Decarbonizing a portfolio of operating assets: Cost estimates for vehicle fleets

Gunther Glenk, Katrin Gschwind and Stefan Reichelstein

No 26-011, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Companies across industries seek to assess the costs of complying with environmental regulations and meeting voluntary emission targets. This paper develops a carbon abatement cost model for firms operating a portfolio of assets with differing cost or load profiles. The resulting abatement cost curves serve as a decision tool for configuring individual assets to achieve firm-wide emission reductions at least cost. We apply our model to urban bus fleets regulated under the California Cap-and-Trade Program. We find that a carbon price of $35 per ton of CO2e (2024 average) incentivizes firms to configure their fleets such that batteryelectric drivetrains constitute 70% of usable installed capacity and 92% of annual demand, while diesel drivetrains serve peak loads. Since the resulting emissions are fairly inelastic to the carbon price, we conclude that the life-cycle cost per mile would increase substantially if deep decarbonization were to be induced entirely by higher carbon prices.

Keywords: life-cycle costing; capacity investments; abatement cost curves; carbon emissions; transport decarbonization (search for similar items in EconPapers)
JEL-codes: M41 M48 Q54 Q56 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-ene, nep-env and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:340016

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