When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves

23 Pages Posted: 20 Apr 2016

See all articles by Adrien Vogt-Schilb

Adrien Vogt-Schilb

CIRED, Centre international de recherche sur l’environnement et le développement

S. Hallegatte

World Bank

Date Written: September 1, 2011

Abstract

This article investigates the use of expert-based Marginal Abatement Cost Curves (MACC) to design abatement strategies. It shows that introducing inertia, in the form of the "cost in time" of available options, changes significantly the message from MACCs. With an abatement objective in cumulative emissions (e.g., emitting less than 200 GtCO2 in the 2000-2050 period), it makes sense to implement some of the more expensive options before the potential of the cheapest ones has been exhausted. With abatement targets expressed in terms of emissions at one point in time (e.g., reducing emissions by 20 percent in 2020), it can even be preferable to start with the implementation of the most expensive options if their potential is high and their inertia significant. Also, the best strategy to reach a short-term target is different depending on whether this target is the ultimate objective or there is a longer-term target. The best way to achieve Europe's goal of 20 percent reduction in emissions by 2020 is different if this objective is the ultimate objective or if it is only a milestone in a trajectory toward a 75 percent reduction in 2050. The cheapest options may be sufficient to reach the 2020 target but could create a carbon-intensive lock-in and preclude deeper emission reductions by 2050. These results show that in a world without perfect foresight and perfect credibility of the long-term carbon-price signal, a unique carbon price in all sectors is not the most efficient approach. Sectoral objectives, such as Europe's 20 percent renewable energy target in Europe, fuel-economy standards in the auto industry, or changes in urban planning, building norms and infrastructure design are a critical part of an efficient mitigation policy.

Keywords: Climate Change Mitigation and Green House Gases, Climate Change Economics, Environment and Energy Efficiency, Energy and Environment, Transport and Environment

Suggested Citation

Vogt-Schilb, Adrien and Hallegatte, Stephane, When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves (September 1, 2011). World Bank Policy Research Working Paper No. 5803. Available at SSRN: https://ssrn.com/abstract=1932025

Adrien Vogt-Schilb (Contact Author)

CIRED, Centre international de recherche sur l’environnement et le développement ( email )

France

Stephane Hallegatte

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

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