Abatement Cost

What Is an Abatement Cost?

An abatement cost is a cost borne by firms when they are required to eliminate or potentially reduce unfortunate irritations or negative side-effects made during production.

As organizations shift towards chasing after environmental, social, and governance (ESG) means, abatement costs play a large job in deterring companies from tolerance on their environmental, ozone depleting substance emissions. In particular, abatement costs are there as "fines" for companies that either fail to advance in making greener production cycles or fail to account for expected issues and end up harming the environment. The most common scenario where abatement costs are applied is for pollution and oil spills, whether accidental or deliberate.

Understanding Abatement Costs

Abatement costs can have an extremely negative impact against company earnings, and furthermore decline the inspiration of a company's public picture as consumers are requesting greener practices. Particularly for certain industries, abatement costs can essentially impact a company. For instance, when an industrial company is required by the U.S. Environmental Protection Agency (EPA) to clean up pollution accumulated by a company's manufacturing, mining, processing, or waste discharge site, abatement costs will without a doubt be involved.

While discussing abatement fees, the term "marginal abatement cost" likewise alludes to the marginal benefit to accomplish an efficient reduction of pollution. Working out the marginal abatement cost curve, otherwise called the MAC curve or MACC, is a cycle that includes delineating the cost-viability of ozone harming substance emissions reductions, for instance gauging a company's toxic waste against drives it might fund in reforestation.

Illustration of a Pollution Abatement Cost

A 200-mile portion of the Hudson River in New York is right now classified by the EPA as one of the largest Superfund sites in the country. During a 30-year period ending in 1977, when the EPA restricted the production of polychlorinated biphenyls (PCBs), it is estimated that roughly 1.3 million pounds of PCBs were discharged into the Hudson River from two General Electric (GE) capacitor manufacturing plants situated 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 whole 197-mile Superfund site yet explicitly required to clean up 40 miles of the upper river. Remediation digging began in 2009 and ended in 2015 with the company claiming it invested $1.7 billion on the cleanup. In December 2016, GE mentioned a certificate of completion from the EPA. The EPA sent a letter to GE in January 2018 noticing its decision of completion would be delayed until its five-year survey of the cleanup is finished, ideally by year-end. Depending on the EPA's audit, GE might be required to perform extra digging that could essentially help its total pollution abatement costs associated with the Hudson River cleanup.

Features

• Abatement costs are the costs associated with eliminating negative results made during production.
• Abatement costs are commonly incurred for things like cleaning up pollution after a spill and are exacted by states seeking to relieve negative environmental impacts.