Japanese power companies can meet the challenge of CO₂ abatement by either converting generating plants from high carbon intensive plants to low intensive plants or by replacing the high carbon intensive plants, while keeping electric power supply constant. This paper examines the marginal abatement cost and the potential for CO₂ abatement using data for Japanese power companies. The shape of marginal abatement cost curves and the potential for abatement estimated by redispatch is determined by the capacity of low carbon intensive plants. It is more cost effective for a company which did not invest in LNG plants in the past to use the replacement approach.