Abatement cost

What Is an Abatement Cost?

An abatement cost is a cost borne by firms when they are required to remove and/or reduce undesirable nuisances or negative byproducts created during production.

As businesses shift towards pursuing environmental, social, and governance (ESG) means, abatement costs play a large role in discouraging companies from leniency on their environmental, greenhouse gas emissions. Specifically, abatement costs are there as “fines” for companies that either fail to innovate in creating greener production cycles or fail to account for potential problems and end up damaging the environment. The most common scenario in which abatement costs are applied is for pollution and oil spills, whether accidental or intentional.

Other definitions:

An abatement cost is the expense a business incurs as a result of cleaning or removing an undesired byproduct of its goods and services. Abatement cost is often associated with large manufacturing plants that must abide by environmental standards or city noise ordinances. However, it may apply to a small business also. For example, a dental office must bear the cost of disposing of medically hazardous material.

Abatement costs means a city’s necessary and reasonable costs for and associated with clearing, preventing unauthorized entry to, or demolishing all or a portion of a structure or premises, or taking any other action with regard to a structure or premises necessary to remedy a violation and to maintain and preserve the public health, safety and welfare in accordance with any city ordinance.

Abatement costs means any costs or expenses, including County staff time reasonably related to the Abatement of a violation under this Chapter, and shall include, but shall not be limited to, enforcement, investigation, summaries, reports, notices, telephonic contact, correspondence, mailing expense, title search costs, costs incurred in obtaining an administrative warrant, administrative costs, including the total direct and indirect costs of enforcement established by generally accepted accounting principles that are reasonably and necessarily incurred by the County to investigate, inspect, or

Abatement costs means any and all costs incurred by the City to enforce this Article and to abate the hazardous vegetation or combustible material on any property pursuant to this Chapter including physical abatement costs, administration fees and any additional actual costs incurred for the abatement proceeding(s), including attorney’s fees, if applicable.

A Little More on What is Abatement Costs

The United States Environmental Protection Agency has the right to impose penalties on businesses that havent adequately addressed high outputs of toxic by-products in their manufacturing process. History shows that, if the EPA has to step in and forces a company to clean up their manufacturing process, the abatement costs associated with the clean up can be significantly higher and extremely damaging to a companys bottom-line earnings. Recently, GE found itself liable for a large environmental clean-up operation in 2006, when the EPA ruled that GE is responsible for the pollution and subsequent cleanup. GE was judged liable for a 197-mile stretch of the Hudson River where two of their plants had discharged 1.3 million pounds of PCBs into the waterway between the years 1947 and 1977. GE would be forced to foot the bill for the operation, including clean up of an additional 40 miles of upstream coastline that was also affected by the pollution. The cleanup operation began in 2009 and, after eight years, was finally completed in 2009. By the time the environmental cleanup was completed, GE had spent a staggering $1.7 billion dredging the river bed and cleaning up the affected coastline, but its not over for GE yet. The EPA has five years to review the job before they release GE from their obligation, and GE could end up having to spend more money on dredging the Hudson if the EPA is not satisfied.

Understanding Abatement Costs

Abatement costs can have a very negative impact against company earnings, and also decrease the positivity of a company’s public image as consumers are demanding greener practices. Especially for certain industries, abatement costs can significantly impact a company. For example, 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 undoubtedly be involved.

When talking about abatement fees, the term “marginal abatement cost” also refers to the marginal benefit to achieve an efficient reduction of pollution. Calculating the marginal abatement cost curve, also known as the MAC curve or MACC, is a process that involves mapping out the cost-effectiveness of greenhouse gas emissions reductions, for example weighing a company’s toxic waste against initiatives it may fund in reforestation.

How Does an Abatement Cost Work?

In many instances, companies produce goods or services that directly or indirectly result in a byproduct that may be medically or environmentally dangerous. This can be an indirect result of a cost-cutting measure to increase productive efficiency. Should governmental or regulatory authorities determine that a production process has hazardous side effects for the community at large, these authorities may require a company to eliminate or, at least reduce the incidence thereof. The cost to a company associated with reengineering the production process (whatever that may entail) for this purpose would be the abatement cost. For instance, if a company must begin using a more expensive raw material in order to reduce the amount of mercury released into the local environment, the additional cost would be the abatement cost.

Why Does an Abatement Cost Matter?

Abatement costs are often an indirect outcome of government-imposed regulations intended to benefit the greater community and environment. To this end, they represent, albeit by necessity, a source of economic inefficiency similar to a tax.

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