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Definition

Marginal abatement cost

Marginal abatement cost is the net cost of avoiding one additional metric tonne of greenhouse gas emissions, calculated against a defined baseline over the same period.

What is marginal abatement cost?

Marginal abatement cost expresses a reduction option's net cost per metric tonne of carbon dioxide equivalent (tCO2e) avoided against a baseline. A curve ranks options by this figure; bar width shows abatement potential and height shows cost per tCO2e.

Why does marginal abatement cost matter to you?

It lets finance and operations compare projects on one basis. Use the same baseline for every option. The baseline is the starting case used to measure costs and emissions. Also match the project life, currency, discount rate and the emissions sources included. Otherwise, the ranking can favour an apparently cheap option that delivers less reduction than claimed.

How is marginal abatement cost calculated?

For each option, add the extra capital and operating costs and subtract the expected savings. Discount future costs, savings and avoided tCO2e over the same period, using the same rate. Then divide the resulting net cost by the resulting tCO2e avoided. A negative result means expected savings exceed costs. Record the baseline, factor source, implementation date and maximum feasible reduction.

What mistakes should you avoid?

  • Comparing options with different lifetimes, output levels or emissions scopes.
  • Counting the same avoided emissions under two dependent projects.
  • Leaving energy savings, maintenance, financing or residual value out of net cost.
  • Treating uncertain forecasts as exact figures instead of testing key assumptions.

Is marginal abatement cost the same as an internal carbon price?

No. Marginal abatement cost estimates what a reduction option costs per tCO2e. An internal carbon price is a value your company applies to emissions when testing decisions.

What does a negative marginal abatement cost mean?

It means estimated savings exceed incremental costs over the chosen period. Check whether the calculation includes all implementation costs and uses an achievable reduction estimate before calling the option profitable.

Should the cheapest abatement option always go first?

No. Also test delivery time, dependencies and production constraints. Check whether a cheap short-term project would commit you to equipment or infrastructure that blocks a later, deeper reduction. A higher-cost project may need to start first.

Example

Suppose a packaging manufacturer in Turkey considers insulating a gas-fired drying line. It expects to save 100,000 kWh of natural gas each year. Keslio's dataset has no Turkish natural-gas factor, so this illustration uses the UK DESNZ and DEFRA 2026 factor of 0.18231 kg CO2e/kWh gross calorific value as an explicit proxy. Replace it with the factor accepted for the company's reporting method.

Annual avoided emissions are 100,000 kWh x 0.18231 kg CO2e/kWh = 18,231 kg CO2e, or 18.231 tCO2e. Suppose the project costs TRY 1,200,000, lasts six years, adds TRY 20,000 of annual maintenance and saves TRY 320,000 in gas each year. This simplified illustration uses a 0% discount rate and assumes the maintenance, savings and avoided emissions stay constant for six years. Total net cost is TRY 1,200,000 + (TRY 20,000 - TRY 320,000) x 6 = -TRY 600,000. Total avoided emissions are 18.231 tCO2e x 6 = 109.386 tCO2e. Marginal abatement cost is -TRY 600,000 / 109.386 tCO2e = -TRY 5,485 per tCO2e. A full investment case should use the company's approved discount rate and test the cost, savings and emissions assumptions.

Where it comes up

CDP guidance on using marginal abatement cost curves to direct investment in emissions-reduction activitiesCDP Climate Change guidance, question C4.3c and Additional information, explains MACC calculation, project comparison and investment use (checked 2026-08-21)Official sourceMcKinsey company decarbonization strategy and lever prioritization with MACCsMcKinsey, Understanding the price of decarbonization, explains cost-per-tonne and abatement-potential construction, sequencing limits and strategy use (checked 2026-08-21)Official sourceIPCC mitigation-pathway marginal abatement costs for 2030 and 2050IPCC AR6 WGIII Chapter 3, Figure 3.33, compares modelled marginal abatement cost of carbon across mitigation pathways (checked 2026-08-21)Official source

Related terms

Internal carbon pricing

Internal carbon pricing assigns a monetary value to greenhouse gas emissions so your company can compare investments, budgets, products or business units using both financial costs and emissions in metric tonnes of CO2e.

Decarbonization lever

A decarbonization lever is a category of change, such as energy efficiency, fuel switching or renewable energy, used to group emissions-reduction actions and quantify how much each category contributes to a climate target.

Climate transition plan

A climate transition plan turns a climate target into dated actions, assigned resources, governance, financial assumptions, and progress measures for changing a company's strategy and business model toward a lower-carbon economy.

Climate change mitigation (EU Taxonomy objective 1 / ESRS E1)

Climate change mitigation means cutting greenhouse gas emissions or increasing removals to limit warming, and it is the first EU Taxonomy environmental objective and a separate climate subtopic in ESRS E1.

Sources

  • World Bank

    Additional-cost-per-tonne calculation, negative costs, option ranking and limits of cost-only sequencing

    2026-08-21

  • NSW Environment Protection Authority

    Cost-curve interpretation and consistent levelised treatment of costs and avoided emissions

    2026-08-21

Last verified 2026-08-21

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Marginal abatement cost Definition | Keslio