Marginal abatement cost curves and the quality of emission reductions: a case study on Brazil

Abstract

Decision makers facing emission-reduction targets need to decide which abatement measures to implement, and in which order. This paper investigates how marginal abatement cost (MAC) curves can inform such a decision. We re-analyse a MAC curve built for Brazil by 2030, and show that misinterpreting MAC curves as abatement supply curves can lead to suboptimal strategies. It would lead to (i) under-investment in expensive, long-to-implement and large-potential options, such as clean transportation infrastructure, and (ii) over-investment in cheap but limited-potential options such as energy-efficiency improvement in refineries. To mitigate this issue, the paper proposes a new graphical representation of MAC curves that explicitly renders the time required to implement each measure. Policy relevanceIn addition to the cost and potential of available options, designing optimal short-term policies requires information on long-term targets (e.g., halving emissions by 2050) and on the speed at which measures can deliver emission reductions. Mitigation policies are thus best investigated in a dynamic framework, building on sector-scale pathways to long-term targets. Climate policies should seek both quantity and quality of abatement, by combining two approaches. A "synergy approach" that focuses on the cheapest mitigation options and maximizes co-benefits. And an "urgency approach" that starts from a long-term objective and works backward to identify actions that need to be implemented early. Accordingly, sector-specific policies may be used (i) to remove implementation barriers on negative-and low-cost options and (ii) to ensure short-term targets are met with abatement of sufficient quality, i.e. with sufficient investment in the long-to-implement options required to reach long-term targets.

From climate finance toward sustainable development finance

“…Against this background, the task is how to invest a specific amount of the available climate finance budget so as to maximize beneficial results in climate‐ and other goal dimensions, where specifying a generalized rule for balancing the prioritization of different goals is difficult. One straightforward approach for prioritizing mitigation measures would select the most cost‐effective project on the basis of country‐specific marginal abatement cost curves based on technoeconomic assessments . Another approach could impose standards on projects that receive funds, for example, in terms of technologies or emission intensity.…”

Climate policies and nationally determined contributions: reconciling the needed ambition with the political economy

“…To track progress over time toward decarbonization, it is not enough to track the quantity of emission reduction in the short term. It is essential to also monitor how emission reductions are delivered, and in particular in which sectors and with which technology . Even if short‐term action leads to significant emission reductions, it is likely to be off‐track if it misses key sectors of the economy: those, like public transportation, which are more difficult to decarbonize because low‐carbon alternatives are expensive and/or take long to deploy.…”

When starting with the most expensive option makes sense: Optimal timing, cost and sectoral allocation of abatement investment

“…Several studies using complex Integrated Assessment Model (IAMs) stress the importance of aligning short-term emission reduction action with long-term emission reduction targets: given the limited ability of economies to switch overnight to low-carbon technologies, if short-term efforts are too modest, subsequent efforts will need to be much higher (Iyer et al, 2014;Riahi et al, 2015;IPCC, 2014b). Further, several authors have shown that what matters is not only the amount of short-term effort, but also in which sectors it happens (Lecocq et al, 1998;Jaccard and Rivers, 2007;Vogt-Schilb et al, 2015).…”