Abatement Cost

Context: ‘Abatement cost’ has emerged as a key tool to steer the decarbonisation of the economy, to reduce its cost and to assess the efficiency of a technology, an investment or a public policy.

Abatement Cost

  • Abatement cost is simply the cost of an intervention that will reduce greenhouse gases emissions by one tonne. Abatement costs will be negative for energy efficient (cost savings) technologies.
  • Example: A plant can reduce its greenhouse gas emissions by replacing a gas boiler with a heat pump. But they will have to pay for installation of heat pump and will have to pay for the electricity needed to run it and will save money by no longer purchasing gas. Abatement cost per tonne of carbon not emitted can be arrived at dividing the total additional cost by the avoided emissions. 

Significance of Abatement Cost

  • Abatement costs can be considered as a tool to select priority climate actions. 
  • Negative abatement costs correspond to opportunities to reduce emissions with a net economic gain. Lowest abatement costs indicate opportunities to avoid emissions at low cost.
  • Thus, if we have limited budget for transition, then choosing the lowest abatement costs will maximise emissions reductions.

Limitations of using Abatement Cost

  • Abatement cost focuses on marginal emissions: Abatement cost is designed to reduce marginal emissions. Thus, if the goal was to reduce emissions slightly – for ex. by 10%, they abatement cost will be perfect tool. But the world is aiming for ‘Net-zero emissions’, wherein we cannot ignore hard-to-abate emissions. 
  • Costs of technologies keep evolving: In a deep transition, technologies and their costs are not fixed and they evolve with our investments. For ex. In 2007, solar photovoltaics and wind power were expensive per tonne avoided. However, with increasing investments the cost of solar and wind power has come down. 

Conclusion

Thus, marginal abatement costs may not be useful in developing a decarbonisation strategy. However, to minimize costs to net-zero emissions, we need to implement integrated strategies – in all sectors simultaneously – an economic, technological and social transition towards carbon neutrality.

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