Abatement Cost Curves

Historically, Alberta is one of the highest Greenhouse Gas (GHG) emitting provinces in Canada. In 2019, Alberta released approximately 276 mt of CO2 into the atmosphere. Unfortunately, Alberta’s energy industry does play a significant role in GHG emissions. As a substantial GHG contributor, we can use abatement cost curves to determine the most effective method of reducing our carbon emission.

EDC Associates Ltd. is developing a study that will provide strategic guidance on the future transactional pressures Alberta offsets and emission performance credits will face as Canada’s carbon tax accelerates to $170/t. EDCA will examine the supply & demand balance for environmental instruments across a range of scenarios. Additionally, our report will look into industry-specific abatement curves to identify those industries with the highest abatement costs and/or implementation challenges

Abatement Cost Curves

Abatement cost curves rank options available to industries on the basis of their cost effectiveness for reducing carbon emissions. Figure 2 (below) illustrates a typical graphical presentation of a marginal abatement cost curve.

Actions for which abatement costs are negative illustrate that the net cost savings outweigh the increase in investment and operational costs required for taking an action (i.e., the action reduces both emissions and saves money). Quantitative abatement curves are then overlaid with qualitative considerations, such as market/agency issues and/or regulatory barriers that could impede investment, as well as the ease of implementation.

To generate a marginal abatement curve, the following is required:

  • Lifetime – the number of years a project is expected to deliver carbon emission abatement
  • Total cost – the total implementation cost and any ongoing operational costs required for the life of the project
  • Expected savings – the cost associated with lower consumption of resources (e.g. electricity and fuel), relative to the reference technology
  • Carbon emissions reduction – the change in production of carbon emissions, relative to the reference

As an example, Figure 3 illustrates a typical abatement curve for Alberta’s agriculture sector. Energy efficiency improvement is an opportunity for the agricultural sector to reduce their operational costs and reduce emission at the same time. Common abatement options include efficient lighting, efficient ventilation, efficient and biodiesel tractors and ethanol trucks. 80% of the total energy consumed in this sector is due to farm machinery (tractors, combines, balers, etc). Therefore, higher energy efficient farm machine has the most impact on energy savings.

However, qualitatively speaking, educating and mobilizing thousands of farmers to change their daily practice is somewhat impractical and difficult, thus the success of these abatement actions involves a high degree of uncertainty.

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Questions? Please contact alex@edcassociates.com