What Is an Abatement Cost?

An abatement cost iꦆs a cost borne by firms when they are required to remove and/or reduce undesirable nuisances♏ or negative byproducts created during production.

As businesses shift towards pursuing environmental, social, and governance (ESG) means, abatement costs play a large role in discouraging companies from leniency on their environmental greenhouse gas emissions. Specifically, abatement costs are there as "fines" for companies that either fail to innovate in creating greener production cycles or fail to account for potential problems and end up 澳洲幸运5开奖号码历史查询:damaging the environment. The most common scenari𒉰o in which abatement costs are applied is for pollution and oil spills, whether accidental or intentional.

Understanding Abatement Costs

Abatement costs can have a very negative impact against company earnings, and also decrease the positivity of a company's public image as consumers are demanding greener practices. Especially for certain industries, abatement costs can significantly impact a company. For example, when an industrial company is required by the U.S. 澳洲幸运5开💞奖号码历史查询:Environmental Protection Agency (EPA) to clean up pollution accumulated by a company’s manufacturing, mining, processing, or waste discharge site, abatement costs wil🃏l und💃oubtedly be involved.

When talking about abatement fees, the term "marginal abatement cost" also refers to the marginal benefit to achieve an efficient reduction of pollution. Calculating the marginal abatement cost curve, also known as the MAC curve or MACC, is a process that involves mapping out the cost-effectiveness of greenhouse gas emissions reductions, for example weighing a company's toxic waste against initiatives it may fund in reforestation. 

Example of a Pollution Abatement Cost

A 200-mile portion of the Hudson River in New York is currently classified by the EPA as one of the largest 澳洲幸运5开奖号码历史查询:Superfund sites in the country. During a 30-year period ending in 1977, when the EPA banned the production of polychlorinated biphenyls (PCBs), it is estimated that approximately 1.3 million pounds of PCBs were discharged into the Hudson River from two General Electric (GE) capacitor manufacturing plants located in the towns of Fort Edward and Hudson Falls, New York.

Under a 2006 consent decree with the EPA, GE was held responsible for the entire 197-mile Superfund site but specifically required to clean up 40 miles of the upper river. Remediation dredging started in 2009 and ended in 2015 with the company claiming it invested almost $2 billion on the cleanup. In December 2016, GE requested a certificate of completion from the EPA. The EPA issued a certificate of completion in April 2019, however, the state of New York filed a lawsuit claiming that the clean up did not remediate the river. New York lost the lawsuit in 2021. GE will reimburse the EPA for floodplain-related costs for $24 million. GE intends to pay EPA's cost for overseeing the investigation work.