Marginal Abatement Cost Curves: Combining Energy System Modelling and Decomposition Analysis

Marginal abatement cost (MAC) curves are a useful policy tool to communicate findings on the technological structure and the economics of CO2 emissions reduction. However, existing ways of generating MAC curves do not display consistent technological detail and do not consider system-wide interactions and uncertainty in a structured manner. This paper details a new approach to overcome the present shortcomings by using an energy system model, UK MARKAL, in combination with index decomposition analysis. In addition, this approach allows different forms of uncertainty analysis to be used in order to test the robustness of the MAC curve. For illustration purposes, a sensitivity analysis concerning fossil fuel prices is applied to the transport sector of the UK. The resulting MAC curves are found to be relatively robust to different fuel costs at higher CO2 tax levels. The new systems-based approach improves MAC curves through the avoidance of an inconsistent emissions baseline, the incorporation of system-wide interactions and the price responsiveness of demand.

[1]  Ross McKitrick,et al.  A Derivation of the Marginal Abatement Cost Curve , 1999 .

[2]  Sergey Paltsev,et al.  Marginal Abatement Costs and Marginal Welfare Costs for Greenhouse Gas Emissions Reductions: Results from the EPPA Model , 2011, Environmental Modeling & Assessment.

[3]  Asbjørn Torvanger,et al.  Manufacturing sector carbon dioxide emissions in nine OECD countries 1973--87: A Divisia index decomposition to changes in fuel mix, emission coefficients, industry structure, energy intensities, and international structure , 1991 .

[4]  John M. Reilly,et al.  The costs of the Kyoto protocol in the European Union , 2003 .

[5]  Y. Kaya Impact of carbon dioxide emission control on GNP growth : Interpretation of proposed scenarios , 1989 .

[6]  Neil Strachan,et al.  Scenarios and Sensitivities on Long-term UK Carbon Reductions using the UK MARKAL and MARKAL-Macro Energy System Models , 2008 .

[7]  Gabrial Anandarajah,et al.  UK MARKAL Model Documentation , 2007 .

[8]  Gabrial Anandarajah,et al.  Pathways to a Low Carbon Economy: Energy Systems Modelling , 2008 .

[9]  Michael Hooker,et al.  Framing the Issues , 1992 .

[10]  B. W. Ang,et al.  A survey of index decomposition analysis in energy and environmental studies , 2000 .

[11]  Steven Stoft,et al.  The Economics of Conserved-Energy "Supply" Curves* , 1995 .

[12]  P. Ekins,et al.  Marginal abatement cost curves: a call for caution , 2011 .

[13]  B. W. Ang,et al.  Energy decomposition analysis: IEA model versus other methods , 2007 .

[14]  Ramachandran Kannan,et al.  Uncertainties in key low carbon power generation technologies – Implication for UK decarbonisation targets , 2009 .

[15]  B. W. Ang,et al.  Factorizing changes in energy and environmental indicators through decomposition , 1998 .

[16]  I. Fisher,et al.  The Mathematical Problem of the Price Index. , 1937 .

[17]  Richard Loulou,et al.  Energy Technology Systems Analysis Programme , 2005 .

[18]  G. Mavrotas,et al.  A bottom-up decomposition analysis of energy-related CO2 emissions in Greece , 2006 .

[19]  Fabian Kesicki,et al.  Marginal abatement cost curves for policy making – expert-based vs . model-derived curves * , 2011 .

[20]  Steve Pye,et al.  The iterative contribution and relevance of modelling to UK energy policy , 2009 .

[21]  C. Hendriks,et al.  Economic Evaluation of Sectoral Emission Reduction Objectives for Climate Change , 2003 .

[22]  Fabian Kesicki,et al.  Intertemporal issues and marginal abatement costs in the UK transport sector , 2012 .

[23]  J. Edmonds,et al.  A review of mitigation cost studies , 1996 .

[24]  Gabrial Anandarajah,et al.  Pathways to a Low-Carbon Economy , 2009 .

[25]  Gabrial Anandarajah,et al.  Factors affecting CO2 emission from the power sector of selected countries in Asia and the Pacific , 2009 .

[26]  G. Hankinson,et al.  Electricity consumption, electricity intensity and industrial structure , 1983 .

[27]  B. W. Ang,et al.  Decomposition analysis for policymaking in energy:: which is the preferred method? , 2004 .

[28]  Gabrial Anandarajah,et al.  Interactions and Implications of Renewable and Climate Change Policy on UK Energy Scenarios , 2010 .

[29]  Sonja Peterson,et al.  Marginal Abatement Cost Curves in General Equilibrium: The Influence of World Energy Prices , 2004 .

[30]  Tim Jackson,et al.  Least-cost greenhouse planning : supply curves for global warming abatement , 1991 .

[31]  Fabian Kesicki Marginal Abatement Cost Curves for Policy Making - Model-derived versus Expert-based Curves , 2010 .

[32]  F. Divisia L'indice monétaire et la théorie de la monnaie , 1926 .

[33]  Michael Grubb,et al.  The Costs of Limiting Fossil-Fuel CO2 Emissions: A Survey and Analysis , 1993 .

[34]  A. Denny Ellerman,et al.  Analysis of post-Kyoto CO₂ emissions trading using marginal abatement curves , 1998 .

[35]  Bas Eickhout,et al.  Responses to technology and taxes in a simulated world , 2004 .

[36]  Ernst Worrell,et al.  The cost effectiveness of CO2 emission reduction achieved by energy conservation , 1993 .