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.