Assessing the Costs of Industrial Decarbonization

Gunther Glenk, Rebecca Meier and Stefan Reichelstein
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Gunther Glenk: U of Mannheim and MIT
Rebecca Meier: U of Mannheim
Stefan Reichelstein: U of Mannheim and Stanford U

Research Papers from Stanford University, Graduate School of Business

Abstract: Companies in various industries are under growing pressure to assess the costs of decarbonizing their operations. This paper develops a generic abatement cost concept to identify the cost-efficient combination of technological and operational changes firms would need to implement to drastically reduce greenhouse gas emissions from current production processes. The abatement cost curves resulting from our framework further serve as a decision tool for managers to determine the optimal abatement levels in the presence of environmental regulations, such as carbon pricing. We calibrate our model in the context of European cement producers that must obtain emission permits under the European Emission Trading System (EU ETS). We find that a price of €85 per ton of carbon dioxide (CO2), as observed on average in 2023 under the EU ETS, incentivizes firms to reduce their annual direct emissions by about one-third relative to the status quo. Yet, this willingness to abate emissions increases sharply if carbon price were to rise above the €100 per ton of CO2 benchmark.

JEL-codes: M1 O33 Q42 Q52 Q54 Q55 Q58 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-eec, nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:4202

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