Marginal abatement cost
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A marginal abatement cost curve or MAC curve is a set of options available to an economy to reduce pollution. They are valuable tools in understanding emissions trading, driving forecasts of carbon allowance prices, prioritizing investment opportunities, and shaping policy discussions.
Typically, MAC curves cover emissions reduction opportunities across a number of sectors in an economy including power, industry, waste, buildings, transport, agriculture, and forestry.
For example, carbon traders use marginal abatement cost (MAC) curves to derive the supply function for modelling carbon price fundamentals. Power companies may employ MAC curves to guide their decisions about long-term capital investment strategies to select among a variety of efficiency and generation options. Economists have used MAC curves to explain the economics of interregional carbon trading. Policy-makers use MAC curves as merit order curves, to analyze how much abatement can be done in an economy at what cost, and where policy should be directed to achieve the emission reductions.
However, MAC curves should not be used as abatement supply curves (or merit order curves) to decide which measures to implement in order to achieve a given emission-reduction target. Indeed, the options they list would take decades to implement, and it may be optimal to implement expensive but high-potential measures before introducing cheaper measures.
The way that MAC curves are usually built has been criticized for its lack of transparency and the poor treatment it makes of uncertainty, inter-temporal dynamics, interactions between sectors and ancillary benefits.
Examples of existing MAC curves
Various economists, research organizations, and consultancies have produced MAC curves. Bloomberg New Energy Finance and McKinsey & Company have produced economy wide analyses on greenhouse gas emissions reductions for the United States. ICF International produced a California specific curve following AB-32 legislation as have Sweeney and Weyant.
The Wuppertal Institute for Climate, Environment and Energy produced several marginal abatement cost curves for Germany (also called Cost Potential Curves), depending on the perspective (end-user, utilities, society).
The US Environmental Protection Agency has done work on a MAC curve for non carbon dioxide emissions such as methane, N2O, and HFCs. Enerdata and LEPII-CNRS (France) produce MAC curves with the POLES model for the 6 Kyoto Protocol gases. These curves have been used for various public and private actors either to assess carbon policies  or through the use of a carbon market analysis tool.
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