Assessing the Cost-Effectiveness of Incentives for Energy Transition Using Marginal Abatement Cost Curves

Abstract

Incentive policies play a crucial role in encouraging the adoption of renewable energy sources and energy efficiency measures. This study analyzes and compares the incentives for energy transition in the South Tyrol region of Italy using a marginal abatement cost (MAC) curve constructed with an expert-based approach. The incentives for residential energy efficiency, mobility, and boiler replacement are characterized based on assumptions for costs, energy savings, and parameters. The resulting expert-based MAC curve analysis reveals boiler replacement incentives to be the most cost-effective, yielding CO2 reductions at the lowest cost but with limited potential as the incentive is limited to apartment blocks that are not in district heating areas. Mobility incentives enabling electric vehicle adoption have the highest CO2 reduction potential, albeit at higher costs per ton abated. Residential energy efficiency incentives fall between the two for cost-effectiveness and potential. The MAC curve approach provides a useful comparison of cost-effectiveness versus potential, guiding policy prioritization. This techno-economic assessment methodology can be applied to other regions pursuing energy transition. Overall, a balanced policy mix encompassing transport, buildings, and heating is required for comprehensive low-carbon transition.