by Guilherme Virgino Izidoro, MBA ’27
This article was written in response to a class discussion in the EDGE Seminar class at Duke University’s Fuqua School of Business in Fall 2025. This article voices one student’s perspective and does not necessarily represent the views of Duke University.
On January 25, 2025, all eyes were on the U.S. as a new administration announced its withdrawal from the Paris Agreement, arguing the accord placed an unfair burden on American businesses and workers. Beyond the headlines, this move signaled something deeper: a shift from global climate cooperation toward national self-interest. When viewed through the lens of game theory, this kind of early defection risks setting off a chain reaction of uncooperative choices, exactly the spiral laid out in the “Archipelagos” scenario in Shell’s 2025 Energy Security Scenarios.
On September 17, 2024, in our EDGE Seminar class, Shell executives David Hone, Chief Climate Change Advisor, and Martin Mohr, Commercial Business Integrator, Non-Operated Ventures (NOV) – Shell Catalysts & Technologies, shared details about Shell’s latest energy security scenarios with our class. Shell’s most recent scenarios—named “Surge,” “Archipelagos,” and “Horizon”—present three different possible futures in the context of the influence of artificial intelligence (AI) and its energy paradox: while AI has the potential to enable energy transition and help providers scale and optimize operations, it also requires large-scale, uninterruptible power supplies, leading to a significant increase in overall energy demand.
The central question that struck me during David and Martin’s presentation was, “How optimistic should we be? Are we, as a global community, moving toward solving the current energy demand and supply challenges, or are current news headlines the beginning of a spiral that will lead us all toward failure?”
As established in Shell’s scenarios, the world can be divided into Big Players (countries that are either committed to forcing a change toward green energy or prioritizing their own energy independence despite long-term environmental impacts) and Surfers (countries that ride the waves of opportunity presented to them by the actions of the big players). When viewed through a game theory lens, we can see that nations act like players in an iterated Prisoner’s Dilemma, where a country’s choice in one turn becomes an incentive for the next player, potentially turning a single behavior into a chain reaction.
In the classic Prisoner’s Dilemma, two players benefit most if they cooperate, but each has a strong incentive to defect for short-term gain. If one defects, the other is worse off for having cooperated, and trust quickly erodes. In a single round, defection seems rational, but in repeated rounds, early defections set the tone, and cooperation becomes much harder to sustain. Applied to climate and energy, this means that when a major country prioritizes its own energy security over global goals, others follow suit, creating a cascade of uncooperative choices.
Four months after the U.S. withdrawal from the Paris Agreement, Brazil’s environmental agency gave the green light to offshore drilling near the mouth of the Amazon River, contradicting its own previous technical evaluation that cited a lack of solutions to prevent irreparable harm to local biodiversity. More recently, the Indonesian government allowed a controversial nickel mine to resume activities despite studies providing evidence of environmental harm. These actions suggest that these “surfer” countries now have fewer incentives to enforce renewable energy or sustainable practices. Their rationale is clear: if major powers are not committed to global climate goals, there is little strategic or economic benefit in a smaller country bearing the costs of sustainable transition alone.
This clearly sets the tone for a world moving in the direction of Shell’s Archipelago scenario, where technological development is hampered by security concerns, nationalism grows, and global agreements on climate change fade in prominence. Compared to the other two scenarios, where international cooperation is higher, the Archipelago scenario projects the highest fossil fuel use in 2050, with emissions declining slowly. Net-zero carbon emissions would not be achieved until the late 21st or early 22nd century, with warming levels reaching approximately 2.2°C by 2100, also the highest among the three scenarios.
So, how can we break the uncooperative iterations of the Prisoner’s Dilemma we are currently seeing? It all comes down to reputation and rebuilding trust among nations. Since we are talking about successive iterations, the action of one player in each round builds its reputation, providing other players with more information about what to expect from that country, which in turn increases the chances of cooperation. Therefore, it is essential that the Big Players not only keep their commitments to green practices but also cooperate internationally to develop mechanisms that increase incentives for “surfer” countries to cooperate.
This is where the importance of the Paris Agreement and COPs comes into place. These international frameworks are crucial because they serve as the primary global mechanism for coordinating cooperation. They create a platform where nations can establish and communicate their commitments through Nationally Determined Contributions (NDCs), which increases transparency and accountability. At the annual COP meetings, nations maintain open lines of communication, which is vital for sustaining trust even during times of tension. Furthermore, the COPs increase incentives for cooperation by bolstering the reputation of countries that meet their promises and by facilitating financial aid and technology transfer. This helps developing nations, the “surfer” countries, adopt more sustainable practices. Ultimately, these global platforms help mitigate the Prisoner’s Dilemma mindset by turning what is now a repeated cycle of defections into a structured repeated game, where mechanisms like transparency, accountability, and reputation make cooperation the rational long-term strategy.
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