What are the key drivers of MAC curves? A partial-equilibrium modelling approach for the UK

Abstract

Marginal abatement cost (MAC) curves are widely used for the assessment of costs related to CO2 emissions reduction in environmental economics, as well as domestic and international climate policy. Several meta-analyses and model comparisons have previously been performed that aim to identify the causes for the wide range of MAC curves. Most of these concentrate on general equilibrium models with a focus on aspects such as specific model type and technology learning, while other important aspects remain almost unconsidered, including the availability of abatement technologies and level of discount rates. This paper addresses the influence of several key parameters on MAC curves for the United Kingdom and the year 2030. A technology-rich energy system model, UK MARKAL, is used to derive the MAC curves. The results of this study show that MAC curves are robust even to extreme fossil fuel price changes, while uncertainty around the choice of the discount rate, the availability of key abatement technologies and the demand level were singled out as the most important influencing factors. By using a different model type and studying a wider range of influencing factors, this paper contributes to the debate on the sensitivity of MAC curves.