IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

On the problem of optimizing through least cost per unit, when costs are negative: Implications for cost curves and the definition of economic efficiency

Listed author(s):
  • Levihn, Fabian
Registered author(s):

    For society and industry alike, efficient allocation of resources is crucial. Numerous tools are available that in different ways rank available options and actions under the aim to minimize costs or maximize profit. One common definition of economic efficiency is least cost per unit supplied. A definition that becomes problematic if cost take negative values. One model, where negative costs are not uncommon, is expert based/bottom up [marginal abatement] cost curves. This model is used in many contexts for understanding the impact of economic policy as well as optimizing amongst potential actions. Within this context attention has been turned towards the ranking problem when costs are negative.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544216312026
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Energy.

    Volume (Year): 114 (2016)
    Issue (Month): C ()
    Pages: 1155-1163

    as
    in new window

    Handle: RePEc:eee:energy:v:114:y:2016:i:c:p:1155-1163
    DOI: 10.1016/j.energy.2016.08.089
    Contact details of provider: Web page: http://www.journals.elsevier.com/energy

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Murphy, Rose & Jaccard, Mark, 2011. "Energy efficiency and the cost of GHG abatement: A comparison of bottom-up and hybrid models for the US," Energy Policy, Elsevier, vol. 39(11), pages 7146-7155.
    2. Morrow, William R. & Marano, John & Hasanbeigi, Ali & Masanet, Eric & Sathaye, Jayant, 2015. "Efficiency improvement and CO2 emission reduction potentials in the United States petroleum refining industry," Energy, Elsevier, vol. 93(P1), pages 95-105.
    3. Jackson, Tim, 1993. "Greenhouse conjectures -- and refutations," Energy Policy, Elsevier, vol. 21(7), pages 722-725, July.
    4. Levihn, Fabian, 2014. "CO2 emissions accounting: Whether, how, and when different allocation methods should be used," Energy, Elsevier, vol. 68(C), pages 811-818.
    5. Vine, Edward L. & Harris, Jeffrey P., 1990. "Evaluating energy and non-energy impacts of energy conservation programs: A supply curve framework of analysis," Energy, Elsevier, vol. 15(1), pages 11-21.
    6. Vogt-Schilb, Adrien & Hallegatte, Stéphane, 2014. "Marginal abatement cost curves and the optimal timing of mitigation measures," Energy Policy, Elsevier, vol. 66(C), pages 645-653.
    7. Klepper, Gernot & Peterson, Sonja, 2006. "Marginal abatement cost curves in general equilibrium: The influence of world energy prices," Resource and Energy Economics, Elsevier, vol. 28(1), pages 1-23, January.
    8. Georgopoulou, E. & Sarafidis, Y. & Mirasgedis, S. & Balaras, C.A. & Gaglia, A. & Lalas, D.P., 2006. "Evaluating the need for economic support policies in promoting greenhouse gas emission reduction measures in the building sector: The case of Greece," Energy Policy, Elsevier, vol. 34(15), pages 2012-2031, October.
    9. Yang, Xi & Teng, Fei & Wang, Gehua, 2013. "Incorporating environmental co-benefits into climate policies: A regional study of the cement industry in China," Applied Energy, Elsevier, vol. 112(C), pages 1446-1453.
    10. Halsnaes, K. & Mackenzie, G. A. & Swisher, J. N. & Villavicencio, A., 1994. "Comparable assessment of national GHG abatement costs," Energy Policy, Elsevier, vol. 22(11), pages 925-934, November.
    11. Stiglitz, Joseph E., 2002. "New perspectives on public finance: recent achievements and future challenges," Journal of Public Economics, Elsevier, vol. 86(3), pages 341-360, December.
    12. Flachsland, Christian & Brunner, Steffen & Edenhofer, Ottmar & Creutzig, Felix, 2011. "Climate policies for road transport revisited (II): Closing the policy gap with cap-and-trade," Energy Policy, Elsevier, vol. 39(4), pages 2100-2110, April.
    13. Wallis, Max, 1992. "Greenhouse ranking of gas-fuelling," Energy Policy, Elsevier, vol. 20(2), pages 174-176, February.
    14. Dedinec, Aleksandar & Markovska, Natasa & Taseska, Verica & Duic, Neven & Kanevce, Gligor, 2013. "Assessment of climate change mitigation potential of the Macedonian transport sector," Energy, Elsevier, vol. 57(C), pages 177-187.
    15. Blumstein, Carl & Stoft, Steven E, 1995. "Technical efficiency, production functions and conservation supply curves," Energy Policy, Elsevier, vol. 23(9), pages 765-768, September.
    16. Morthorst, Poul Erik, 1994. "Constructing CO2 reduction cost curves The case of Denmark," Energy Policy, Elsevier, vol. 22(11), pages 964-970, November.
    17. Taylor, Simon, 2012. "The ranking of negative-cost emissions reduction measures," Energy Policy, Elsevier, vol. 48(C), pages 430-438.
    18. Stankeviciute, Loreta & Kitous, Alban & Criqui, Patrick, 2008. "The fundamentals of the future international emissions trading system," Energy Policy, Elsevier, vol. 36(11), pages 4272-4286, November.
    19. Meier, Alan & Rosenfeld, Arthur H. & Wright, Janice, 1982. "Supply curves of conserved energy for California's residential sector," Energy, Elsevier, vol. 7(4), pages 347-358.
    20. Jackson, Tim, 1991. "Least-cost greenhouse planning supply curves for global warming abatement," Energy Policy, Elsevier, vol. 19(1), pages 35-46.
    21. Kesicki, Fabian, 2013. "What are the key drivers of MAC curves? A partial-equilibrium modelling approach for the UK," Energy Policy, Elsevier, vol. 58(C), pages 142-151.
    22. Levihn, F. & Nuur, C. & Laestadius, S., 2014. "Marginal abatement cost curves and abatement strategies: Taking option interdependency and investments unrelated to climate change into account," Energy, Elsevier, vol. 76(C), pages 336-344.
    23. Steven E. Stoft, 1995. "The Economics of Conserved-Energy "Supply" Curves," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 109-137.
    24. Wallis, Max K., 1992. "Forum Ranking of greenhouse gas abatement measures," Energy Policy, Elsevier, vol. 20(12), pages 1130-1133, December.
    25. Garg, Amit & Shukla, P.R. & Maheshwari, Jyoti & Upadhyay, Jigeesha, 2014. "An assessment of household electricity load curves and corresponding CO2 marginal abatement cost curves for Gujarat state, India," Energy Policy, Elsevier, vol. 66(C), pages 568-584.
    26. Brunke, Jean-Christian & Blesl, Markus, 2014. "A plant-specific bottom-up approach for assessing the cost-effective energy conservation potential and its ability to compensate rising energy-related costs in the German iron and steel industry," Energy Policy, Elsevier, vol. 67(C), pages 431-446.
    27. Halsnaes, Kirsten, 2002. "Market potential for Kyoto mechanisms--estimation of global market potential for co-operative greenhouse gas emission reduction policies," Energy Policy, Elsevier, vol. 30(1), pages 13-32, January.
    28. Fabian Kesicki & Paul Ekins, 2012. "Marginal abatement cost curves: a call for caution," Climate Policy, Taylor & Francis Journals, vol. 12(2), pages 219-236, March.
    29. Ward, D.J., 2014. "The failure of marginal abatement cost curves in optimising a transition to a low carbon energy supply," Energy Policy, Elsevier, vol. 73(C), pages 820-822.
    30. Nakićenović, Nebojša & John, Aviott, 1991. "CO2 reduction and removal: Measures for the next century," Energy, Elsevier, vol. 16(11), pages 1347-1377.
    31. Yuan, Jun & Ng, Szu Hui & Sou, Weng Sut, 2016. "Uncertainty quantification of CO2 emission reduction for maritime shipping," Energy Policy, Elsevier, vol. 88(C), pages 113-130.
    32. Delarue, E.D. & Ellerman, A.D. & D'haeseleer, W.D., 2010. "Robust MACCs? The topography of abatement by fuel switching in the European power sector," Energy, Elsevier, vol. 35(3), pages 1465-1475.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:114:y:2016:i:c:p:1155-1163. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.