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

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

What Are Marginal Abatement Cost Curves?

A marginal abatement cost curve (MAC curve) 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 interventions. Measures below the horizontal axis generate savings (negative abatement costs), whilst those above require net investments. This representation enables policymakers and businesses to identify the most cost-effective ways to reduce emissions across sectors including transport, buildings, industry, and energy.

According to the World Bank, approximately 50% of emission reductions in core sectors can be achieved at zero or negative net cost, highlighting the importance of identifying these opportunities early in the planning process.

Understanding MAC Curves: How to Read MACC Diagrams

Reading a marginal abatement cost curve requires understanding three key dimensions:

Bar Height: Represents abatement costs in euros per tonne of CO₂ equivalent. Positive values indicate additional costs, whilst negative values signal economic savings through reduced energy consumption or operational efficiency.

Bar Width: Shows the annual reduction potential measured in tonnes of CO₂e. Wider bars represent measures with greater emissions reduction capacity.

Bar Area: The combined product of height and width indicates total annual cost or savings. This allows direct comparison of overall financial impact across different measures.

Recent analyses demonstrate that many established measures—including renewable energy, efficiency improvements, and heat pumps—now occupy the left side of the curve with significantly lower marginal abatement costs than in previous years. For companies developing climate strategies, this shift creates opportunities to achieve substantial reductions through measures that simultaneously reduce operational costs.

Building Your MACC: Data Collection and Cost Calculations

Constructing a robust marginal abatement cost curve begins with systematic data collection across four categories:

Emissions Data: Baseline measurements of current carbon emissions by source, typically expressed in tonnes of CO₂ equivalent per annum. Accurate baseline data is essential for calculating reduction potential.

Investment Costs: Capital expenditure for technology adoption, including procurement, installation, and training. These one-time costs vary significantly across sectors and scale.

Operating Costs: Ongoing expenses including maintenance, energy consumption, and personnel requirements. Many low-carbon technologies reduce operating costs over their lifecycle, creating negative marginal cost profiles.

Savings Potential: Expected emissions reductions and associated financial benefits. A study on building envelope technologies demonstrated CO₂ reductions of 9% to 31% with varying payback periods, illustrating the importance of technology-specific analysis (Climateworks Centre).

The marginal abatement cost calculation divides total cost differences by emissions reduction potential. For measures with negative costs, this calculation reveals the financial benefit of completing each additional unit of abatement.

The Shifting Landscape: Why Left-Side Costs Are Falling in 2025

The marginal abatement cost landscape has transformed dramatically over the past decade. Technology learning curves, economies of scale, and policy support have driven down costs for renewable energy, electric vehicles, and energy-efficient solutions. What once represented expensive climate action now offers immediate financial returns.

Solar photovoltaic installations, for example, have seen cost reductions exceeding 80% since 2010. Wind energy, heat pump technology, and LED lighting similarly demonstrate negative or minimal abatement costs across most applications. This creates a substantial "left curve" of measures that reduce both emissions and operational expenditure.

However, sector-specific analysis reveals persistent challenges. Hard-to-abate sectors including steel, cement, and chemicals continue to face marginal abatement costs ranging from €200-€500 per tonne of CO₂. These industries require breakthrough technologies and substantial capital investment, positioning them on the right side of the curve where intervention costs remain high.

This bifurcation between readily available low-cost measures and expensive industrial transformation creates strategic implications for portfolio management. Companies can achieve significant near-term reductions through technology adoption whilst developing longer-term roadmaps for high-cost abatement in production processes.

MACCs and Internal Carbon Pricing: Strategic Integration

Leading organisations increasingly combine marginal abatement cost curves with internal carbon pricing mechanisms to drive investment decisions. An internal carbon price serves as a financial threshold: measures below this price point qualify as "no-regret" investments, whilst those above require additional strategic justification.

The EU Emissions Trading System (EU ETS) provides external price signals that inform internal pricing strategies. With EU ETS prices fluctuating between €60-€100 per tonne in recent years, companies face growing financial pressure to implement measures across their marginal abatement cost curves. The expansion to EU ETS 2 for buildings and transport from 2027 onwards further extends this market mechanism.

Strategic integration involves three steps:

1. Threshold Setting: Establish an internal carbon price aligned with projected EU ETS developments and corporate climate ambitions

2. Portfolio Analysis: Map all potential measures against the internal price to identify immediate opportunities

3. Dynamic Adjustment: Regularly update the threshold as external carbon prices evolve and technology costs decline

This approach enables finance teams to evaluate climate investments using familiar decision frameworks whilst maintaining alignment with science-based targets. For guidance on target-setting processes, see our comprehensive SBTi certification guide.

From Static to Dynamic: Scenario-Based MACC Applications

Traditional marginal abatement cost curves provide snapshot analyses based on current technology costs and fuel prices. However, energy transitions unfold over decades, during which technology performance improves, input costs fluctuate, and policy landscapes shift dramatically.

Enhanced MACCs address these limitations by incorporating scenario analysis. Rather than presenting a single cost curve, dynamic approaches model how marginal abatement costs evolve under different climate scenarios (RCPs and SSPs).

Key considerations include:

Technology Learning: Cost reductions follow predictable patterns as deployment scales. Solar and battery technologies exemplify this phenomenon, with costs declining 15-20% for each doubling of cumulative capacity.

Fuel Price Volatility: Natural gas and oil price shocks can rapidly alter the economics of electrification and renewable energy adoption. Scenario planning tests measure robustness across price environments.

Policy Trajectories: Regulatory changes including carbon taxes, subsidies, and mandates fundamentally reshape investment cases. Different policy scenarios yield distinct optimal abatement portfolios.

Companies developing net-zero transition plans benefit from scenario-based MACCs that reveal which measures remain cost-effective across multiple futures and which depend on specific external developments.

MACCs in Supply Chains and Scope 3 Emissions

A significant innovation in marginal abatement cost applications involves extending the analysis beyond direct operations into supply chain emissions. Scope 3 typically represents 70-90% of total corporate carbon footprints, yet remains notoriously difficult to address due to limited direct control.

Progressive organisations now develop collaborative MACCs with key suppliers, identifying cost-effective decarbonisation opportunities throughout the value chain. This approach shifts focus from purely technical measures to business model innovations including:

• Material substitution and circular economy models

• Supplier development programmes with shared investment

• Contract structures that incentivise low-carbon production

• Collaborative technology adoption across multiple supply chain tiers

For companies navigating Scope 3 accounting complexities, supplier-focused MACCs provide a framework for prioritising engagement efforts based on both emissions impact and cost-effectiveness. The approach recognises that optimal system-wide decarbonisation may involve investments distributed across the value chain rather than concentrated in a single entity.

MACCs in Business Practice: Target Setting and Budget Planning

Implementing marginal abatement cost curves in corporate practice requires translating analytical insights into actionable climate targets and capital allocation decisions. 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.

Climate Target Development: MACCs enable evidence-based target setting across different time horizons:

• Near-term (1-3 years): Focus on negative-cost measures and low-hanging fruit

• Medium-term (3-7 years): Deploy mature technologies with moderate abatement costs

• Long-term (7+ years): Invest in emerging technologies and infrastructure transformation

Budget Planning Considerations: Financial analysis must account for three cost components:

1. Capital Expenditure: Upfront technology investments, often concentrated in early implementation years

2. Operating Expenditure: Ongoing costs including maintenance, energy, and personnel

3. Opportunity Costs: Resources allocated to climate measures versus alternative investments

Companies seeking to enhance ESG performance whilst maintaining profitability use MACCs to identify optimal intervention points where climate action delivers measurable business value beyond regulatory compliance.

Integration with CSRD and ESG Reporting

Under the Corporate Sustainability Reporting Directive (CSRD), European companies must disclose their transition plans, including emissions reduction strategies and capital allocation for climate measures. Marginal abatement cost curves provide analytical foundation for these disclosures, even when the curves themselves remain internal management tools.

CSRD reporting requirements intersect with MACC analysis in several areas:

Double Materiality Assessment: Understanding which emissions sources create financial risks helps prioritise MACC development for material topics.

Transition Plan Credibility: Detailed MACCs demonstrate that climate targets reflect thorough analysis of available technologies, associated costs, and implementation roadmaps.

CapEx Alignment: European Sustainability Reporting Standards (ESRS) require disclosure of capital expenditure for climate transition. MACCs support this reporting by quantifying investment needs across different abatement measures.

Scenario Resilience: CSRD mandates assessment of strategy resilience under climate scenarios. Dynamic MACCs enable companies to demonstrate how their abatement portfolio performs across different carbon price trajectories and technology development pathways.

For organisations navigating ESG reporting complexity, MACCs bridge technical climate analysis with strategic disclosure requirements.

Limitations and Challenges: Data Quality and System Interactions

Despite their utility, marginal abatement cost curves face several methodological limitations that users must acknowledge. Understanding these constraints enables more sophisticated application whilst avoiding common pitfalls.

Data Quality Issues: Cost estimates depend heavily on assumptions about technology performance, energy prices, and implementation contexts. A study analysing 14 country-level cost curves found that data uncertainties led to significant result variations (McKinsey). Using confidence intervals around cost estimates rather than point values improves analytical robustness.

System Interactions: Traditional MACCs often miss interactions between measures. Implementing one intervention may increase or decrease the effectiveness of others through technical, economic, or behavioural channels. For example, building insulation reduces the emissions reduction potential of heat pump installations, as heating demand decreases.

Temporal Dynamics: Static curves ignore how costs and performance evolve over time. Technology learning, scale effects, and market development can dramatically alter cost-effectiveness between analysis and implementation.

Boundary Definitions: Narrow system boundaries risk overlooking important impacts. Comprehensive analysis accounts for lifecycle emissions, including production, operation, and end-of-life phases.

Addressing these limitations requires transparent documentation of assumptions, regular updates to reflect changing conditions, and integration with complementary analytical tools including lifecycle assessment and carbon stress testing.

Practical Implementation and Key Success Factors

Successful MACC implementation extends beyond technical analysis to organisational change management. Companies achieving meaningful emissions reductions through marginal abatement cost frameworks typically demonstrate several characteristics:

Cross-Functional Engagement: Effective MACCs require input from operations, finance, procurement, and sustainability teams. Each function contributes distinct perspectives on feasibility, costs, and implementation barriers.

Regular Updates: Leading practitioners review their MACCs every 2-3 years, updating cost assumptions, technology options, and reduction potentials based on market developments and organisational changes.

Integration with Capital Planning: MACCs inform rather than dictate investment decisions. Successful organisations integrate abatement cost analysis into standard capital budgeting processes, evaluating climate measures alongside other strategic investments.

Stakeholder Communication: While detailed MACCs remain internal tools, communicating key insights to investors, customers, and employees builds support for climate investments—particularly measures with positive abatement costs requiring financial justification beyond immediate returns.

Complementary Risk Analysis: Combining MACCs with climate risk assessment ensures that physical climate risks and transition risks inform abatement prioritisation alongside cost considerations.

For startups and growth companies navigating EU Taxonomy alignment, simplified MACC approaches can identify quick wins whilst establishing frameworks for more sophisticated analysis as organisations scale.

Key Takeaways for Strategic Decarbonisation

Marginal abatement cost curves have evolved into sophisticated strategic tools that combine technology analysis, financial planning, and scenario modelling. Current applications extend well beyond simple cost ranking to encompass supply chain collaboration, internal carbon pricing integration, and ESG reporting frameworks.

The fundamental shift toward negative-cost measures in the left side of the curve creates unprecedented opportunities for win-win climate action. Companies can achieve substantial emissions reductions whilst improving operational efficiency and reducing costs. However, reaching net-zero targets ultimately requires addressing high-cost abatement in hard-to-decarbonise sectors through technology development and business model innovation.

Successful organisations treat MACCs as living tools that evolve with changing technology costs, carbon prices, and strategic priorities. Rather than one-time studies, effective MACC programmes involve regular updates, cross-functional collaboration, and tight integration with capital planning processes.

As regulatory requirements intensify through CSRD, EU ETS expansion, and sector-specific regulations, MACCs provide the analytical foundation for credible transition planning, strategic capital allocation, and stakeholder communication around climate investments.

Frequently Asked Questions

How can companies ensure data quality for accurate marginal abatement cost analysis?

Robust data governance starts with clear documentation of all assumptions, data sources, and calculation methodologies. Companies should establish confidence intervals around cost estimates rather than relying on point values, recognising inherent uncertainties in technology performance and future prices. Regular data validation through peer review, comparison with industry benchmarks, and pilot testing of key measures improves accuracy. Integration of multiple data sources—including supplier quotes, industry studies, and historical project data—provides triangulation that reduces reliance on any single input.

What role do marginal abatement cost curves play in Scope 3 emissions reduction?

MACCs increasingly extend into supply chain decarbonisation through collaborative development with key suppliers. Rather than viewing Scope 3 as outside direct control, progressive companies work with vendors to identify cost-effective abatement opportunities throughout the value chain. This approach shifts focus from technical measures to business model innovations including material substitution, supplier development programmes, and contract structures that incentivise low-carbon production. Collaborative MACCs enable strategic prioritisation of supplier engagement based on both emissions impact and cost-effectiveness.

How should companies integrate marginal abatement cost curves with internal carbon pricing?

Effective integration establishes the internal carbon price as a financial threshold within the MACC framework. Measures below the internal price qualify as "no-regret" investments that both reduce emissions and generate financial returns. Those above the threshold require additional strategic justification based on factors including regulatory risk, stakeholder expectations, or long-term competitiveness. Companies typically align internal prices with projected EU ETS trajectories and science-based target requirements, creating dynamic thresholds that evolve as external carbon prices rise and technology costs fall.