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

Author

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  • Adrien Vogt-Schilb

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Stéphane Hallegatte

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

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.
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(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Adrien Vogt-Schilb & Stéphane Hallegatte, 2012. "When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves," Post-Print hal-00797612, HAL.
    • Handle: RePEc:hal:journl:hal-00797612
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    References listed on IDEAS

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    1. Lecocq, Franck & Hourcade, Jean-Charles & Ha Duong, Minh, 1998. "Decision making under uncertainty and inertia constraints: sectoral implications of the when flexibility," Energy Economics, Elsevier, vol. 20(5-6), pages 539-555, December.
    2. H. Damon Matthews & Nathan P. Gillett & Peter A. Stott & Kirsten Zickfeld, 2009. "The proportionality of global warming to cumulative carbon emissions," Nature, Nature, vol. 459(7248), pages 829-832, June.
    3. Manne, Alan & Richels, Richard, 2004. "The impact of learning-by-doing on the timing and costs of CO2 abatement," Energy Economics, Elsevier, vol. 26(4), pages 603-619, July.
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    Citations

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    Cited by:

    1. Lecuyer, Oskar & Quirion, Philippe, 2013. "Can uncertainty justify overlapping policy instruments to mitigate emissions?," Ecological Economics, Elsevier, vol. 93(C), pages 177-191.
    2. Oskar Lecuyer & Adrien Vogt-Schilb, 2013. "Assessing and ordering investments in polluting fossil-fueled and zero-carbon capital," CIRED Working Papers hal-00850680, HAL.
    3. Saujot, Mathieu & Lefèvre, Benoit, 2016. "The next generation of urban MACCs. Reassessing the cost-effectiveness of urban mitigation options by integrating a systemic approach and social costs," Energy Policy, Elsevier, vol. 92(C), pages 124-138.
    4. Spencer, Thomas & Marcey, Celine & Colombier, Michel & Guerin, Emmanuel, 2011. "Decarbonizing the EU power sector: policy approaches in the light of current trends and long-term trajectories," MPRA Paper 35009, University Library of Munich, Germany.
    5. Adrien Vogt-Schilb & Guy Meunier & Hallegatte Stéphane, 2013. "Should marginal abatement costs differ across sectors? The effect of low-carbon capital accumulation," Post-Print hal-00829420, HAL.
    6. Adrien Vogt-Schilb & Guy Meunier & Stéphane Hallegatte, 2012. "How inertia and limited potentials affect the timing of sectoral abatements in optimal climate policy," Post-Print hal-00722574, HAL.
    7. Adrien Vogt-Schilb & Guy Meunier & Stéphane Hallegatte, 2013. "Should marginal abatement costs differ across sectors? The effect of low-carbon capital accumulation," Working Papers hal-00850682, HAL.
    8. Du, Limin & Hanley, Aoife & Wei, Chu, 2015. "Estimating the Marginal Abatement Cost Curve of CO2 Emissions in China: Provincial Panel Data Analysis," Energy Economics, Elsevier, vol. 48(C), pages 217-229.
    9. Hallegatte, Stephane & Heal, Geoffrey & Fay, Marianne & Treguer, David, 2011. "From growth to green growth -- a framework," Policy Research Working Paper Series 5872, The World Bank.
    10. Schell, Kristen R. & Claro, João & Fischbeck, Paul, 2015. "Geographic attribution of an electricity system renewable energy target: Local economic, social and environmental tradeoffs," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 884-902.
    11. Larry Lohmann, 2012. "A Rejoinder to Matthew Paterson and Peter Newell," Development and Change, International Institute of Social Studies, vol. 43(5), pages 1177-1184, September.
    12. Benjamin Görlach, 2014. "Emissions Trading in the Climate Policy Mix — Understanding and Managing Interactions with other Policy Instruments," Energy & Environment, , vol. 25(3-4), pages 733-749, April.
    13. Eory, Vera, 2015. "Evaluating the use of marginal abatement cost curves applied to greenhouse gas abatement in agriculture," Working Papers 199777, Scotland's Rural College (formerly Scottish Agricultural College), Land Economy & Environment Research Group.
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    More about this item

    JEL classification:

    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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