Marginal Abatement Cost Curves

A marginal abatement cost (MAC) curve is a ranked list of every action a firm can take to reduce its emissions, ordered from cheapest to most expensive. It answers one question: what is the cost of cutting one more tonne of CO₂?

How to read the curve

Each row in your Abatement options table is one step on your MAC curve:

• Cost ($/tCO₂) — what it costs to remove one tonne using this technology. A negative cost means the action saves money (e.g. an energy efficiency upgrade that pays back through lower fuel bills). A positive cost means you spend money to abate.
• Potential (tCO₂) — the maximum emissions reduction this step can deliver for your firm.

Steps are sorted cheapest first. A rational firm works left-to-right: adopt the cheapest options first, then progressively more expensive ones.

Negative-cost options

Some steps show a green negative cost. These are profitable on their own — the energy savings or process improvements outweigh the upfront investment. In theory every firm should adopt them immediately. In practice they often go unpicked due to capital constraints, split incentives, or simple inertia. See Negative-Cost Abatement for more on why.

How the MAC curve shapes trading decisions

Your MAC curve sets your break-even price: the carbon price at which it becomes cheaper to abate internally than to buy allowances. If the market price is below your cheapest positive-cost step, buying allowances is rational. If it rises above that step's cost, you are better off investing in abatement.

Firms with steep, expensive curves will be net buyers of allowances. Firms with cheap abatement options — especially negative-cost ones — may sell excess allowances after adopting their low-cost steps.