Marginal Abatement Graph

Example model

A Marginal Abatement Cost Curve is a helpful graphical method to help prioritize a portfolio of projects to reduce carbon emissions. It shows the projects as set of rectangles ordered by increasing height, which depicts marginal abatement cost -- that is the cost per tonne of carbon dioxide emissions equivalent abated (i.e. reduced). The width of each rectangle depicts the total emission reduction in tonnes of CO2. If you want to achieve a target emissions reduction for minimum cost, you find the target reduction along the X axis, and then selecct all the projects to the left of that.

Some projects, like weather stripping and ceiling insulation in the example below, have a negative marginal cost Their rectangle goes below the Y zero origin -- meaning that they not only reduce emissions, but they actually save money. Their cost savings in energy (present value over the project lifetime) exceeds their cost. Obviously you should do those projects first, before the projects with a positive marginal cost.

This model, along with the accompanying blog article, show how to set up a Marginal Abatement Cost graph in Analytica.

Keywords: Graph methods, carbon price, energy efficiency, climate policy, optimal allocation, portfolio management, budget constraint.

Author: Lonnie Chrisman

Download: Marginal abatement home heating.ana