Marginal abatement cost

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Green economics

A marginal abatement cost curve or MAC curve is a set of options available to an economy to reduce pollution. They are valuable tools in understanding emissions trading, driving forecasts of carbon allowance prices, prioritizing investment opportunities, and shaping policy discussions.

Usage

For example, carbon traders use marginal abatement cost (MAC) curves to derive the supply function for modelling carbon price fundamentals. Power companies may employ MAC curves to guide their decisions about long-term capital investment strategies to select among a variety of efficiency and generation options. Economists have used MAC curves to explain the economics of interregional carbon trading,[1] and policy-makers turn to MAC curves to show how much abatement an economy can afford and where policy should be directed to achieve the emission reductions.

Various economists, research organizations, and consultancies have produced MAC curves. Bloomberg New Energy Finance[2] and McKinsey & Company[3] have produced economy wide analyses on greenhouse gas emissions reductions for the United States. ICF International[4] produced a California specific curve following AB-32 legislation as have Sweeney and Weyant.[5]

The Wuppertal Institute for Climate, Environment and Energy produced several marginal abatement cost curves for Germany (also called Cost Potential Curves), depending on the perspective (end-user, utilities, society). [6]

The US Environmental Protection Agency has done work on a MAC curve for non carbon dioxide emissions such as methane, N2O, and HFCs[7]. Enerdata and LEPII-CNRS (France) produce MAC curves with the POLES model for the 6 Kyoto Protocol gases[8], these curves have been used for various public and private actors either to assess carbon policies [9] or through the use of a carbon market analysis tool[10].

Typically, MAC curves cover emissions reduction opportunities across a number of sectors in an economy including power, industry, waste, buildings, transport, agriculture, and forestry.

See also

References

  1. ^ Ellerman, A.D. and Decaux, A., Analysis of post-Kyoto CO2 emissions trading using marginal abatement curves, 1998.
  2. ^ Bloomberg New Energy Finance, US Marginal Abatement Cost Curve, 2010
  3. ^ McKinsey & Company, Reducing US greenhouse gas emissions: how much at what cost? 2007
  4. ^ ICF International, Emission reduction opportunities for non-CO2 greenhouse gases in California, 2005
  5. ^ Sweeney, J. and Weyant, J., Analysis of measures to meet the requirements of California’s Assembly Bill 32, 2008
  6. ^ Options and Potentials for Energy End-use Efficiency and Energy Services, Wuppertal Institute, 2006
  7. ^ EPA, Global mitigation of non-CO2 greenhouse gases, 2006
  8. ^ Enerdata , Production of MAC curves by sector and by country, 2010
  9. ^ [Impacts of Multi-gas Strategies for Greenhouse Gas Emissions Abatement: Insights from a Partial Equilibirum Model, Criqui P., Russ P., Deybe D., in The Energy Journal, Special Issue: Multi-Greenhouse Gas Mitigation and Climate Policy, 2007]
  10. ^ Enerdata, Use of MACCs for carbon markets analysis, 2010