Marginal Abatement Cost

Cheap reductions (efficiency tweaks) are made first, so the marginal abatement cost curve slopes upward as a firm pushes to eliminate ever-harder units of emissions. The efficient level of pollution control is where marginal abatement cost equals the marginal benefit (or marginal damage avoided) of cleaning up. The concept underpins why a carbon price or cap-and-trade system minimizes total cleanup cost: firms abate up to the point where their marginal abatement cost equals the permit price.