Negative-Cost Abatement

A negative-cost abatement option is an action that reduces emissions and saves money. Examples include upgrading to energy-efficient motors, recovering waste heat, or switching to LED lighting. The firm comes out ahead on both climate and cost.

The energy efficiency paradox

If these options save money, why aren't they already deployed? Several real-world barriers explain it:

• Upfront capital: the investment may be large even if payback is fast.
• Information gaps: decision-makers don't know about all efficiency opportunities.
• Split incentives: the person paying the energy bill is not the person approving capital investment.
• Management bandwidth: small efficiency projects compete with core business priorities.

Carbon pricing helps by making the status quo (emitting freely) more expensive, tipping the cost-benefit calculation in favour of action.

MAC curves

A Marginal Abatement Cost (MAC) curve ranks all available abatement options from cheapest to most expensive. Negative-cost options appear on the left side of the curve, below the x-axis. In the simulator, each firm gets a MAC curve that reflects realistic options for its sector.

In the simulator

When Include negative-cost options is checked (the default), firms have access to these "free wins" — but they still need to choose to invest in them. When unchecked, only positive-cost options appear, simulating a market where the low-hanging fruit has already been picked.