When starting with the most expensive option makes sense: use and misuse of marginal abatement cost curves

Adrien Vogt-Schilb and Stephane Hallegatte

No 5803, Policy Research Working Paper Series from The World Bank

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 (search for similar items in EconPapers)
Date: 2011-09-01
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Marginal Abatement Cost Curves and the Optimal Timing of Mitigation Measures (2013)
Working Paper: When Starting with the Most Expensive Option Makes Sense On Marginal Abatement Cost Curves and Optimal Abatement Pathways (2013)
Working Paper: When Starting with the Most Expensive Option Makes Sense On Marginal Abatement Cost Curves and Optimal Abatement Pathways (2013)
Working Paper: When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves (2012)
Working Paper: When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves (2012)
Working Paper: When Starting with the Most Expensive Option Makes Sense: Use and Misuse of Marginal Abatement Cost Curves (2012)
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