Marginal Abatement Cost Research Articles

Marginal CO2 and SO2 Abatement Costs and Determinants of Coal-Fired Power Plants in China: Considering a Two-Stage Production System with Different Emission Reduction Approaches

Marginal abatement cost (MAC) plays an essential role in pricing pollutants and guiding environmental policies. Considering the heavy polluting nature of China’s coal power industry, this paper aims at providing companies and policymakers with more comprehensive information on the cost of abatement by estimating the MACs of CO2 and SO2 for coal-fired power plants (CFPPs) in China. This study contributes to the literature by considering an interconnected two-stage production system to investigate. The estimation framework is advanced in combining the electricity production and pollution abatement process of CFPPs into a convex quantile regression (CQR) model. The results show that the averages of MAC for CO2 and SO2 are estimated to be 367.56 Yuan/ton and 662.30 Yuan/ton, respectively, indicating that the reduction of such emissions is still costly. The heterogeneous analysis then indicates that large CFPPs, central-government-owned power plants (CGOPPs), and low-regulated CFPPs tend to possess lower MACs for CO2. Regarding SO2, large and medium-sized power plants show significantly larger MACs than small plants. In addition, the MACs of SO2 for CGOPPs and high-regulated CFPPs are more concentrated at high levels. In the second part, the Tobit regression analysis was used to discuss the determinants of MACs for CO2 and SO2. Factors like carbon emission intensity, load, and operating hours can notably decrease MACs for CO2, while MACs for SO2 tend to be positively affected by the total abatement cost and the abatement rate of the FGD equipment. In addition, the MACs for the large CFPPs, CGOPPs, and high-regulated CFPPs are more likely to be affected by the selected influence factors. Based on these results, we conclude with some policy recommendations.

Cost Benefit Analysis and Determination of Liquid Waste Tax Rates Commercial Buildings in DKI Jakarta

This study aims to analyze the cost benefits of wastewater treatment and the determination of liquid waste tax rates on commercial buildings in the DKI Jakarta area. The variables used are (i) positive externalities that are proxied through labor and the benefits of wastewater treatment, (ii) concentration of liquid waste which includes Biological Oxygen Demand (BOD), Chemical Oxygen Demand (COD), Organic (KMnO4), and Total Suspended Solid (TSS), (iii) Liquid waste processing costs, (iv) Costs incurred by the community due to pollution. This research was conducted using an explanatory research approach and descriptive research. The samples used were commercial buildings X, Y and Z and communit affected liquid waste in central Jakarta. The analytical method used is Extended Cost and Benefit Analysis, Marginal Abatement Cost (MAC), Marginal Damage Cost (MDC) and Pigovian Tax. For marginal damage costs using economic valuation and determining the optimum tax rate using the Pigovian Tax approach. The results of the dissertation analysis show that buildings that have Liquid Waste Treatment Plants produce positive externalities, namely employment and the reuse of liquid waste processing results in the form of gardening, car wash, cooling tower, and reverse osmosis. In addition, commercial buildings that carry out liquid waste treatment have economic feasibility due to cost efficiency and are also environmentally feasible with the allocation of liquid waste treatment costs. For buildings that haven’t implemented WWTP and only use the services of PAL Jaya DKI Jakarta, directly shows that it is feasible from an environmental aspect because there is an allocation of costs for wastewater treatment and the benefits obtained are that operational activities can run Liquid waste processing by companies that have WWTPs have not reached usage standards drinking water so that it has an impact on additional damage costs incurred by the community (Marginal Damage Cost/MDC). Used the Marginal Abatement Cost (MAC) and Marginal Damage Cost (MDC) equilibrium, the determination of the waste tax rate on commercial buildings produces the optimum tax value to be paid by pplluters and the optimum concentration of liquid waste that can be discharged into rivers.

Shadow pricing of electricity generation using stochastic and deterministic materials balance models

Marginal abatement cost is an essential input to optimal environmental policies. Shadow pricing has become a popular method for estimating abatement costs subject to parsimonious data requirement. This paper provides a novel contribution to the literature on shadow pricing by considering the implication of the materials balance principle for shadow prices. To that end, the paper establishes a Convex Nonparametric Least Squares estimator for the weak G-disposable production model, which for the first time enables modeling a composite error term and joint estimation of the production frontier and contextual variables within this production model framework. Applying the Directional Distance Function, environmental efficiencies and shadow prices for carbon dioxide emissions are estimated for a sample of power producers using both stochastic and deterministic frontier models. Average shadow price estimates for carbon dioxide range between 14,000 and 40,000 $/ton CO2 for the weak G-disposable model and between 70 and 77 $/ton CO2 for the conventional production model that ignores the materials balance. These findings cast doubt on previous shadow price estimates since a majority of comparable studies ignore the strict technical relationship among pollution-generating inputs and bad outputs under the materials balance condition.

A simulation model of climate policy analysis for sustainable environment in Pakistan

AbstractThis study suggested a plan for making low carbon society (LCS) in Pakistan by 2050. Low Emissions Analysis Platform is used for simulation the entire energy system and forecasted the future CO2 emissions in relation to the use of renewable and fossil fuel resources under the two scenarios namely high carbon society (HCS) and LCS. Additionally, marginal abatement cost of future energy system is forecasted for the study period 2022–2050. The results revealed that, 100% de‐carbonization is possible under the LCS scenario. Further, this scenario suggested that 1123.15 TWh units of green energy are generated to meet the total energy demand of 966.05 TWh till 2050. Biomass has greater share of 380.16 TWh followed by wind 370.67 TWh, solar 358.74 TWh, and hydro 13.58 TWh respectively. CO2 emissions are reduced from 151.63 million metric tons in HCS scenario to 8.90 million metric tons in LCS scenario till 2050 but cost is increased from 46.36 billion US dollar in HCS scenario to 546.49 billion US dollar in LCS scenario for the year 2050. The technique can also be applicable to the developing, under‐developed and developed nations around the globe.

Policy pressure to retrofit Germany's residential buildings to higher energy efficiency standards: A cost-effective way to reduce CO2 emissions?

Germany's climate goals require over 75% of its housing stock to be retrofitted for energy efficiency. An important question for Germany and other countries is, what minimum energy efficiency standard should be mandated for housing retrofits so as to reduce CO2 emissions economically efficiently? It has long been known that the marginal costs of energy efficiency increase as standards are pushed higher, and therefore the marginal costs of CO2 abatement increase, but at the same time energy consumption reduces, thereby reducing CO2 emissions. This paper investigates where the social optimum lies between these two effects. In addition to a large database of house sale advertisements containing price and energy efficiency data, it uses two semi-official data sources of modelled and actual energy efficiency upgrades in Germany. It finds that retrofitting to a modestly high standard of about 70 kWh/m2/y entails marginal costs of CO2 abatement comparable to current CO2 prices. However, each step to a higher standard increases these by up to an order of magnitude, with absurdly high marginal costs of CO2 abatement for the highest standards. German policymakers are currently pushing for higher minimum standards, but money could better be spent retrofitting more houses to less stringent standards.

China's manufacturing firms' willingness to pay for carbon abatement: A cost perspective

AbstractThe existing studies of emissions reduction focus mainly on the technical potential and abatement costs while overlooking firms' willingness to pay (WTP) for emissions reduction. Yet WTP is a key parameter in a firm's decision to carry out emissions reduction while maximizing its profits. This paper estimates China's manufacturing industry (CMI) firms' maximum WTP for carbon abatement—defined as the cumulative product between the marginal abatement cost and corresponding abatement potential—using a large sample from a data envelopment analysis model. The results show that (a) the maximum WTP is significantly constrained by an isocost carbon abatement curve at RMB 8.65 million for the representative CMI firm; (b) the representative firms' WTP for carbon abatement varies among the sub‐sectors; and (c) profitability and production scales both positively affect firms' WTP for carbon abatement in all of CMI sub‐sectors, while innovation investment has a negative effect. The results suggest that the cost of carbon reduction technology for CMI firms should be below RMB 8.65 million for a representative CMI firm. The government should formulate subsidies or tax relief policies to help firms reduce their abatement costs. Further, the division of tasks in different sub‐sectors, between carbon emissions reduction on the one hand, and ongoing innovation on the other, should be clearly distinguished by policy bias to promote the transformation of industrial structure.

Global Hydrogen and Synfuel Exchanges in an Emission-Free Energy System

This study investigates the global allocation of hydrogen and synfuels in order to achieve the well below 2 °C, preferably 1.5 °C target set in the Paris Agreement. For this purpose, TIMES Integrated Assessment Model (TIAM), a global energy system model is used. In order to investigate global hydrogen and synfuel flows, cost potential curves are aggregated and implemented into TIAM, as well as demand technologies for the end use sectors. Furthermore, hydrogen and synfuel trades are established using liquid hydrogen transport (LH2), and both new and existing technologies for synfuels are implemented. To represent a wide range of possible future events, four different scenarios are considered with different characteristics of climate and security of supply policies. The results show that in the case of climate policy, the renewable energies need tremendous expansion. The final energy consumption is shifting towards the direct use of electricity, while certain demand technologies (e.g., aviation and international shipping) require hydrogen and synfuels for full decarbonization. Due to different security of supply policies, the global allocation of hydrogen and synfuel production and exports is shifting, while the 1.5 °C target remains feasible in the different climate policy scenarios. Considering climate policy, Middle East Asia is the preferred region for hydrogen export. For synfuel production, several regions are competitive, including Middle East Asia, Mexico, Africa, South America and Australia. In the case of security of supply policies, Middle East Asia is sharing the export volume with Africa, while only minor changes can be seen in the synfuel supply.

Marginal climate change abatement costs in Swiss dairy production considering farm heterogeneity and interaction effects

Marginal climate change abatement costs in Swiss dairy production considering farm heterogeneity and interaction effects

Decarbonization of energy supply to offshore oil & gas production with post-combustion capture: A simulation-based techno-economic analysis

Low-carbon-emissions FPSO (Floating, Production, Storage, and Offloading) designs are developed and compared, using process simulation in HYSYS, and an original economic analysis approach. FPSO units with power-intensive operations (e.g., fields with high gas-to-oil ratio) are the focus of the study. Three designs are evaluated: Case A considers a floating natural-gas-combined-cycle power unit with post-combustion CCS (Carbon Capture and Storage) connected to an existing FPSO. Case B.1 retrofits a CCS unit downstream of a conventional FPSO with simple-cycle power generation. B.2 adds a more efficient combined cycle to B.1. The removed CO2 is injected for enhanced oil recovery. Marginal abatement cost is investigated for oil prices of 60/80/100 USD/bbloil and recovery of 0.0/1.5/3.0 bbloil/tCO2 injected. The added weights to topsides are 4,326t (A), 2,762t (B.1) and 3,445t (B.2). CO2 intensity (kgCO2/boe) is reduced from 6.92 in the conventional design to 0.74 (A-B.2) and 0.92 (B.1). The marginal abatement cost of B.1 and B.2 are alike, approaching zero at 1.5 bbloil/tCO2 oil recovery. Taking technical retrofitting challenges aside, Case B.1 is the most cost-effective alternative. Cases A and B.2 have a slightly better environmental performance than B.1, but B.2 presents a superior economic performance and lower operational risks compared to A.

Smart energy approaches for carbon abatement: Scenario designs for Chile's energy transition

This study develops scenarios aiming to transition the Chilean energy system in 2050 to 100% renewable energy; taking into account local resource potentials, demands, cross-sectoral integration of the electricity, heating, transport, and industrial sectors, and synergies in their related infrastructures. The energy system model EnergyPLAN is used to simulate the hourly operation of the energy system. The relationship between potential CO2 emissions reductions and relative costs is estimated using marginal abatement cost curves with the EPLANoptMAC tool to assess the optimal sequence of capacity expansion and carbon abatement alternatives. The analysis demonstrates that it is possible to carry out this transition from a technical perspective more efficiently than what is proposed with current national scenarios while still aligning with climate neutrality targets; and that, in different phases of the Chilean energy transition, specific options could be prioritized based on an improved balance between carbon abatement and costs.

Marginal abatement cost of carbon dioxide emissions: The role of abatement options

Reducing carbon dioxide (CO2) emissions is often not free, and estimating the marginal abatement cost of CO2 emissions (MCAC) provides valuable information for policy analysis and decision-making. Past studies often assume that producers would take a uniform abatement option that overlooks the heterogeneity of abatement options and the possibility of taking energy-related abatement options (e.g., merely cutting down fossil fuel consumption). This study contributes to the literature by investigating how different abatement options can be incorporated into estimating the MCAC. It first provides an expository derivation of the MCAC by opening the “black box” of the production process, which reveals that the MCAC can be negative if switching to fuels with lower carbon content generates positive marginal profit. We then develop a new approach for estimating the MCAC, where six alternative abatement options are considered. A case study on China's thermal power industry is presented, which reveals that the least-cost abatement option varies across different provinces and periods. Compared with the option of reducing energy consumption and downscaling production activity, switching to cleaner energy tends to abate CO2 emissions at lower costs for most provinces in most years.

A comparison of state-level carbon reduction strategies: A case study of Hawai‘i

State-level electricity standards are proliferating and becoming more ambitious, with numerous US states adopting a Renewable Portfolio Standard (RPS) and a small but increasing number of states participating in carbon pricing programs. The State of Hawai‘i has an ambitious RPS that requires 100% electricity generation through renewable sources by 2045. This study uses a general equilibrium model to compare a range of state-level carbon reduction strategies that achieve the same level of GHG emissions reductions in Hawai‘i as the RPS. We find that the RPS has regressive welfare outcomes. In contrast, an electric-sector-only carbon tax can be progressive if revenues are returned to households in equal-share dividends. Without dividends, there is little difference in welfare impacts between the RPS and electric-sector-only carbon tax. An economywide carbon tax has the lowest marginal cost of GHG abatement and highest level of electric vehicle adoption. When revenues are returned to households, the economywide carbon tax also has the most progressive welfare outcomes. Without revenue recycling to households, however, the economywide carbon tax yields the worst welfare impacts.

How carbon emission prices accelerate net zero: Evidence from China's coal-fired power plants

China produced over half the world's coal-fired power capacity. Using a recent and comprehensive dataset of 1269 Chinese coal-fired power plants from 2009 to 2019, this paper provides empirical evidence of the impact of China's carbon trading pilot program on emissions regulation. Results show the significant potential for emissions intensity reduction due to increasing carbon prices, especially for low-risk, low-efficiency but high-cost plants, particularly those in China's midland and western regions. Rising marginal abatement costs and accelerated depreciation from carbon prices may encourage utilities to retire high-emission power plants sooner than originally planned, leading to lower emissions intensity. The average retirement years of China's power plants can be shortened by 1.8001 and 1.6862 years under R2CUT and R2LUMP scenarios, respectively, as Cao et al. (2016). This study offers new insights into the impact of carbon prices on power plants and has important policy implications.

Closing the Gap between Carbon Neutrality Targets and Action: Technology Solutions for China's Key Energy-Intensive Sectors.

Facing significant carbon emissions annually, China requires a clear decarbonization strategy to meet its climate targets. This study presents a MESSAGEix-CAEP model to explore Chinese decarbonization pathways and their cost-benefit under two mitigation scenarios by establishing connections between five energy-intensive sectors based on energy and material flows. The results indicated the following: 1) Interaction and feedback between sectors should not be disregarded. The electrification process of the other four sectors was projected to increase electricity production by 206%, resulting in a higher power demand than current forecasts. 2) The marginal abatement cost to achieve carbon neutrality across all five sectors was 2189 CNY/tCO2, notably higher than current Chinese carbon emission trading prices. 3) The cost-benefit analysis indicates that a more ambitious abatement strategy would decrease the marginal abatement cost and result in a higher net carbon abatement benefit. The cumulative net benefit of carbon reduction was 7.8 trillion CNY under ambitious mitigation scenario, 1.3 trillion CNY higher than that under current Chinese mitigation scenario. These findings suggest that policy-makers should focus on the interaction effects of decarbonization pathways between sectors and strengthen their decarbonization efforts to motivate early carbon reduction.

An Economic Evaluation of the European Union’s 2030 Climate Policy Plan

Purpose: The purpose of the study is to evaluate the European Union’s “Fit for 55” plan, announced in 2021, which intends to meet a 2030 goal of reducing carbon emissions by 55 percent from 1990 levels.
 Design/methodology/approach: An analytical model is used to assess the impact of the EU environmental policies, including the carbon border tax, emissions trading system, energy efficiency, and emission standards.
 Findings: The study finds that the environmental policies achieve different policy criteria, including cost minimization, equalization of marginal abatement cost, minimization of general equilibrium cost, political feasibility, and minimization of inequitable impacts across income groups. But no single policy instrument is necessarily superior to the others. The paper finds that a revenue-neutral carbon border tax and an emissions trading system with auctioned permits satisfy the most evaluation criteria.
 Research limitations/implications: For the purpose of simplification, the model ignores dynamic extensions. That is, the adjustments of businesses to policy measures and the effects on emissions are beyond the scope of this analysis.
 Originality/value: The study develops a model that evaluates the European Union’s environmental policies in a unifying perspective, assessing the tradeoffs of policy design.

Cost of abating excess nitrogen on wheat plots in France: An assessment with multi‐technology modelling

AbstractWe use a multi‐equation model of polluting technologies to evaluate excess nitrogen's marginal abatement cost (MAC). The MAC is estimated using the convex non‐parametric quantile regression. The empirical application is conducted at the plot level for wheat production in France in 2017. Results show a median shadow price for excess nitrogen of about €21 per kilogram. If the current European Union's Nitrates Directive (which sets a 170‐kg constraint on organic nitrogen per hectare) were extended to mineral nitrogen, this would allow a reduction of total excess nitrogen by 9.5%, but this would be accompanied by a 3.1% decrease in wheat revenue.

Contribution of carbon pricing to meeting a mid-century net zero target

ABSTRACT A mid-century net zero target creates a challenge for reducing the emissions of emissions-intensive, trade-exposed sectors with high cost mitigation options. These sectors include aluminium, cement, chemicals, iron and steel, lime, pulp and paper and petroleum refining. Available studies agree that decarbonization of these sectors is possible by mid-century if more ambitious policies are implemented soon. Existing carbon pricing policies have had limited impact on the emissions of these sectors because their marginal abatement costs almost always exceed the tax rate or allowance price. But emissions trading systems with free allowance allocations to emissions-intensive, trade-exposed sectors have minimized the adverse economic impacts and associated leakage. Internationally coordinated policies are unlikely, so implementing more ambitious policies creates a risk of leakage. This paper presents policy packages a country can implement to accelerate emission reduction by these sectors with minimal risk of leakage. To comply with international trade law the policy packages differ for producers whose goods compete with imports in the domestic market and producers whose goods are exported. Carbon pricing is a critical component of each package due its ability to minimize the risk of adverse economic impacts on domestic industry, support innovation and generate revenue. The revenue can be used to assist groups adversely impacted by the domestic price and production changes due to carbon pricing and to build public support for the policies. Key policy insights A country with a mid-century net zero GHG emission target likely will need to implement more ambitious mitigation policies soon for emission-intensive sectors such as aluminium, cement, chemicals, iron and steel, lime, pulp and paper and petroleum refining. More ambitious mitigation policies are likely to vary by country and be implemented at different times, creating a risk of leakage due to industrial production shifts to other jurisdictions. More ambitious mitigation policy packages, compatible with international trade law, that a country can implement to reduce emissions from these sectors with minimal risk of leakage are available but differ for producers whose goods compete with imports in the domestic market and those whose goods are exported. Carbon pricing is a critical component of each package due its ability to minimize the risk of adverse economic impacts on domestic producers, support innovation and generate revenue.

Marginal abatement cost curve of carbon emissions in China: a functional data analysis

Marginal abatement cost curve of carbon emissions in China: a functional data analysis

The Marginal Abatement Cost of Antimicrobials for Dairy Cow Mastitis: A Bioeconomic Optimization Perspective

Maintaining udder health is the primary indication for antimicrobial use (AMU) in dairy production, and modulating this application is a key factor in decreasing AMU. Defining the optimal AMU and the associated practical rules is challenging since AMU interacts with many parameters. To define the trade-offs between decreased AMU, labor and economic performance, the bioeconomic stochastic simulation model DairyHealthSim (DHS)© was applied to dairy cow mastitis management and coupled to a mean variance optimization model and marginal abatement cost curve (MACC) analysis. The scenarios included three antimicrobial (AM) treatment strategies at dry-off, five types of general barn hygiene practices, five milking practices focused on parlor hygiene levels and three milk withdrawal strategies. The first part of economic results showed similar economic performances for the blanked dry-off strategy and selective strategy but demonstrated the trade-off between AMU reduction and farmers' workload. The second part of the results demonstrated the optimal value of the animal level of exposure to AM (ALEA). The MACC analysis showed that reducing ALEA below 1.5 was associated with a EUR 10,000 loss per unit of ALEA on average for the farmer. The results call for more integrative farm decision processes and bioeconomic reasoning to prompt efficient public interventions.

Which strategy among avoid, shift, or improve is the best to reduce CO2 emissions from sand and gravel aggregate transportation?

Sand and gravel aggregate (SGA) transportation accounts for over 30% of the freight volume in China, which is greater than that of any other cargo; low-carbon development can effectively promote the decarbonization of freight transportation. This study presents a four-step evaluation method to assess CO2 emission reductions in freight transportation; the proposed method helps determine the relationship between the policy, CO2 emission reductions, demand, and mode market share. Using Beijing as a case study, this paper estimates the potential of reducing CO2 emissions from SGA transportation under various scenarios. The scenarios are set based on the avoid, shift, and improve strategies; the results of the Beijing case indicate that the CO2 emission for SGA transportation is 920.86 kt, which is approximately 1% of the total CO2 emissions in Beijing. The maximum reductions in CO2 emissions that can be achieved using the avoid, shift, and improve strategies are 0.92 kt (0.1% of total), 560.52 kt (60.9% of total), and 78.59 kt (8.5% of total), respectively. The shift strategy is confirmed to be the most realistic and cost-effective approach for reducing CO2 emissions from SGA transportation. In addition, the implementation of subsidy policies is discussed. Marginal abatement costs under the subsidy scenarios are higher than 224 CNY/t, which is higher than the price in the Chinese carbon trading market.