Decarbonizing a Portfolio of Operating Assets: Cost Analysis for Vehicle Fleets

Gunther Glenk, Katrin Gschwind, and Stefan Reichelstein

August 2026

Companies across industries seek to assess the costs of complying with environmental regulations and meeting voluntary emission targets. This paper develops a carbon abatement cost model for firms operating a portfolio of assets with differing cost or load profiles. The resulting abatement cost curves serve as a decision tool for configuring individual assets to achieve firm-wide emission reductions at least cost. We apply our model to urban bus fleets regulated under the California Cap-and-Trade Program. We find that a carbon price of $35 per ton of CO2e (2024 average) incentivizes firms to configure their fleets such that battery-electric drivetrains constitute 70% of usable installed capacity and 92% of annual demand, while diesel drivetrains serve peak loads. Since the resulting emissions are fairly inelastic to the carbon price, we conclude that the life-cycle cost per mile would increase substantially if deep decarbonization were to be induced entirely by higher carbon prices.

Keywords: life-cycle costing, capacity investments, abatement cost curves, carbon emissions, transport decarbonization

JEL Codes: M41, M48, Q54, Q56