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.

BREAKING DOWN 'Abatement Cost'

Abatement costs can have a very negative impact against company earnings 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.

Example of a Pollution Abatement Cost

A 200-mile portion of the Hudson River in New York is currently classified by the EPA as one of largest Superfund sites in the country. During a 30-year period ending in 1977, when the EPA banned the production of polychlorinated biphenyls (PCBs), it is estimated that approximately 1.3 million pounds of PCBs were discharged into the Hudson River from two General Electric (GE) capacitor manufacturing plants located 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 entire 197-mile Superfund site, but specifically required to clean up 40 miles of the upper river. Remediation dredging started in 2009 and ended in 2015 with the company claiming it invested $1.7 billion on the cleanup. In December 2016, GE requested a certificate of completion from the EPA. The EPA sent a letter to GE in January 2018 noting its decision of completion will be delayed until its five-year review of the cleanup is finalized, hopefully by year end. Depending on the EPA’s review, GE may be required to perform additional dredging that could significantly boost its total pollution abatement costs associated with the Hudson River cleanup.

RELATED TERMS
  1. Abatement

    A reduction in the level of taxation faced by an individual or ...
  2. Clean-Up Requirement

    A clean-up requirement is a stipulation that is a way for lenders ...
  3. Annual Clean-Up

    A banking practice that requires a borrower to pay off all balances ...
  4. Common Pool

    A resource or asset that is jointly managed or accessed by a ...
  5. Form 843: Claim For Refund And ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  6. Heavy

    A market that is demonstrating difficulty in advancing and is ...
Related Articles
  1. Investing

    Software Issues for Fiat Chrysler: Recalls 1.25 Million Trucks

    Fiat Chrysler recalls 1.25 million vehicles for software error believed to disable airbags and seatbelt functions. This comes months after the EPA charged Fiat Chrysler with employing emissions ...
  2. Taxes

    Taking Advantage of Property Tax Abatement Programs

    Increase your home's value without increasing your property taxes.
  3. Investing

    GE Capital Could Have 'Zero Value,' Says Street

    Legacy insurance policies, subprime US mortgages and unusual financial products spark concern.
  4. Investing

    GE's CEO Eyes 'Next Age of Productivity' (GE)

    General Electric Co. (GE) may continue to explore innovative ways to drive revenue growth in the foreseeable future.
  5. Investing

    GE Is Exploring Spinoffs, IPOs, Hybrids Deals

    GE is reportedly considering hybrid deals for divisions like GE Transportation as it works on a turnaround.
  6. Financial Advisor

    Why Is GE Selling Some of Its Subsidiaries?

    Learn why GE is selling off a substantial amount so it does not have to comply with increased government regulation in the wake of the 2008 financial crisis.
  7. Investing

    General Electric Adds to Its Leadership Team (GE)

    General Electric Co (GE) has announced the appointment of four officers, a move that may help the company achieve its earnings goals.
  8. Investing

    The Biggest Risks of Investing in General Electric Stock

    Read about the biggest risks facing General Electric Company, an international conglomerate that is undergoing unprecedented restructuring.
  9. Financial Advisor

    What's Behind GE's $32 Billion Deal With Wells Fargo

    GE is a 123-year-old blue chip mainstay, with some radical plans for the future--as evidenced by Wells Fargo's $32 billion purchase of several of GE's finance-related businesses.
  10. Investing

    Why The GE Stock Is Falling Today (GE)

    GE reported positive earnings this morning. But its stock is down. Why?
RELATED FAQS
  1. How significantly does government regulation impact the chemicals sector?

    Study the impact of stringent federal regulations on the chemicals sector and learn how industries are impacted by the cost ... Read Answer >>
  2. What are the types of costs in cost accounting?

    Cost accounting aids in decision-making by helping a company's management evaluate its costs. There are various types of ... Read Answer >>
  3. What are the differences between period costs and product costs?

    Find out why GAAP separates all company expenses into either period or production costs and how this impacts the way expenses ... Read Answer >>
  4. Cost of Capital vs Required Return

    Though they may sound similar, they do have key conceptual differences. Take a look at the primary differences between an ... Read Answer >>
  5. How do externalities affect equilibrium and create market failure?

    Discover the ways that externalities lead to market failure. Externalities are costs or benefits that go to a third party, ... Read Answer >>
Hot Definitions
  1. Capital Asset Pricing Model - CAPM

    Capital Asset Pricing Model (CAPM) is a model that describes the relationship between risk and expected return and that is ...
  2. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  3. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  4. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  5. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  6. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
Trading Center