Marginal abatement cost curves analysis for New Zealand

Potential greenhouse gas mitigation options and their costs

The Ministry for the Environment, with the help of Concept Consulting, has undertaken work to develop a marginal abatement cost curves (MACCs) analysis for New Zealand. This report describes their progress and stage 1 results.  A marginal abatement cost curve is a graph that visualises the abatement potential of greenhouse gas mitigation measures, and the relative costs associated with each of these measures.

Four key points to highlight are:

  1. Costs are analysed from a national economic perspective, ie, they inform on the costs and benefits to New Zealand of an abatement option being implemented. In many cases these will differ to the costs and benefits faced from a private consumer perspective, for reasons such as misaligned price signals. In some cases, we have also looked at a private perspective to inform on the potential extent of misalignment. Note we also use a discount rate of 6% across our analysis.
  2. The abatement potential shown is the technical potential. This assumes there are no non-cost barriers to implementation, such as infrastructure constraints, supply constraints, and behavioural barriers. It also does not take into account the time required to implement policies and build scale. The realisable potential is therefore likely to be smaller, particularly in the near-term. It is intended that future work will be undertaken to assess realisable potential.
  3. The analysis does not predict the market response to an emissions price. The estimated marginal abatement cost should therefore not be conflated with the required emissions price in the New Zealand Emissions Trading Scheme (NZ ETS).
  4. Our analysis identifies several options with negative abatement costs – a common finding in this type of work. This means these options are found to have net economic benefits over their lifetime, even with no cost to carbon. This indicates that cost is not likely to be the barrier to these options being adopted.
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