Decoding carbon abatement cost: Top strategies, practices & examples

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It is an acknowledged fact that carbon abatement is pivotal to curbing GHG emissions and realizing the target of net-zero by mid-century. While the focus of most investors, businesses, and governments had diverged to countering the effects of the pandemic, the new normal is gradually aligning the focus back to addressing climate change.

Carbon abatement cost is one among many considerations for organizations developing a robust decarbonization strategy. Paving the way to net-zero requires companies to duly assess their processes and identify the modifications required to reduce emissions.

Having a comprehensive overview of the value chain and the changes required to facilitate net-zero emissions can provide a clear understanding of carbon abatement costs. This can assist businesses to make the best decision in terms of the technology they can afford to adopt.  This article focuses on comprehending carbon abatement cost, some of its foremost strategies, practices, and real-world examples.

Abatement and marginal carbon abatement cost: Explained

Abatement cost is defined as the cost of minimizing environmental negatives like pollution. To develop a deeper understanding, we need to discover what marginal abatement cost is. In economics, marginal cost is defined as the cost of one additional unit. Therefore, marginal abatement costs measure the cost of minimizing one additional unit of pollution.

Since net-zero revolves around removing more carbon than produced, marginal abatement costs qualify as a crucial aspect for organizations to measure the economic viability of executing zero-carbon strategies.

Marginal carbon abatement costs can be negative, signifying that adopting a low carbon alternative is more economically viable than the traditional business alternative. On the other hand, reducing more carbon can lead to a sharp increase in the abatement cost curve and pose profit concerns.

So, what strategies can help businesses scale the cost curve and construct a successful carbon abatement strategy?

The foremost strategies to scale the carbon abatement cost curve

  • Pragmatic action: Conference meetings can only go so far as to examine on a theoretical level. A successful decarbonization strategy should begin with initiating low emission plans by leveraging available and affordable technologies.
  • Exploration: The abatement curve can only enlist limited strategies, technicalities, and market opportunities to minimize the impact of increased emissions and generate value. A well-defined abatement strategy would focus on exploring uncharted territory.

Pragmatic action to attain low carbon objectives

Materializing low carbon plans would require easily accessible capital. This would further necessitate interest from governments and other private investors to disburse long-term loans on favorable terms. Such developments can enable businesses to acquire the required capital to invest in low carbon processes at almost half of their current capital cost. Furthermore, companies can expedite their existing emission control projects.

An excellent example is Anheuser-Busch InBev’s largest sustainability-linked credit facility, launched in February 2021. It provides a 10.1 billion USD sustainability linked revolving credit facility aimed at realizing an array of sustainability projects.

While transitioning to net-zero emissions, companies can re-evaluate the investment criteria. A plethora of zero-carbon initiatives needs to go through similar financial examinations as traditional capital investments. A focus on increasing the payback tenure from the usual two years to four-five years can significantly impact long-term investment decisions.

Exploring fresh models for low emission

Discovering new models of ownership and funding can be another great practice to beat the carbon abatement costs for companies. New models could allow organizations to retain ownership of their equipment while facilitating low carbon projects.

The construction of the first-ever ethanol production plant by Clariant in Podari, Romania, is an exceptional example of how the company has optimized their carbon abatement costs by leveraging electricity and steam generation from a plant manoeuvred by GETEC.

An integrated sustainability production system

While the aforementioned practices exhibit real-world viability, the construction of a robust sustainability production system is vital for companies to enhance carbon control processes. Organizations need to sight, strategize and implement efficient procedures with the effective assistance of technology and a proficient workforce. Moreover, organizations would need the infrastructure and a systematic approach to acquire and enhance a zero-carbon production system.

Investments in various analytical tools that can ingest and analyze sustainability data can facilitate continuous improvements in the efficiency level of resources and energy.

Appropriate solutions to overcome abatement costs would depend extensively on the location of the business, access to capital, government support, and the company’s devotion to adopting new technologies.  Organizations would be required to enhance existing technologies and integrate them with the production cycle.  Strategic innovation would further involve healthy collaborations with new ventures, pursuing breakthroughs, and associations with research organizations.

Constructing a solid carbon abatement strategy with Schneider Electric

As a leading name in transforming automation and energy management, Schneider Electric encourages organizations to develop solid carbon cost abatement strategies and expedite the movement towards net-zero emissions.

Named as the world’s foremost sustainable organization in 2021, Schneider Electric has continually showcased its relentless dedication towards accelerating the world’s movement towards a carbon-free future. Our energy-efficient solutions in electricity distribution, automation control, and building solutions have helped organizations make their value chain more efficient.

Sustainability rests at the core of our operations, culture, and vision as we expedite our contributions to an inclusive and sustainable world. Deploying our supply chain on the zero-carbon project, we have helped over 1000 suppliers to realize their climate goals and reduce their carbon emissions to half by 2025. Our programs dedicated to decarbonization offer exceptional professional support, solutions, and tools to assist our partners in accelerating their business operations.

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