Calculating Cost-effectiveness for Activities with Multiple Environmental Effects Using the Maximum Abatement Cost Method

Authors


Graduate School of Economics and Administration Fukui Prefectural University 4-1-1 Kenjojima, Matsuoka-cho Yoshida-gun, Fukui 910-1195, Japan <oka@fpu.ac.jp> <www.s.fpu.ac.jpoka>

Summary

A maximum abatement cost (MAC) method is proposed as a means of assessing preferential purchasing of products with multiple environmental effects. Using the MAC method, cost-effectiveness of the introduction of a product with less emissions of some substances than conventional products can be assessed. In the MAC method, the reduction of a pollutant is multiplied by the MAC, the maximum unit cost of the measures taken elsewhere in society aiming to reduce the pollutant, and is added up over the relevant pollutants. The total sum, called avoidable abatement cost (AAC), is compared with the additional private cost of the product for the purchaser. When the additional private cost is smaller than the AAC, the product is regarded as relatively eco-efficient. The MAC method is illustrated with an assessment of industrial pumps. The advantages and limitations of the method are discussed.

Ancillary