Reducing emissions saves money, even ignoring climate change
Dr. álvaro López-Pe?a
Energy Transition Strategy & Public Affairs / Renewables, Policy, Investment, Markets / Big Picture, Versatile, Communicator, Social & Analytical
?? Many economies are already decarbonizing, and in many cases, this is driven purely by economics. As the Financial Times highlighted in “Economics may take us to net zero all on its own”, “the plummeting cost of low-carbon energy has already allowed many countries to decouple economic growth from emissions.”
This is because many decarbonization options save money—especially when fossil fuels are expensive and energy efficiency measures and renewables are cheap (see previous posts).
This is precisely what Marginal Abatement Cost (MAC) Curves have been illustrating for decades, ever since McKinsey introduced them in 2007. These curves show the relative cost-benefit of different emission reduction measures: options on the left of the graph have negative abatement costs (i.e., they are profitable on their own), while those further to the right involve a cost and would require a carbon price to be financially viable. Below is one of the latest global McKinsey MAC curves as an example.
MAC curves have been developed for individual countries, continents, and even the entire world; but also for cities, companies, economic sectors… However, they do have some limitations—such as how measures interact, the role of taxation, sequencing, and the pace of technological improvement. Years ago, for instance, renewables appeared on the costly side of the graph, but today they are likely on the left, as one of the cheapest options, together with energy efficiency.
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And importantly, these analyses do not account for additional economic benefits such as enhanced energy security or avoided climate change impacts
You may see it differently—opinions always welcome!
?? References: Financial Times (2022) “Economics may take us to net zero all on its own”, John Burn-Murdoch; McKinsey & Company (2017) “A revolutionary tool for cutting emissions, ten years on”.
#Economics #Efficiency #Renewables #Climate
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Profesor Docente Investigador en la Universidad Pontificia Comillas
3 周Thank you, Dr. álvaro López-Pe?a, for sharing this excellent analysis and for your outstanding work with Visual Energy Transition! It’s always a pleasure to read your insights. I agree that economics is playing a key role in driving decarbonization, especially with the plummeting costs of renewables and improvements in energy efficiency. However, I believe the article’s title could benefit from a slight adjustment—perhaps adding a "sometimes." As the MAC curves themselves illustrate, not all measures result in negative abatement costs, and unfortunately, we still need some of those costlier options to reach net zero.