Marginal abatement cost (MAC) curves have traditionally focused on scope 1 (direct) and scope 2 (electricity) emissions. However, as companies intensify efforts to address value chain emissions, many are now building MAC curves for scope 3 emissions.
When used correctly, MAC curves can be a useful tool in developing an emissions reduction strategy. However, applying the concept to scope 3 emissions introduces key differences that need to be considered.
This article outlines a five-step process to build a scope 3 MAC curve while avoiding common pitfalls:
By following these steps, companies can create a robust scope 3 MAC curve, providing confidence and clarity on how to start reducing value chain emissions.
When used correctly, MAC curves can be a useful tool in developing an emissions reduction strategy. However, applying the concept to scope 3 emissions introduces key differences that need to be considered.
This article outlines a five-step process to build a scope 3 MAC curve while avoiding common pitfalls:
- Define the boundary: Focus on what matters most
- Pick a perspective: Determine the cost basis
- Divide and conquer: Streamline the process
- De-duplicate: Ensure accurate abatement calculations
- Create a dynamic dashboard: Extract insights from the analysis
By following these steps, companies can create a robust scope 3 MAC curve, providing confidence and clarity on how to start reducing value chain emissions.
Step 1: Define the boundary
Start with your existing scope 3 emissions inventory and reporting boundary, then narrow down further to focus on the most material sources of scope 3 emissions. For example, consider starting with the 20% of emission sources that account for 80% of your total emissions.
Creating a high-quality scope 3 MAC curve is a substantial undertaking. In the early stages, it is more effective to delve deeper into the most significant sources of emissions rather than spreading yourself too thin trying to cover the full reporting boundary. A MAC curve helps identify the highest priority abatement levers, and any lever that addresses only a small percentage of your footprint is unlikely to make the initial cut.
Creating a high-quality scope 3 MAC curve is a substantial undertaking. In the early stages, it is more effective to delve deeper into the most significant sources of emissions rather than spreading yourself too thin trying to cover the full reporting boundary. A MAC curve helps identify the highest priority abatement levers, and any lever that addresses only a small percentage of your footprint is unlikely to make the initial cut.
Step 2: Pick a perspective
In scope 1 and 2 MAC curves, the cost typically refers to what the company itself bears. For scope 3 emissions, the cost to your company may be only a portion of the total. For example, if your suppliers could implement energy efficiency measures, you may only need to cover part of the cost to motivate action.
As such, there are two approaches for scope 3 MAC curves:
Most companies prefer the second method, focusing on the necessary investment. However, this approach can be complex, so some start with the first method for preliminary screening. Regardless of the approach, ensure consistency across all abatement levers for accurate comparisons.
As such, there are two approaches for scope 3 MAC curves:
- Full cost: Model the full implementation cost of the abatement lever.
- Incremental cost: Determine the cost to incentivise stakeholders to implement abatement measure.
Most companies prefer the second method, focusing on the necessary investment. However, this approach can be complex, so some start with the first method for preliminary screening. Regardless of the approach, ensure consistency across all abatement levers for accurate comparisons.
Step 3: Divide and conquer
Developing a scope 3 MAC curve is more complex due to the larger and more varied sources of emissions, and the challenge of modelling emissions reductions in areas your business is less familiar with.
Divide the task by business unit, commodity, or industry to streamline the process. A central coordinating team, typically within sustainability, finance, or strategy, should provide clear templates and guidance to ensure consistent and comparable data collection and calculations.
Divide the task by business unit, commodity, or industry to streamline the process. A central coordinating team, typically within sustainability, finance, or strategy, should provide clear templates and guidance to ensure consistent and comparable data collection and calculations.
Step 4: De-duplicate abatement levers
It's common for identified abatement levers to overlap, leading to a risk of overestimating aggregate abatement potential. For example, to reduce vehicle emissions, you could electrify your fleet or procure biofuel, but you can't do both for the same vehicle. This issue is even more prevalent with scope 3 abatement levers.
While duplicative abatement levers are rarely plotted on a MAC curve, it's crucial not to lose this information. The chosen abatement lever may not be the best approach, so keep alternative levers in your model to toggle on at a later date.
While duplicative abatement levers are rarely plotted on a MAC curve, it's crucial not to lose this information. The chosen abatement lever may not be the best approach, so keep alternative levers in your model to toggle on at a later date.
Step 5: Create a dynamic dashboard
To extract maximum value from your analysis, use a robust software tool or advanced spreadsheet to visualise the data. Scope 3 MACs can involve numerous abatement levers, sometimes up to 100, making basic charts difficult to create and interpret. A good dashboard should allow you to filter by category, focus on specific parts of the MAC curve, and dive into detailed analysis as needed.
If a MAC curve doesn’t effectively communicate your findings, consider alternative visualisation methods that will better convey your message. The real value of MAC curves lies not in the chart itself but in the rigorous analysis and strategic insights gained throughout the process.
If a MAC curve doesn’t effectively communicate your findings, consider alternative visualisation methods that will better convey your message. The real value of MAC curves lies not in the chart itself but in the rigorous analysis and strategic insights gained throughout the process.
Developing a scope 3 MAC curve can be a valuable step towards a comprehensive decarbonisation strategy. By following these five steps—defining the boundary, picking a perspective, dividing the workload, de-duplicating abatement levers, and creating a dynamic dashboard—you can help ensure a thorough and effective approach to scope 3 emissions reduction.
