Marginal Abatement Cost Research Articles

Price Discovery of Consignment Auctions for Emission Permits

A consignment auction aims to increase political feasibility by reducing the financial burden of initial permits allocation and to do the role of price discovery. However, previous analytical models presented contradictory results for the price discovery function of a consignment auction. Thus, this study reexamines whether a consignment auction can perform its price discovery function. The study uses a simple game model with several assumptions differentiated from previous analytical models: explicit consideration of the secondary market and firms as price-takers with various behaviors to respond to uncertainty about the price in the secondary market. Firms are classified into three types: speculators who seek arbitrage, doctrinarians who determine a permit demand based on an estimation of their marginal abatement cost, and neutralists who keep a permit demand the same as initial emission endowments. The results reveal that when a consignment auction was introduced, the expected equilibrium price was identical to that of the secondary market price, demonstrating that the auction could deliver the price discovery function. This is because speculators and doctrinarians provide information about their price expectations and marginal abatement cost through their estimated demand functions. Additionally, the smaller number of neutralists is, and the higher the risk-seeking propensity of speculators is, the more effective the price discovery function is.

The implication of the Paris targets for the Middle East through different cooperation options

The core of the 36th round of the Energy Modeling Forum project shows that it is more likely that major fossil-fuel exporters, such as the Middle East, are highly affected because of the decrease in fossil-fuel extractions required for the worldwide fulfillment of the Paris agreement. We employ a multi-region, multi-sector computable general equilibrium model of global trade and energy to examine the effects of implementing the Paris agreement with a focus on the Middle East which is further disaggregated into Iran, Saudi Arabia, the rest of net fossil fuel exporting countries (XFE), and the rest of countries (XNE). After examining the abatement costs for the regions, we apply four emission reduction targets, ranging from a low ambition level to a high ambition level. We develop comprehensive scenarios covering several cooperation options within the Middle East and between the Middle East and selected regions outside. The results show that Iran has the lowest marginal abatement cost in the Middle East, followed by XNE, XFE, and Saudi Arabia. If the Middle East does not implement any climate policy, the welfare losses can be slightly compensated due to a carbon leakage to the Middle East. The cooperations within the Middle East are not welfare increasing for the region as a whole when Iran mainly benefits from such cooperation whereas Saudi Arabia loses welfare. The Middle East benefits from global cooperation and the cooperation with Europe, but the cooperation with China, India, or Russia can be welfare decreasing.

Air pollutants from shipping: Costs of NOx emissions to the Baltic Sea

Despite a large body of literature on the calculations of costs of air emissions from shipping, calculations of damages to the marine water are missing. This paper calculated the costs of NOx emissions from shipping entering an environmentally heterogeneous sea by applying the abatement cost approach. The total costs and unit shadow cost of NOx were then calculated by means of the marginal abatement cost for international agreements on targets of nitrogen loads to the sea. This conceptual model highlighted the need to distinguish between direct emissions of NOx on the sea and indirect emissions through deposition of emissions on land in the catchment with subsequent transportation into the sea. Calculated total cost amounted to 240 million euros, where indirect deposition accounted for 23% of the costs. The unit shadow costs ranged between 1.41 and 3.69 euros/kg NOx-N depending on location of the vessel.

Cost-effectiveness analysis on improving fuel economy and promoting alternative fuel vehicles: A case study of Chongqing, China

This study analyzed the greenhouse gas (GHG) reduction potential and cost of urban road transportation policies from a boarder perspective including tank-to-wheel (TTW) and well-to-wheel (WTW) assessments, with Chongqing in China taken as the case city. Three policies and two mixed policies, including improving the fuel economy of passenger cars, promoting electric vehicles (EVs), and promoting natural gas vehicles (NGVs), are analyzed in this study. The two groups of mixed policies are developed to analyze the interaction between the policies. The results indicate that all the policies will reduce TTW and WTW fuel consumption and GHG emissions from 2016 to 2035. During this period, promoting an NGV policy will have the smallest marginal abatement cost (MAC) but the smallest GHG reduction potential, and promoting an EV policy will have the largest MAC but the largest GHG reduction potential from TTW. However, considering the GHG emissions from upstream energy consumption, the GHG emission reduction from promoting the EV policy is reduced and that of improving the fuel economy via the motor vehicle policy will increase significantly, resulting in a larger MAC from WTW than from TTW. With the mixed policies, hedging effects impact fuel savings, GHG emission reductions, and MACs. We put forward some policy suggestions to provide a reference for the formulation and adjustment of China's urban road transportation policies to cost-effectively mitigate GHG emissions in the future.

The global cost of reaching a world without hunger: Investment costs and policy action opportunities

This study developed a marginal abatement cost curve 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. 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, 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.

Climate change mitigation measures for global net-zero emissions and the roles of CO2 capture and utilization and direct air capture

Many existing scenario studies show the need for large amounts of biomass energy with carbon dioxide capture and storage (BECCS) to achieve net-zero emissions, requiring high mitigation costs. This study provides comprehensive and cost-efficient technological portfolios for both energy supply and demand, and reveals the roles of carbon dioxide utilization (CCU) and direct air capture (DAC) for achieving global net-zero emissions by using a technology-rich global energy systems and climate change mitigation model which can assess them comprehensively, while considering several kinds of uncertainties. According to the analyses, DAC will be able to dramatically reduce emission reduction costs and alleviate dependence on BECCS. There are no feasible solutions for temperature increases below 1.5 °C in 2100 with 66% achievability under a temperature overshoot pathway unless DAC is used. Carbon free or nearly carbon free hydrogen plays important roles for net-zero emissions, and CCU helps increase the usability of hydrogen via synthetic fuels, and thus contributes to net-zero emissions. The relationships between DAC and CCU are very complex; the reductions in marginal abatement costs of carbon dioxide (CO2) due to DAC will reduce the roles of CCU around 2050 for many of the pathways to net-zero emissions. Meanwhile, for deeper reductions of CO2 emissions including net negative emissions in 2100, DAC will increase the roles of CCU by providing recovered CO2 from DAC, and also expand the opportunity for the use of recovered CO2 from fossil fuel combustion for synthetic fuels, because the related emissions are offset by larger negative emissions from the combination of DAC and CO2 storage (DACCS).

Revisiting the potential of pumped-hydro energy storage: A method to detect economically attractive sites

This study innovatively combines a set of methods to assess the economic potential of pumped hydro energy storage. It first provides a method based on geographic information systems to study the potential of pumped-hydro for different topologies. Second, using cost estimates for each identified site, cost-potential curves are derived. Finally, these curves are used for planning a fully renewable system to assess their impact on investment recommendations. Applications to Chile, Peru, and Bolivia show the usability of the methods. Over 450 pumped-hydro locations are identified, totaling around 20 TWh (or 1600 GW of installed capacity with 12 h of storage). These numbers exceed by 20-fold the projected daily energy demand of the corresponding countries. When taking into account investment costs, most locations are cheaper than current Li-ion batteries, but only some are expected to remain competitive in the future. When using the resulting cost-potential curves to design a future energy system, the planning tool recommends about 1.6 and 5.0 times more pumped-hydro storage compared to using average values and literature values, respectively. These differences underline the significance of the found cost curves.

Scaling up Climate Mitigation Policy in Germany

Germany has set national greenhouse emissions targets of a 65 percent reduction below 1990 levels by 2030 and net zero emissions by 2045, along with various sectoral emissions goals. To achieve these targets, the government has introduced multi-pronged policy measures, including a national emissions trading system (ETS), which complements the ETS at the EU level. This paper shows the substantial variation in the price responsiveness of emissions across sectors and thus prices implied by sectoral targets. It proposes the following measures to help Germany meet emissions targets with greater certainty and cost effectiveness: (i) further strengthening carbon pricing, for example through automatically rising price floors for the national ETS after 2026; (ii) harmonizing carbon pricing to reduce cross-sector differences in marginal abatement costs; and (iii) introducing feebates (revenue neutral taxsubsidy schemes) to reinforce incentives at the sectoral level. The paper also studies the distributional impact of higher carbon pricing and suggests that reducing social security contributions can mitigate the regressive direct impact of higher carbon pricing on lowerincome households. Concerns with carbon leakages and firms’ competitiveness are best addressed through agreeing on an international carbon price floor.

Deep decarbonization impacts on electric load shapes and peak demand

The existing literature has shown the important role of electrification in deep decarbonization pathways, increasing electricity demand as end uses decarbonize. However, studies have not focused on the effects of electrification on aggregate load shapes and peak demand, which influence power sector investments, operations, and costs. Here we investigate potential impacts of deep decarbonization on regional load shapes and peak electricity demand using a detailed end-use simulation model linked to an electric sector capacity planning model. Scenario results suggest that electrification may contribute to peak load increases and shifts from summer peaks to winter ones, especially in cooler climates due to space heating electrification. We illustrate how net-zero emissions goals can amplify electrification and may entail 120%–165% increases in electric system capacity by 2050 due to a combination of electrification and high renewables deployment. The intensity and frequency of peak demand can be limited by load flexibility (providing incentives for electric end uses to shift away from periods of high demand, e.g. through deferrable electric vehicle charging), alternate end-use technology configurations (deploying higher efficiency end-use equipment to lower electricity consumption during peaks or using dual-fuel systems such as heat pumps paired with gas furnaces), and carbon removal (displacing higher marginal abatement cost electrification while reaching an equivalent emissions cap). This analysis is a first step toward systematically exploring load curves for electrified and decarbonized energy systems, and the results highlight opportunities for future research to better understand load shape impacts and flexibility.

The political economy of negotiating international carbon markets

International carbon markets are a cost efficient instrument for achieving a given CO2 emissions target. This paper identifies the conditions under which participating governments benefit from the establishment of such a market through Coasean cooperation, in the presence of strategic considerations in the negotiations. While negotiations internalize cross-border spillovers, governments have incentives to send delegates who value environmental damages less than they do themselves. We find – for benefit and damage functions typically assumed in the literature on international environmental agreements – that even though total emissions are lower than in a non-cooperative regime, high cost savings from trading permits are not sufficient for all participating governments to benefit from an international market. An international market constitutes a Pareto improvement in particular if i) marginal damages substantially differ across countries, ii) marginal damages and marginal abatement costs are sufficiently similar across countries. Bilateral carbon markets among the large emitters China, the EU and the US would not be Pareto improving. What is more, bilateral agreements with non-tradable emissions caps may be better suited to establish mutually beneficial cooperation in such cases. We conclude our analysis with a robustness check for different functional forms.

Prioritizing greenhouse gas mitigation strategies for local governments using marginal abatement cost

Abstract Cities and other subnational jurisdictions have emerged as key agents for plans and policies to mitigate global climate change, with many presenting their strategies through climate action plans (CAPs). A critical review of CAPs from local government jurisdictions in California found that many CAPs lacked quantitative information on the economic cost and emissions reductions of proposed strategies, precluding decision-making based on the cost-effectiveness of competing policies. In response, this study develops a framework for comparing strategies based on their life cycle emissions mitigation potential and life cycle costs in a marginal abatement cost curve (MACC) to allow for side-by-side comparison. This framework was piloted with the cooperation of two California counties, Yolo and Los Angeles, to analyze six strategies in the transportation sector: intercity bike lanes, installation of roundabout intersections, alternative pavement rehabilitation, electric bus fleet, alternative fuel city fleet and installation of solar canopies in parking lots. Applying the life cycle approach revealed strategies that had net cost savings over their life cycle, indicating there are opportunities for reducing emissions and costs (roundabout intersections and solar canopies). The life cycle accounting processes also revealed that some emissions reduction strategies in fact increased emissions relative to no action (intercity bike lanes and alternative pavement rehabilitation). Despite the attractiveness of a life cycle-based MACC to support local government decision-making, there is the mismatch between a life cycle perspective and the annual emissions accounting used in most CAPs and associated policies. Future work should explore how to marry the life cycle and annual accounting methods and incorporate other sustainability concerns, such as equity and environmental justice, to support local decision-making.

Autumn: A Python library for dynamic modelling of captured CO~2~ cost potential curves

autumn: A Python library for dynamic modelling of captured CO~2~ cost potential curves

Solely economic mitigation strategy suggests upward revision of nationally determined contributions

Solely economic mitigation strategy suggests upward revision of nationally determined contributions

How can carbon trading price distortion be corrected? An empirical study from China's carbon trading pilot markets.

The essence of carbon trading is to optimize the allocation of factor resources by using price leverage. However, the effect of the carbon trading market might be seriously affected by carbon trading price distortion (CTPD), which means the deviation of the actual trading price from the carbon marginal abatement cost (MAC). This paper proposes a novel analytical framework to evaluate the impacts of CTPD and explore corresponding correction strategies. Specifically, the impacts of CTPD are analyzed theoretically, and then CTPD in China's carbon trading pilot markets during 2013-2017 is evaluated by the Stochastic Frontier Analysis. Last, the panel data vector autoregression model and panel data vector error correction model are used to explore correction strategies. Our analysis reveals several interesting insights. First, our results show that CTPD negatively impacts the economic benefits, environmental benefits, and policy acceptance of the carbon trading market. Second, China's carbon trading market suffers from not only CTPD but also persistent negative price distortions in energy, labor, and capital factors, although CTPD is the most serious issue. Third, the energy price and macroeconomic environment have positive impacts on the carbon trading price. Last, a greater of any factor price distortion would lead to an increase in the carbon MAC. Based on these results, several correction strategies are recommended.

Assessing transition pathways to low-carbon electricity generation in Kenya: A hybrid approach using backcasting, socio-technical scenarios and energy system modelling

This paper establishes a bottom-up LEAP-Kenya-Centralized-Electricity model to simulate the mitigation potential of chief atmospheric pollutants and greenhouse gas (GHG) emissions from 2010-2040 under different scenarios: Business as Usual (BAU), Vision 2030+Least Cost Power Development Plan (VLCPDP), and four low-carbon scenarios spanning Full Renewables (FRE), UN Agenda 2030 SDGS (SDGs) and AU Agenda 2063 (AU). A comparative analysis of the alternative generation scenarios is presented and assesses multiple indicators including electricity demand, technology stocks, air pollution, greenhouse gas emissions, marginal abatement costs, and air pollution health impacts. Total electricity demand is projected to reach 57.4 thousand gigawatts-hours by 2040 under VLCPDP and the low-carbon scenarios; 11.8% greater than the BAU scenario. Total GHG emissions under SDGs and AU will be 99.7% and 97.6% lower than VLCPDP whose GHG emissions will be 14.7% greater than BAU. PM2.5 concentration in both BAU and VLCPDP will increase by 0.54µg/m3 by 2040. Besides, renewable energies will account for 99% of total electricity generation capacity under SDGs 2 in 2040; 26.7% and 20.9% higher than BAU and VLCPDP respectively. Importantly, FRE and SDGs 2 emerged as the most promising scenarios for achieving the highest greenhouse gas abatement potential and least impacts on human health at least costs.

Environmental and economic impact of household energy systems with storage in the UK

Households accounted for 35% of total UK electricity consumption in 2019 and have considerable potential to support the target of net-zero CO2 emissions by 2050. However, there is little understanding of the potential to reduce emissions from household energy systems using emissions-responsive battery charging, and existing investigations use average emissions factors rather than marginal. To understand the overall carbon reduction potential of household energy systems, a life cycle assessment has been conducted for a typical house in the UK, with annual electricity consumption of 3960 kWh. Household energy systems comprising solar photovoltaics arrays and battery energy storage systems are assessed using time-series consumption and generation data, determined by combining a validated demand model, marginal emissions factor calculations, storage system models, and assumptions regarding the future grid. Marginal emissions factors are used to calculate the life cycle carbon emissions of electricity consumption. The carbon emissions and financial costs of household electricity consumption have been estimated for different combinations of battery storage, photovoltaics arrays, and smart battery charging systems. Results show that the deployment of a rooftop photovoltaics array and lithium nickel-manganese-cobalt battery operating in response to grid emissions factors could achieve 14 tons of CO2 savings through the system’s life span, though total electricity costs would be increased considerably. The household with just a photovoltaics array and no battery storage could increase total electricity costs by £2170 and achieve 12 tons of CO2 savings through the system’s life span, providing much improved marginal abatement costs over systems with battery storage. The battery operation mode and the characteristics of batteries and photovoltaics systems in carbon emissions reduction are discussed. High cost is the main factor limiting the deployment of household battery systems.

Greenhouse gas mitigation technologies in agriculture: Regional circumstances and interactions determine cost-effectiveness

Agriculture, forestry and other land use are important components of a global strategy to limit climate change. Using the example of EU agriculture, this paper examines the potential contribution of technological (i.e. technical and management-based) greenhouse gas mitigation options to climate targets. The quantitative framework presented allows to analyze disparities between marginal abatement cost curves (MACCs) derived from two different commonly used approaches, and between aggregated and regional MACCs. Results highlight the importance of assessing mitigation of agricultural emissions from a multi-dimensional perspective, considering regional heterogeneity of biophysical and economic circumstances and comprising both carbon-dioxide (CO2) and non-CO2 emissions. Regarding the ranking of technologies in terms of mitigation potential and costs, the results underline the need to consider technologies in a combined manner, avoiding the simple aggregation of mitigation potentials by individual measures without taking their interactions into account. Focusing only on standalone MACCs can lead to an overestimation of the mitigation potential. Conversely, measures classified as relatively high cost in standalone and aggregated MACCs should not be discarded, as they can still be cost-effective in some regions. The analysis shows that there is no ‘one size fits all’ rule that could be followed for identifying technologies that should be implemented in all regions. From a policy perspective the results imply that farmers should be granted some flexibility to adopt a set of cost-effective mitigation options that best fits their circumstances.

The cost-effectiveness of CO2 mitigation measures for the decarbonisation of shipping. The case study of a globally operating ship-management company

The International Maritime Organisation has set a goal to achieve a 50% reduction of the total annual greenhouse gas emissions related to the international shipping by 2050 compared to the 2008 baseline emissions. Thus, companies are looking for solutions and measures to align with the Organisation's goal. Marginal Abatement Cost Curves have been extensively used in the literature to rank several Greenhouse Gas mitigation measures based on their costs of reducing an additional unit of pollution. In this paper an expert-based, bottom-up approach was employed to construct Marginal Abatement Cost Curves for a globally operating ship-management company. Several mitigation measures were examined for the following vessel categories (a) Containerships 8000+ TEU, (b) Containerships 2000–2999 TEU, (c) Bulkers 35000–59999 DWT, and (d) Gas Tankers <49999 CBM. Furthermore, the fuel price fluctuation and carbon taxation were used to investigate the sensitivity of baseline Marginal Abatement Cost Curves. The measures, which remain cost-effective under all sensitivity analyses, undergo a Pareto Analysis and a Marginal Cost-Effectiveness Analysis. The results suggest that most of the recommended mitigation measures are of an operational and technical nature, with exception the burning of Liquified Natural Gas and the installation of Flettner Rotors for the Gas Tankers. The company could save up to 17% CO2 emissions and approximately 2 million dollars per year compared to the 2019 baseline by employing all recommended mitigation measures to all vessel categories. In addition, Carbon Storage and Capture could become a cost-effective solution with appropriate carbon taxation, but it is not the ultimate solution since it does not lead to independence from fossil fuels. The study also reveals that depending on the operating condition, even within the same vessel category, different mitigation measures should be employed.

Reducing household greenhouse gas emissions from space and water heating through low-carbon technology: Identifying cost-effective approaches

Reducing fuel use for the heating of houses is key to meeting greenhouse gas emission reduction targets. This study constructs Marginal Abatement Cost Curves (MACC) of different technologies for space and water heating of houses in the county of Gwynedd in Wales, UK, and uses information provided by energy certificates to correctly assess the energy requirements of a house. This approach allows us to accurately predict energy consumption and identify potential ways to reduce demand. We then explore the costs and savings of a switch from systems using conventional heating fuel (e.g., gas, electricity, oil, LPG, and coal) to low-carbon technology such as PV, biomass boilers and heat pumps. Solar PV was the low-carbon heating technology found to be most cost-effective per tonne of emissions abated (£/t CO2). A reduction in capital costs of low-carbon technologies could potentially make technologies such as heat pumps be cost-effective. Without any policy intervention, low investment and fuel cost of gas would make replacement with any low-carbon technology uneconomical. Emission savings in Gwynedd over 30-year period could be between 3.494 and 5.289 Mt CO2 if appropriate measures which cater towards reducing capital costs and/or incentivising the uptake of technology are adopted.

Greenhouse gas emissions vs CO2 emissions: Comparative analysis of a global carbon tax

Both CO2 and non-CO2 emissions are liable in climate change policies in many countries around the world. However, there are still many impact assessment studies in different regions that consider only CO2 emissions. We hypothesise that excluding non-CO2 greenhouse gas emissions, which are also liable in climate change policies, may lead to misleading results and impacts. We employ a global climate change policy model (GTAP-E-PowerS) to examine how the impact of a uniform carbon tax at US$15 applying to the world regions are different when only CO2 emissions are liable compared to the case that non-CO2 emissions are additionally subject to the tax. That is, the impacts of the carbon tax applying to CO2 emissions only (against no carbon tax) will be compared to the impacts of such a tax applying to both CO2 and non-CO2 greenhouse gas emissions (against no carbon tax). Results show the deviations in the impacts between with and without inclusion of non-CO2 emissions are more obvious in developing countries particularly by comparison to developed nations. Iran, for instance, experiences a higher reduction in real GDP of 1.52 percentage points when non-CO2 emissions are overlooked. These impact deviations also rise with increased costs to economies (e.g., more sectors involved or higher tax rates). We find developing countries experience higher contraction rates in their economies than developed nations. Iran, Kazakhstan, South Africa, China, India, Russia, Mexico, and Indonesia all experience 2–5.1% reductions in real GDP relative to business-as-usual (no carbon tax), while such reductions are below 0.8% in Australia, the United States and other developed nations because emission costs compared to economy size are relatively high in developing nations. Major polluting countries like China, the United States, India, and Russia were also found to have low marginal abatement costs compared to other nations due to high emission levels and input substitution possibilities. To provide more accurate and insightful impacts of climate change policies, we recommend future studies include both CO2 and non-CO2 emissions in models.