Abatement cost curves: a viable management tool for enabling the achievement of win–win waste reduction strategies?

Abstract

Environmental regulation of industrial activity is generally believed to have a negative impact on the industry. Recent literature has suggested, however, that reducing industrial waste outputs can, in some circumstances, result in a ‘win–win’, or at least ‘win–draw’, scenario for industry and the environment. The viability of using the abatement cost curve method as a management tool to enable the achievement of a ‘win–win’ state is investigated here. Copper pollution in the Humber Estuary is used as a case-study, and the abatement cost curve methodology proves to be a valuable tool in identifying barriers to achieving the win–win state, and also in providing future direction for the waste management strategy. Abatement cost curves are concluded to be powerful management tools which greatly improve the transparency of waste reduction information.

Introduction

Industrial activity is historically linked to environmental degradation, through the unsustainable utilisation of resources and through the unsustainable use of the environment as a sink for waste. It is therefore unsurprising that a critical sector of environmental management is the reduction of harmful industrial waste outputs. Waste reduction from industrial sites has in the past been undertaken in a rapid and somewhat undirected fashion, and is generally believed to have a negative impact on the industry. Contrary to this perception reducing industrial waste outputs can, in some circumstances, result in a ‘win–win’, or at least ‘win–draw’, scenario for industry and the environment, by increasing efficiency and decreasing waste and emissions (Porter, 1991, Greer and van Loben Sels, 1997, Murty and Kumar, 2003).

This ‘win–win’ position is, however, rarely attained, despite growing awareness of the potential benefits of environmental technologies (CEST, 1995). This is due in part to the fact that environmental regulation in the UK has traditionally tended to encourage short term, ‘End of Pipe’ (EOP) measures. Regulators are now increasingly working with industries to develop and adopt efficient pollution abatement techniques over a flexible time scale, hence encouraging technologies which benefit the company and the environment (Braden et al., 1994, Wenborn et al., 1997). Despite this development of regulation there remain barriers to the implementation of environmental technologies within the industries themselves. Opportunities to reduce waste and save money must compete with other potential activities for the firm—both in terms of scarce capital for investment, and scarce managerial time and effort. In many cases the benefits of environmental technologies are not sufficient to outweigh the other options, and hence they are not implemented (Greer and van Loben Sels, 1997). Similarly, there may be failures of information or organisational structure such that the potential savings are not recognised (Sorrell et al., 2000).

To overcome these barriers, and achieve a win–win position for industry and the environment, it is essential that environmental management is based on an understanding of the technologies available and the associated costs, benefits and pressures involved when implementing waste reduction technologies. Environmental management which is based on this understanding will encourage companies to re-engineer their technologies in a way which not only pollutes less, but also improves quality and efficiency (Porter, 1991).

The study of waste reduction strategies and their implications is a growing field within the discipline of environmental economics (Hernandez et al., 1996, Hanley et al., 1995, Wickborn, 1996), and there are a number of methods available at varying levels of complexity and scale (Zhang and Folmer, 1995). Methods which focus upon technological detail and the impact upon individual enterprise are classed as bottom up measures, for example, the Ad Hoc method (Hernandez et al., 1996, Hanley et al., 1995) and Dynamic Optimisation (Manne and Richels, 1992). The economy wide impact of abatement costs are investigated by top down measures, for example, Computable General Equilibrium (Nestor and Pasurka, 1995). The method investigated in this study is the derivation of abatement cost curves. Abatement cost curves can be used to provide an estimate of cost to reach a required level of abatement, and also to reveal the most efficient route to this discharge level. The description of costs in this format allows the ready evaluation of the impact upon the economy, and aids negotiations between the government, regulators and industries (Jung et al., 1996). The production of abatement curves also increases the transparency and awareness of environmental technologies, which as a result improves the likelihood of achieving a win–win scenario. The abatement costs can also be analysed to provide information on trends in abatement and environmental awareness of industries.

Detailed abatement studies are rarely found in the literature, as although research into abatement technologies and associated costs is increasing, most studies are confidential or not published. The majority of published studies are based upon greenhouse gases (Hernandez et al., 1996, Boer and Bosch, 1995, Wickborn, 1996, Maya and Fenhann, 1994, Kram et al., 1995), or are specific to individual industries (Greer and van Loben Sels, 1997, Environmental Protection Agency, 1997). The aim of this study is to investigate the viability and usefulness of abatement curves as management tools. This is undertaken through the production of an abatement cost curve, based on the case study issue of copper pollution in the Humber Estuary. Prior to the description of the case study different types of abatement measure, and difficulties associated with determining their costs and benefits, are discussed.