How Can MACs Be Used for Trade Studies?
If several regions commit to achieve emission reductions at the same time and there is some prediction of what emissions would be without the commitment, the abatement required can be represented as a point on each region’s marginal abatement curve. [16] Moreover, if the marginal costs associated with those reductions are different across regions, the aggregate cost of meeting the commitments will be less to the extent that a region with higher marginal costs can induce a region with lower marginal costs to abate more on its behalf. Figure A2 illustrates the gains from trading for two regions, R1 and R2, subject to the constraints: CO2 abated = q1 for R1 and q2 for R2. Figure A2. Marginal Abatement Curves Used for Trade Studies. By abating more, the lower cost region produces “rights to emit,” or emission permits, which it can sell to the higher cost region which would thereby avoid a like amount of higher cost domestic abatement. Thus, the difference in the marginal costs associated w
