Every emitter has a menu of abatement options — ways to cut a tonne
of CO₂ — each with its own cost. Sorted cheapest to most expensive, those
options form a rising staircase: the marginal abatement cost (MAC)
curve. A carbon price is a flat horizontal line across that staircase.
Any bar whose cost sits below the line is cheaper to fix than to
keep paying for, so it gets abated. Any bar above the line is cheaper to
simply keep emitting and pay the carbon price on — no rational emitter
pays more to abate than the price charges them to pollute.
for each option, sorted by cost ascending:
if cost <= carbon_price: abate it (add its Mt to abated total)
else: keep emitting it (add its Mt to remaining, pays price × Mt)
revenue = carbon_price × remaining_emissions_Mt
- Carbon price — the $/tonne cost imposed on every tonne of CO₂ emitted, via a tax or a cap-and-trade permit price.
- Sweeping line — the horizontal marker rises with the price; bars it clears turn teal (abated) cheapest-first.
- Emissions abated — cumulative Mt CO₂ from every option currently cheaper than the price.
- Carbon revenue — price × the Mt still being emitted (and therefore still paying), the government/registry income from the policy.
- Hard-to-abate residual — the tall grey bar on the right has no realistic low-cost fix; it keeps paying the carbon price at almost any level shown here.
This is why carbon prices are raised gradually over time: each increase sweeps the line higher, unlocking the next tranche of abatement that was previously too expensive to bother with.