Marginal Abatement Cost Curves (MACCs): A Strategic Guide to Cost-Effective CO₂ Reduction

Marginal Abatement Cost Curves (MACCs) are a practical tool for reducing CO₂ emissions in a cost-efficient way. They show which measures deliver the greatest benefits and help companies, governments, and organizations prioritize climate protection projects. Here is a brief summary:

• What is a MACC?
  A graphical representation that compares the costs (€/tCO₂e) and savings potential of various climate protection measures. Measures with negative costs save money, while positive costs require investment.
• Benefits of MACCs:
  • Companies: Optimize ESG budgets and invest in green technologies.
  • Governments: Plan incentive programs and meet climate targets.
  • International organizations: Coordinate cross-border climate projects.
• How does a MACC work?
  • Bar height: Cost per ton of CO₂ saved.
  • Bar width: Savings potential in tons of CO₂.
  • Sorting: From the most cost-effective to the most expensive measures.
• Challenges:
  • Data quality and uncertainties in cost estimates.
  • Underestimated interactions between measures.

Quick Overview:

With MACCs, you can strategically achieve your climate goals while saving costs. Read on to learn more about creating and using MACCs.

MACC Building Blocks

The following core elements are essential for applying MACCs (Marginal Abatement Cost Curves) in corporate climate strategy.

Cost Calculations

Calculating abatement costs is at the heart of every MACC analysis. These costs are given in euros per ton of CO₂ equivalent (€/tCO₂e). To calculate abatement costs, the total costs are divided by the amount of CO₂ avoided.

Total costs are made up of the following components:

"Abatement costs are simply the cost of an intervention that reduces greenhouse gas emissions by one ton."

Measuring CO₂ Reduction

The savings potential is determined by comparing emissions before and after implementation of a measure. Various factors are considered:

• Direct savings through technical improvements
• Indirect reductions along the supply or value chain
• Development of savings over the usage period

Precise, transparent measurement is crucial to accurately represent measures in a MACC diagram. These measurements provide the basis for visually categorizing the measures.

Understanding MACC Diagrams

The calculated key figures are visualized in a MACC diagram. This diagram displays bars arranged from left to right—each bar represents a specific emission reduction measure. Interpretation is based on the following dimensions:

• Bar height: Indicates abatement costs in €/tCO₂e (positive values = costs, negative values = savings).
• Bar width: Shows annual reduction potential in tons of CO₂e.
• Bar area: The product of height and width represents the total cost.

The bars are sorted by increasing abatement cost: Measures below the x-axis result in savings, while those above require additional investment. This diagram provides a clear overview of the costs and savings potential of all measures.

Creating Your MACC

Once you understand the building blocks of a MACC (Marginal Abatement Cost Curve), it’s time for practical implementation—from data collection to visualization. According to the Climateworks Centre, a robust MACC relies on accurate, up-to-date data and a clear understanding of project boundaries, ensuring that each measure’s impact is properly isolated and quantified.

Collecting the Right Data

For a precise analysis, you need specific data. The following elements should be considered:

"A MACC shows the potential costs or savings of reducing an additional unit of emissions across various sustainability projects, compared to the expected emissions volume that can be reduced upon implementation." - Aligned Incentives

Analyzing Financial Impacts

To make informed decisions, you should calculate the financial metrics for each measure:

• Net Present Value (NPV)
  The NPV considers all inflows and outflows over a project’s lifetime. A real-world example: Integrating reflective paint with Glazing Integrated Photovoltaics (GIPV) showed an internal rate of return (IRR) of 26.45%.
• Payback period
  The time until the investment pays off is crucial. Studies show that energy-efficient building solutions can achieve CO₂ reductions of 9% to 31% with varying payback periods.
• Abatement costs
  These costs, expressed in €/tCO₂e, show the price per ton of CO₂ saved. Negative values indicate economic benefits, while positive values represent additional costs.

Creating the Diagram

Once the data is available, it’s time to visualize the curve:

• Sort measures
  Arrange projects by increasing abatement costs. Start with economically advantageous measures (negative costs) and end with more expensive options.
• Design the visualization
  Bar width represents CO₂ savings potential (in tons), while height shows abatement costs (in €/tCO₂e). Example: Replacing incandescent bulbs with LED lighting often shows negative abatement costs with a savings potential of about 5.1 kilotons of CO₂.
• Set a budget
  Plan a realistic budget that enables the implementation of prioritized measures.

With these steps, you create a solid foundation to support your ESG strategy in a targeted way. For more on the technical aspects and best practices in MACC construction, see Climateworks Centre.

MACCs in Business Practice

Setting Climate Targets

MACCs enable companies to plan their climate targets in a focused and efficient manner. A 2021 study by McKinsey found that implementing around 500 decarbonization measures could achieve a 50% reduction in emissions by 2030, with an average cost of just 1% of total revenue (source). This demonstrates the scalability and economic feasibility of MACC-guided strategies.

Structured planning is essential:

After setting targets, companies can also use MACCs to implement legal requirements, such as those of the EU Emissions Trading System.

Meeting EU Requirements

The EU Emissions Trading System (EU ETS) regulates around 45% of greenhouse gas emissions in the EU. By 2030, affected sectors must reduce their emissions by 43% compared to 2005 (EU ETS). German companies, for example, are increasingly aligning investments with renewable energy and energy efficiency to comply with these requirements and benefit from the rising price of CO₂ allowances.

In addition to meeting climate targets and EU requirements, precise budget planning plays a central role.

Budget Planning

Thorough budget analysis is key to successful emissions reduction. According to the World Bank, about 50% of emission reductions in core sectors can be achieved at zero or negative net cost, highlighting the importance of identifying and prioritizing these opportunities. To make budget planning efficient, companies should consider the following points:

• Carefully calculate CapEx: Obtain supplier quotes and compare with publicly available data for similar measures.
• Fully account for OpEx: In addition to maintenance costs, include employee training and savings from reduced resource consumption.
• Regular updates: Review MACC analyses every 2–5 years, as external costs and reduction potentials change continuously.

Since conditions and savings potentials change over time, regular adjustment of analyses is essential.

MACC Limitations and Challenges

After discussing the basics of creating and using MACCs (Marginal Abatement Cost Curves), the question arises about potential challenges that may occur in their application.

Problems with Data Quality

The significance of MACC analyses depends heavily on the quality of the underlying data. A study by McKinsey, which created 14 cost curves for various countries between 2007 and 2009, showed that data inaccuracies led to significant fluctuations in results (source). The World Bank also emphasizes that uncertainties in cost and emissions data can undermine the reliability of MACC outputs, especially when projecting future scenarios.

Typical data quality issues and possible solutions:

Underestimated Effects

MACCs tend to overlook indirect effects that can distort the overall picture. Particularly problematic is the insufficient consideration of interactions between different reduction measures. For instance, the Climateworks Centre notes that the impact of one measure may reduce the effectiveness or cost-efficiency of another, leading to double counting or missed synergies if not properly accounted for.

Frequently overlooked effects include:

• Systemic interactions: Measures can influence each other, amplifying or reducing effects.
• Behavioral aspects: Human behavior in implementing measures is often not considered.
• Temporal dynamics: Changes in costs and technologies over time are often ignored.

Targeted solutions are needed to better capture these hidden effects.

Solutions for Common Problems

The steel industry, for example, faces average abatement costs of around €500 per ton of CO₂. Such calculations require precise and well-thought-out methods, as highlighted by the World Bank, which recommends transparent methodologies and regular updates to reflect technological and market changes.

Three key approaches to minimize problems with MACCs:

• Systemic approach
  Interactions between measures should be included through a comprehensive perspective.
• Transparent documentation
  All assumptions and data should be clearly documented and regularly reviewed, especially regarding technological advances.
• Regular review
  Since technical and economic conditions are constantly changing, continuous alignment between technical assessments and life cycle analyses is crucial.

Conclusion

Marginal Abatement Cost Curves (MACCs) are an essential tool for German companies to strategically and cost-effectively reduce their CO₂ emissions. Studies show that a 20–30% reduction in emissions by 2030 (compared to 2008) can be achieved with marginal costs of around €50–100 per ton of CO₂ (World Bank). These figures highlight the practical value of MACCs in planning and implementing climate protection measures.

The MACC building blocks presented here underline their importance for policymakers, especially when prioritizing investments in renewable energy.

A systematic approach to implementation could look like this:

In addition to internal measures, external factors such as regulatory requirements play a decisive role. In particular, rising CO₂ prices in the EU Emissions Trading System are making investments in decarbonization increasingly attractive. Companies are therefore well advised to regularly adjust their internal CO₂ prices. This dynamic shows just how important strategic implementation of MACCs is (EU ETS).

The following steps are central to successful implementation: clear target setting, regular updating of data, integration into decision-making processes, and active involvement of all relevant stakeholders. With this structured approach, German companies can achieve their climate goals while securing their competitiveness in an environment of rising CO₂ prices.

FAQs

How can companies ensure data quality for more accurate MACC analyses?

To improve data quality for Marginal Abatement Cost Curve (MACC) analyses, companies should develop clear data governance policies and use modern tools for data collection and analysis. These measures help ensure that datasets remain consistent, accurate, and up to date.

Regular data cleaning and targeted training for employees can further strengthen understanding and competence in data management. It is crucial to integrate and align all relevant data sources to avoid distortions and significantly improve the accuracy of analytical results.

How can indirect effects and interactions be accounted for in creating MACCs?

Indirect effects and interactions play a key role in the creation of Marginal Abatement Cost Curves (MACCs). They influence the actual costs and benefits of emissions reduction measures. For example, changes in energy use or technological advances can significantly affect the cost-effectiveness of certain approaches.

To realistically reflect such effects, models should be used that account for both direct and indirect impacts. This ensures more accurate results and provides a more comprehensive picture of the economic and environmental outcomes of decarbonisation strategies. Thorough analysis of these interactions enables companies to make informed and effective decisions for their climate action plans.

How can companies successfully integrate MACCs into their climate strategy?

To meaningfully integrate MACCs (Marginal Abatement Cost Curves) into your climate strategy, begin by thoroughly reviewing and updating your current emissions baseline. This gives you a clear picture of your starting point. Next, compile a detailed list of potential emissions reduction measures. Each measure should be assessed realistically in terms of costs and potential savings.

Rank the measures by their cost-effectiveness and impact on emissions reduction. It’s also important to consider non-monetary factors such as corporate objectives or regulatory requirements. The prioritised results should be integrated into your long-term strategy. Clear communication with all relevant stakeholders is essential to ensure successful implementation.