation). However, several Chinese producers were concerned that release of their company data would reveal trade secrets and potentially harm their competitiveness; consequently, both they and all of their compatriot competitors are declining to participate in the scheme.  Since China produces nearly half of the world's steel, the data omission severely undermines the project's usefulness. As an added twist, the current head of the WSA is also the president of one of those Chinese producers that is now deciding not to cooperate, despite previous expressions of support.


While interesting by itself, I think the case also illustrates some of the challenges posed by economic and geopolitical factors, which act as barriers to international agreement and collective action on energy problems which necessarily span borders.  The degree to which energy use is intertwined with both a) international markets and global externalities in the aggregate, and b) relative national economic growth, development, and security objectives means that there will always be a constant tension between competition and cooperation in the energy space.

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