FIG 1 - uploaded by Paul Ekins
Content may be subject to copyright.
Source publication
Legal commitments to reduce CO2 emissions require policy makers to find cost-efficient means to meet these obligations. Marginal abatement cost (MAC) curves, which illustrate the economics associated with climate change mitigation, have recently attracted a great amount of attention. A number of limitations with MAC curves are explained by the impl...
Context in source publication
Context 1
... published 14 cost curves for different countries and a global cost curve (see Fig. 1 between 2007 and 2009. McKinsey updated its global MAC curve in Enkvist et al. (2010) to reflect the current reduction in emissions due in part to the global financial crisis and to reflect expectations of higher fossil fuel prices. Recently, McKinsey created a Climate Desk, which makes the data, though not the assumptions, behind its ...
Citations
... A key assumption of traditional marginal abatement cost curves is that the abatement effects of different levers are separable (independent), allowing for elementary levers to be ordered according to their (incremental) marginal cost. Such ordering is not possible in the context of our model, precisely because the joint costs and emission levels corresponding to different combined levers are not separable across the constituent elementary levers [22][23][24][25] . ...
... also shows an abatement cost curve that is not convex. This non-convexity emerges because the joint cost and emissions levels corresponding to different combined levers are not separable across the constituent elementary levers[22][23][24][25] . Thus, holding the size of abatement increments constant, the resulting incremental (marginal) abatement cost is not always increasing as the firm selects more ambitious target levels E. Convex segments of the AC(·) curve emerge for both relatively high and relatively low emissions target levels but not in the mid-range. ...
Accounting for nearly 8% of global annual carbon dioxide (CO2) emissions, the cement industry is considered difficult to decarbonize. While a sizeable number of abatement levers for Portland cement production is becoming technologically ready for deployment, many are still viewed as prohibitively expensive. Here we develop a generic abatement cost framework for identifying cost-efficient pathways toward substantial emission reductions. We calibrate our model with new industry data in the context of European cement plants that must obtain emission permits under the European Emissions Trading System. We find that a price of €81 per ton of CO2, as observed on average in 2022, incentivizes firms to reduce their annual direct emissions by about one-third relative to the status quo. Yet, these incentives increase sharply at a carbon price of €126 per ton. If cement producers were to expect such carbon price levels to persist in the future, they would have incentives to reduce emissions by almost 80% relative to current emission levels.
JEL Codes: M1, O33, Q42, Q52, Q54, Q55, Q58
... MACCs are a standard policy tool to assess the cost-effectiveness of mitigation options in a simplified and straightforward manner; however, the MACC results for certain technologies may present a single average cost that does not account for system variation, which ultimately may affect the abatement cost and the abatement potential of a mitigation technology. In particular, MACC analyses that use a partial approach have shortcomings that include a lack of disclosure of the input data assumptions selected for the calculations, the lack of consideration of interdependencies and interactions between variables, and the limited representation of uncertainty [66]. These shortcomings can be a result of the amount of data required for the construction of the curve itself and the methodology selected for the calculation. ...
Marginal Abatement Cost Curves compare and assess greenhouse gas mitigation options available to various sectors of the economy. In the Irish agricultural sector, large anaerobic digestion facilities are currently considered a high-cost abatement solution. In prior studies of anaerobic digestion abatement costs, two options were assessed: the generation of heat and electricity from biogas (115 €/tCO2eq) and the production of renewable heat from biomethane (280 €/tCO2eq). Both scenarios encompass single cost values that may not capture the potentially variable nature of such systems. In contrast, prior techno-economic analyses and lifecycle analyses can provide a comparison of the abatement costs of anaerobic digestion systems at a range of scales. This work compares two case studies (based on prior literature) for small and medium-scale on farm anaerobic digestion systems. The small-scale system is set in Ireland with cattle slurry collected in open tanks during the winter, while the medium-scale system is set in the USA with cattle slurry collected periodically indoors all year-round. It was found that the abatement cost can vary between −117 to +79 € per t CO2eq. The key variables that affected the abatement cost were additional revenue streams such as biofertilizer sales, displaced energy savings, and additional incentives and emissions savings within the system boundary. Including only some of these options in the analysis resulted in higher abatement costs being reported. Based on the variation between system topologies and therefore system boundaries, assigning a single mitigation cost to anaerobic digestion systems may not be representative.
... Regarding the position of these articles on the MACC curve, the vast majority are limited to using the methodology to analyse the abatement potential in a specific industry or country, which can be considered an acceptance of the MACC methodology as an alternative with broad scientific acceptance, although most of the articles mention the limitations of the MAC curve (Fabian Kesicki, 2011), (Kesicki, 2011), there are only two articles among the 40 most cited articles that openly oppose the MACC methodology as a valid decision method. Kesicki and Ekins (2012) focus their criticism, especially on McKinsey's work with the following words, "it does not take into account interactions and the dynamic character of decarbonising the economy; it summaries average costs across a technology, though we know the variation in project costs within a technology can be much greater than variations between the average costs of competing technologies; it presents information about a single year's emissions, though they depend crucially on earlier abatement actions". Moreover, secondly, the article (Ward, 2014), criticises the methodology in its entirety. ...
Since the 1990s, articles have widely used MAC curves to analyse the best alternatives in terms of cost-effectiveness when deciding to abate a negative externality. Most of the articles are related to CO2 abatement as the main externality to be reduced, and the main advantages and disadvantages of the MACC tool are presented in the literature review presented here. Finally, it is determined whether the curve is a definitive method for analysing and elaborating policy and business decisions or whether the tool needs to correct the methodology to increase the scientific consensus.
... For example, among these studies, the data covers the province-level, city-level, or firm-level, limiting the comparability of the results. Second, the unconditional marginal abatement cost estimated under a single pollutant is often overestimated owing to the ancillary benefit (Burtraw et al., 2003;Kesicki and Ekins, 2012;Ma and Hailu, 2016). Moreover, the choice of DV may remarkably alter the results. ...
Cement industry is both energy-intensive and pollution-intensive, imposing significant negative externalities on sustainability. However, previous studies have not sufficiently focused on China's cement industry; thus, there is a lack of information on efficiency and cost, limiting policy effectiveness. Using a directional-distance-function- based model and firm-level data, this study measures the technical efficiency and shadow price of SO2 and PM in China's cement industry from 1998 to 2010. In response to the debates on the selection of directional vector, this is the first study that proposes a new directional vector determined via text analysis. We use the five-year plans as a breakthrough point to construct a corpus, establish a lexicon, and introduce a text analysis in order to reveal the policy preference, and finally, solve this directional vector. Through this improvement, we highlight the inherent meanings of the directional vector and provide a new insight into the directional-distance-function-based method. We solve this new directional vector to be (0.98, -0.13, -0.13), implying that the preference for economic growth is significantly greater than that for environmental protection. The conditional median marginal abatement costs of SO2 and PM are estimated to be 29,070 and 1374 yuan/ton, respectively. The annual trends of technical efficiency and shadow price are depicted, and the heterogeneities of regions, provinces, cities, and pollutants are revealed.
... Huang and Wu (2021) analyzed the energy efficiency improvement and CO 2 emission reduction potentials in the cement industry for energy transition using an extended marginal abatement cost curve, which comprises multiple rectangular blocks representing the results of a CO 2 abatement option. However, this approach suffers from a lack of indirect cost and benefit considerations (Kesicki & Ekins, 2012). It ignores the transaction costs necessary to implement the measures, which leads to negative abatement costs. ...
Cities, which are the primary economic engine and emission source in China, accounted for 70% of the country’s total energy-related CO2 emissions in 2010. The development of low-carbon cities has become the first priority of policymakers. Low-carbon cities enhance competition in the long run but also inevitably impose costs in the short term. To investigate the associated abatement costs of CO2 toward low-carbon cities, we apply the directional distance function on panel data covering 104 Chinese prefecture-level and above cities from 2001 to 2014. Our results show that, on average, the cost to control one ton of CO2 is 1070 CNY, or equivalent to 129 US $. This cost shows great individual heterogeneity and time variation; the year 2011 witnesses a significant reversal of the marginal abatement cost of CO2. It is because China begins implementing a mandatory CO2 intensity reduction target for the 12th Five-Year Plan (FYP). We establish a four-quadrant matrix framework to identify low-carbon cities and track the low-carbon transition path based on emission indicators (total emissions, per capita emissions, and emission intensity) and abatement cost pairs. Among the four types of emission-cost patterns, more cities are scattered in the "low emission-level and high abatement-cost" quadrant, and eight cities are clarified as low-carbon cities in 2014. In terms of per capita emissions and abatement costs, the “high-per-capita-emission and low-abatement-cost” club include five cities in 2001, while this number rises to seven members in 2014. Most cities are also located in the “low-emission-intensity and low-abatement-cost” zone when the relationship between CO2 intensity and abatement cost is considered. Our results call for policymakers' attention to hot spots and emission-based, per capita emission-based, or intensity-based city-level decarbonizing policies.
... From an applied perspective, our approach greatly facilitates the incorporation of learningby-doing and spillovers into the evaluation of decarbonization options as recommended in a number of papers [e.g. 17,23,11]. More precisely Gillingham and Stock [11] stresses that myopic abatement costs do not integrate relevant dynamic features. ...
... The different DAC may be used to generate an sector abatement curve in which the abatement cost of anyone unit depends on the abatement cost of the other ones. In this way we open the black box of global large multi-sector studies which are often criticized for their lack of transparency [17]. Enlarging the perimeter of the analysis to encompass time dimensions and externalities as suggested here may be a more operational route than resorting to a complex global model. ...
Public authorities have to decide whether to support projects to mitigate GHG emissions. In the context of the transition toward Net Zero Emissions, all polluting activities need be decarbonised one day or the other that is, projects should lead to a perpetual clean phase. The relevant questions are which clean technology should be used and when it should be launched. The paper proposes the relevant dynamic cost benefit framework to solve these questions. Under some specific assumptions we derive two metrics of abatement cost, the first one to determine when to implement a given technology, and the second one to compare alternative technologies. The first metric, called the dynamic abatement cost, is defined as the ratio between the annualized incremental cash cost of the new technology by the long term abatement. It is obtained through a marginal cost benefit analysis relative to the launch date. The second metric is an adjustement of the first one to integrate the impact of intermediary abatements along the transitory phase. These two metrics are not simple extensions of current abatement metrics, which ordinarily would provide spurious answers. We generalize our metrics to situations with exogenous technical change, a random arrival of a backstop technology, and when Hotelling's rule does not apply. We show how to incorporate endogenous technical change and spillovers between sub-components of a project. Two applied studies are revisited to highlight the operational interest of our approach.
JEL Classi cation: Q51, Q56, R58
... A central assumption of marginal abatement cost curves is that the abatement impact of different levers is separable, allowing for levers to be ordered according to their marginal costs. In contrast, incremental abatement cost curves are generally not monotonically increasing in the level of abatement, precisely because the joint costs and emission levels corresponding to different combined levers are not separable across the constituent elementary levers [20][21][22][23] . ...
Accounting for nearly 8% of global annual carbon dioxide (CO2) emissions, the cement industry is considered difficult to decarbonize. While a sizeable number of abatement levers for Portland cement production are technologically ready for deployment, many are still viewed as prohibitively expensive. Here we develop a generic abatement cost framework for identifying cost-efficient pathways toward substantial emission reductions. We calibrate our model with new industry data in the context of European cement plants that must obtain emission permits under the European Emission Trading System. We find that a price of €81 per ton of CO2, as observed on average in 2022, incentivizes firms to reduce their annual direct emissions by about one-third relative to the status quo. Yet, this willingness to abate emissions increases sharply at a carbon price of €100 per ton. If cement producers were to expect such carbon price levels to persist in the future, they would have incentives to reduce emissions by almost 80% relative to current emission levels.
... Another key obstacle for policymakers to overcome when developing an LT-LEDS is the assessment of the associated abatement costs related to certain emission reductions. Marginal abatement cost (MAC) curves have become one of the most important tools for analysing the cost-effectiveness of climate mitigation policies (Kesicki and Ekins 2012;Jiang et al. 2019). A MAC curve is a graph that depicts the costs in a given currency, usually in United States dollars (USD), for reducing one unit of pollution, generally in million tonnes of CO 2 , which supports the identification of the most cost-efficient options to achieve a certain target (Kesicki and Strachan 2011). ...
... Finally, the second mitigation pathway is the most cost inexpensive to realise. It focusses on policy areas which require less investment or implementation cost for their realisation, such as the forestry and land use sector (Kesicki and Ekins 2012;Timilsina et al. 2016;McKinsey & Company 2009;Gillingham and Stock 2018;City of New York 2013). The qualitative analysis of the MAC of variables of policy interest applied in this work considered several studies conducted in other countries around the globe. ...
The Paris Agreement encourages Parties to prepare and submit long-term low greenhouse gas emission development strategies (LT-LEDS) to the United Framework Convention on Climate Change (UNFCCC). LT-LEDS are national strategies that identify pathways or scenarios for low-emission development to reach a long-term vision and/or target, while considering broader socio-economic goals. The development of a LT-LEDS is a national process, driven by national priorities and goals, with each country facing different obstacles, and requiring distinctive approaches, priorities, and actions for the required transformation. In this work, a novel five-step back-casting approach is developed to assess alternative mitigation pathways for Tajikistan in order to achieve carbon neutrality by 2050, presenting an initial assessment and mapping, and providing the country with a starting point for LT-LEDS development. The approach is based around a set of variables of policy interest, which are areas in which climate mitigation policies, actions, or programmes of incentives can be designed and implemented. Major strengths of the approach are the consistency with the Nationally Determined Contribution (NDC) and the national greenhouse gas (GHG) emission inventory. Four mitigation pathways are defined for Tajikistan, each incorporating different policy intensity levels for the variables of policy interest. It is found that although each of the four mitigation pathways provides a significant GHG emission reduction potential, only one reaches carbon neutrality by 2050, namely, the pathway that focusses on considerable policy efforts in all sectors of the economy and incorporates intensive policy efforts for both nature-based and technological carbon dioxide (CO2) removal.
... In this regard, Marginal Abatement Cost Curves (MACC) can be helpful as a policy tool in ranking investments options. Applications of MACCs are common in the economic assessment of climate change mitigation options (Schneider et al., 2007;Kesicki & Ekins, 2012;Bockel et al., 2012;IPCC, 2014;Eory et al., 2018) and have been also extended into the assessment of effective water policies (Addams et al., 2009). This study implements MACC approach in hunger reduction research. ...
... An advantage of MACC analysis is also its transparency. However, the concept has several limitations which have been already highlighted in previous studies (Kesicki & Ekins, 2012;Bockel et al., 2012;Eory et al., 2018). One of the limitations relates to the fact that the MACC presents the incremental cost of reducing hunger for a single point in time. ...
This study developed a marginal abatement cost curve (MACC) to identify a mix of least-cost investment options with the highest potential for hunger reduction, hunger here defined by the undernourishment concept of the Food and Agriculture Organization (FAO). Twenty-two different interventions are considered for reducing undernourishment relying on information drawn from best available evidence-based literature, including model- and large-scale intervention studies. Ending hunger by 2030 would require annual investments of about US$ 39 to 50 billion until 2030 to lift about 840 to 909 million people out of hunger, which is the 2020 estimate of hunger projection in 2030, also considering the effects of COVID-19. Investing in agricultural R&D, agricultural extension services, information and communication technologies (ICT) – agricultural information systems, small-scale irrigation expansion in Africa and female literacy improvement are low cost options that have a relatively large hunger reduction potential. To achieve the goal of ending hunger by 2030, not only is it urgent not to lose any more time, but also to optimally phase investments. Investments that have more long-term impacts should be frontloaded in the decade in order to reap their benefits soon before 2030. A balanced approach is needed to reach the hungry soon – including those adversely affected by COVID-19 with social protection and nutrition programs.
... A central assumption of marginal abatement cost curves is that the abatement impact of different levers is separable, allowing for levers to be ordered according to their marginal costs. In contrast, incremental abatement cost curves are generally not monotonically increasing in the level of abatement, precisely because the joint costs and emission levels corresponding to different combined levers are not separable across the constituent elementary levers [20][21][22][23] . ...
