The cost of reduction is the cost of reducing environmental negatives such as pollution. Marginal cost is the economic concept that measures the cost of additional units. marginal reduction cost ( MAC ), in general, measures the cost of reducing one more pollution unit.
Although marginal cost reductions can be negative, such as when low-carbon options are cheaper than business-as-usual options, MACs often rise sharply as more pollution is reduced.
Marginal cost reduction is typically used on marginal marginal cost curves (MACC) or MAC curves , which indicate the marginal cost of additional reductions in pollution.
Video Marginal abatement cost
Usage
Carbon traders use the MAC curve to obtain a supply function for the fundamental modeling of carbon prices. Power companies can use MAC curves to guide their decisions about long-term capital investment strategies to choose between efficiency and generation options. Economists have used the MAC curve to explain the economics of carbon trade between regions. Policymakers use the MAC curve as a merit order curve, to analyze how much reductions can be made in the economy at what cost, and where policies should be directed toward achieving emissions reductions.
However, the MAC curve should not be used as a reduced supply curve (or service request curve) to decide on the steps to be implemented to achieve the given emission reduction target. Indeed, the options they compile will take decades to apply, and may be optimal to implement costly but high-potential actions before introducing cheaper steps.
Maps Marginal abatement cost
Criticism
The way MAC curves are usually constructed has been criticized for lack of transparency and ill-treatment it creates uncertainty, inter-temporal dynamics, interaction between sectors and additional benefits. There is also concern about the bias ratings that occur if some of the included options have negative costs.
Examples of existing MAC curves
Various economists, research organizations, and consultants have produced MAC curves. Bloomberg New Energy Finance and McKinsey & amp; The Company has produced extensive economic analysis on greenhouse gas emissions reductions for the United States. ICF International produces California-specific curves following the AB-32 law as well as Sweeney and Weyant.
The Wuppertal Institute for Climate, Environment and Energy produces some marginal cost reduction curves for Germany (also called the Cost Potential Curve), depending on the perspective (end-user, utility, community).
The US Environmental Protection Agency has done work on the MAC curve for non-carbon dioxide emissions such as methane, N 2 O, and HFCs. Enerdata and LEPII-CNRS (France) produced the MAC curve with Prospective Outlook on the Model of Long-Term Energy System (POLES) for 6 Kyoto Protocol gas. This curve has been used for various public and private actors either to assess carbon policies or through the use of carbon market analysis tools.
The World Bank 2013 low-carbon energy development plan for Nigeria, compiled with the World Bank, uses the MAC curve created in Analytica.
See also
- Environmental economics
- Marginal cost
- Social costs
References
Source of the article : Wikipedia
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