An abatement option against a changing baseline
An industrial facility is weighing an operational improvement against purchasing eligible units. Its analyst must separate a simplified cost comparison from an actual compliance determination.
Permanent case linkYour task
Calculate the assumed emissions gap, compare two cost paths and test a lower baseline without promising a compliance outcome.
Your role
Emissions analyst preparing a decision screen for review
Practice data & worked solution
Separate tonnes, units and dollars
Original synthetic single-year screen, not a legal assessment. Assume covered emissions 110,000 tCO2-e and a fixed teaching baseline of 100,000 tCO2-e. One eligible surrendered unit offsets one tonne for this arithmetic only. Units cost A$35 each; the abatement option costs A$220,000 for this year and reduces covered emissions by 8,000 tonnes. No banking, borrowing, multi-year arrangements, production changes, tax or financing.
| Option | Covered emissions tCO2-e | Assumed baseline tCO2-e | Abatement cost AUD | Eligible unit price AUD |
|---|---|---|---|---|
| No abatement | 110000 | 100000 | 0 | 35 |
| Operational improvement | 102000 | 100000 | 220000 | 35 |
Your analysis
- Calculate the assumed residual gap and total cost for each option.
- Find the unit price at which the operational improvement breaks even. Explain why electricity certificates cannot fill this ledger automatically.
- Lower the assumed baseline to 95,000 tonnes for both options. Recalculate costs and distinguish the sensitivity from a real baseline formula.
Worked solution
Base comparison
No abatement leaves a 10,000-tonne gap, costing A$350,000 in units. The improvement leaves a 2,000-tonne gap, costing A$70,000 in units plus A$220,000 in abatement: A$290,000 total. The simplified saving is A$60,000.
Break-even and unit integrity
Abatement costs 220,000/8,000 = A$27.50 per tonne avoided. Above this eligible-unit price it is cheaper under these assumptions. Electricity certificates measure electricity attributes in MWh, not this tonnes-based obligation. Verify the actual scheme's eligible instruments, ownership, surrender and reporting treatment.
Lower-baseline sensitivity
At 95,000 tonnes, the gaps are 15,000 and 7,000 tonnes. Total costs become A$525,000 and A$465,000; the difference remains A$60,000. This subtraction is not the Safeguard baseline calculation. Actual baselines depend on the governing rules and facility circumstances; seek qualified review before compliance decisions.
Review your response
- Boundary: covered emissions and the hypothetical baseline are explicit.
- Units: tCO2-e, eligible units and electricity attributes stay distinct.
- Decision: compare total cost and marginal abatement cost consistently.
- Compliance: no invented baseline, current unit price or legal eligibility is presented as fact.
This checklist supports self-review. No tutor marking or independent credential is included.
Related topics 4
Sources & evidence
All figures are original teaching inputs, not observations or published forecasts. The official source supplies industry context, not this dataset. Source link checked 17 October 2026. Consult CER baseline guidance and the facility's actual determination, reporting boundary, eligible units and applicable compliance dates. Do not infer a legal obligation from the teaching table.
Clean Energy Regulator — Safeguard baselines