The ranking of negative-cost emissions reduction measures

A flaw has been identified in the calculation of the cost‐effectiveness in marginal abatement cost curves (MACCs). The problem affects ‘negative‐cost’ emissions reduction measures–those that produce a return on investment. The resulting ranking sometimes favours measures that produce low emissions savings and is therefore unreliable. The issue is important because incorrect ranking means a potential failure to achieve the best‐value outcome. A simple mathematical analysis shows that not only is the standard cost‐effectiveness calculation inadequate for ranking negative‐cost measures, but there is no possible replacement that satisfies reasonable requirements. Furthermore, the concept of negative cost‐effectiveness is found to be unsound and its use should be avoided. Among other things, this means that MACCs are unsuitable for ranking negative‐cost measures. As a result, MACCs produced by a range of organizations including UK government departments may need to be revised. An alternative partial ranking method has been devised by making use of Pareto optimization. The outcome can be presented as a stacked bar chart that indicates both the preferred ordering and the total emissions saving available for each measure without specifying a cost‐effectiveness.