MACC Analysis: Prioritize CO₂ Reductions by Cost & Impact

Executive Summary: Marginal abatement cost curves (MACCs) have evolved from static planning tools into dynamic instruments for strategic decarbonisation. With falling technology costs, integration with internal carbon pricing, and application across supply chains, MACCs help companies prioritise emissions reductions whilst optimising ESG investments. This guide explains how organisations can leverage MACCs to achieve climate targets, comply with EU requirements, and maintain competitiveness under rising carbon prices.

What Is a Marginal Abatement Cost Curve and Why Does It Matter?

A marginal abatement cost curve (MACC) visualises the cost-effectiveness of different technologies and measures to reduce carbon emissions. Each bar represents a specific abatement measure, with bar height indicating marginal cost per tonne of CO₂ equivalent (€/tCO₂e) and bar width showing emissions reduction potential. The curve arranges measures from lowest cost to highest cost, left to right, giving decision-makers an immediate view of where to invest first and where to plan for the long term.

Measures below the horizontal axis generate net savings (negative abatement costs), whilst those above require net investment. This structure makes MACCs the most intuitive tool available for identifying where to start on a decarbonisation journey—and for building investment cases that finance teams can immediately understand and benchmark against capital allocation frameworks.

MACCs matter strategically because they translate complex climate science into financial language. Rather than framing decarbonisation as a cost burden, a well-constructed MACC reveals the economic logic of each intervention, separating quick wins from longer-term bets and allowing organisations to sequence action rationally across time horizons.

According to the World Bank, approximately 50% of emission reductions in core sectors can be achieved at zero or negative net cost, which makes early identification of these opportunities a strategic priority for any organisation developing a transition plan under CSRD or pursuing science-based targets.

How to Read a MACC Chart

Reading a marginal abatement cost curve requires understanding three dimensions:

Bar Height: Represents abatement cost in €/tCO₂e. Positive values indicate additional costs; negative values signal net savings from reduced energy or operational costs.

Bar Width: Shows annual CO₂e reduction potential. Wider bars represent measures with greater emissions reduction capacity.

Bar Area: Height multiplied by width equals total annual cost or saving, enabling direct financial comparison across measures.

Many established measures—renewable energy, efficiency upgrades, and heat pumps—now sit on the left side of the curve with significantly lower marginal costs than a decade ago. Solar PV costs alone have fallen more than 80% since 2010. This creates substantial opportunities to achieve near-term reductions that simultaneously cut operational costs, making the business case for early action stronger than at any previous point in the energy transition.

Key Components: X-Axis, Y-Axis, and Bar Width

The three structural elements of any MACC determine how useful it is as a decision tool:

X-Axis (cumulative abatement potential): Running left to right, the x-axis represents cumulative CO₂e reductions achievable as each successive measure is implemented. It shows how far along the decarbonisation pathway a given portfolio of measures takes the organisation—critical for understanding whether current plans are sufficient to meet a science-based or regulatory target.

Y-Axis (marginal abatement cost): The vertical axis expresses the net cost or saving per tonne of CO₂e abated. An internal carbon price overlaid as a horizontal line separates "no-regret" investments (below the line) from measures requiring additional strategic justification (above it). Aligning this threshold with EU ETS price projections helps finance teams apply a consistent and defensible investment hurdle rate.

Bar Width (reduction potential): Each bar's width quantifies the specific emissions reduction achievable from a measure annually, expressed in tCO₂e. Wider bars signal higher-impact interventions—useful for identifying which measures move the needle most on absolute targets, and for prioritising supplier engagement when Scope 3 abatement options are included in the analysis.

Sector Benchmarks: What CO₂ Reduction Actually Costs

Sector-level benchmarks allow organisations to sense-check cost estimates, identify outliers, and build investment cases that can withstand scrutiny from finance committees and ESG auditors. The figures below draw on published project data and European market cost studies. Treat them as directional guidance and validate against project-specific quotes before making capital allocation decisions.

Negative-cost measures should almost always be implemented first—they pay organisations to decarbonise, and the savings generated can directly subsidise higher-cost interventions later in the roadmap. Sequencing your investment programme to harvest these savings early, then reinvesting them into higher-cost abatement, is the core financial logic behind any credible multi-year transition plan.

Build Your Own MACC: A 3-Step Template

Constructing a corporate MACC requires systematic data, a structured measure inventory, and consistent cost calculations. The following condensed framework is applicable to organisations of any size.

1. Establish Your Emissions Baseline

   Document all greenhouse gas emissions across Scope 1 (direct), Scope 2 (purchased energy), and material Scope 3 categories using the GHG Protocol Corporate Standard. Choose a baseline year representative of normal operations—avoid years distorted by shutdowns, acquisitions, or exceptional production cycles. The accuracy of your MACC depends entirely on the quality of this foundation.

2. Identify and Cost Abatement Measures

   Generate a longlist of at least 10–15 technically feasible measures per scope. For each, calculate capital costs (procurement, installation), operating costs or savings (energy, maintenance), and opportunity costs (capital foregone from alternative investments). Convert all figures to net present value using a consistent discount rate, then express as €/tCO₂e. Obtain at least two supplier quotes per measure to avoid single-source bias. Also quantify co-benefits such as improved air quality or reduced energy price exposure, as excluding them systematically overstates the true cost of action.

3. Plot, Prioritise, and Integrate with Capital Planning

   Arrange measures in ascending cost order from left to right. Plot each as a bar—height = €/tCO₂e, width = tCO₂e/year. Overlay your internal carbon price as a horizontal threshold. Colour-code by scope or business unit for stakeholder presentations. Use the prioritised view to sequence implementation and build investment cases. Update the curve every two years, or immediately after significant changes in energy prices, carbon policy, or organisational structure.

Common Mistakes When Building a MACC

Three errors consistently undermine MACC quality and the decisions based on them:

Using an unrepresentative baseline year: A baseline distorted by the COVID-19 pandemic, a major acquisition, or an unusual production cycle will skew all subsequent cost and reduction calculations—making future targets look either too easy or too difficult. Under CSRD, baseline data is subject to external assurance, so credibility matters from the outset. Where a single year is unrepresentative, use a multi-year average or restate the baseline after significant structural changes and document the rationale transparently.

Applying static pricing assumptions: Building a MACC using today's energy and carbon prices without modelling how inputs may evolve produces a curve accurate only at the moment of analysis. Solar PV costs fell by more than 90% between 2010 and 2024. Run at least two or three price scenarios and flag which measures are robust across all of them versus those whose attractiveness depends on a specific assumption.

Restricting analysis to Scope 1 and 2: For companies with complex supply chains, Scope 3 typically represents 70–90% of total emissions. Excluding it can cause the MACC to miss the highest-impact abatement opportunities available. Supply chain switching and material substitution may appear expensive in isolation on a Scope 1/2 curve, but represent decisive levers when viewed as a share of total footprint. Including Scope 3 also future-proofs the analysis against tightening regulatory expectations: CSRD already requires material Scope 3 disclosures, and science-based target methodologies increasingly demand supply chain engagement as a condition of approval.

Strategic Applications for Companies

MACCs serve multiple strategic functions beyond regulatory compliance. When integrated with internal carbon pricing, they create a clear financial threshold: measures below the internal price qualify as no-regret investments, whilst those above require strategic justification aligned with EU ETS trajectories and science-based targets. The expansion of EU ETS 2 to buildings and transport from 2027 further extends this market mechanism, increasing the financial relevance of MACC analysis for organisations in those sectors.

For CSRD transition plan disclosures, MACCs provide the analytical backbone for demonstrating that emissions reduction targets reflect thorough, costed analysis. The European Sustainability Reporting Standards (ESRS) require disclosure of capital expenditure for climate transition—MACCs quantify those investment needs measure by measure, giving sustainability and finance teams a shared language for capital allocation discussions. Dynamic, scenario-based MACCs further allow companies to demonstrate how their abatement portfolio performs under different carbon price trajectories, which CSRD mandates when assessing strategy resilience.

A McKinsey study found that implementing approximately 500 decarbonisation measures could achieve 50% emission reductions by 2030, with average costs of just 1% of total revenue—reinforcing that the financial case for systematic MACC-based planning is strong and that the perceived cost barrier to climate action is far lower than most organisations assume.

Frequently Asked Questions

How should companies integrate MACCs with internal carbon pricing?

Set an internal carbon price aligned with projected EU ETS developments and corporate climate ambitions. Use it as a horizontal threshold on your MACC: measures below the line are no-regret investments that both reduce emissions and generate returns. Those above require justification based on regulatory risk, stakeholder expectations, or long-term competitiveness. Update the threshold regularly as external carbon prices rise and technology costs fall.

How can MACCs support Scope 3 emissions reduction?

Extend the MACC beyond direct operations by developing collaborative analyses with key suppliers. Progressive companies work with vendors to identify cost-effective abatement opportunities throughout the value chain, shifting focus from purely technical measures to business model innovations—material substitution, supplier development programmes, and contract structures that incentivise low-carbon production. For detailed guidance, see our Scope 3 accounting guide.

How often should a corporate MACC be updated?

Review and update at least every two years—or immediately following a significant change in energy prices, carbon policy, technology costs, or organisational structure. The value of a MACC lies not in a one-time analysis but in a structured process that improves with each iteration. Organisations that revisit their curves regularly develop a progressively more accurate and strategically useful tool.

Conclusion

Marginal abatement cost curves provide the analytical foundation for credible, costed decarbonisation planning. By revealing which measures save money, which require investment, and which deliver the greatest emissions impact, MACCs transform climate strategy from aspiration into actionable roadmap. The most effective MACC programmes are treated as living tools—updated as energy prices shift, technology costs fall, and regulatory requirements evolve—rather than one-time studies that gather dust after the initial workshop.

As CSRD requirements intensify, EU ETS prices rise, and stakeholders demand ever more transparent transition plans, organisations with robust MACC programmes will be better positioned to allocate capital efficiently, engage investors and customers credibly, and achieve science-based targets on time. The companies that start building and iterating on their MACCs now will have a material competitive advantage when deeper decarbonisation commitments become unavoidable across every sector.

Ready to build your own MACC or integrate carbon pricing into your climate strategy? Contact Fiegenbaum Solutions to get started.