Academic journal article Agricultural and Resource Economics Review

Carbon Emissions, Renewable Electricity, and Profits: Comparing Policies to Promote Anaerobic Digesters on Dairies

Academic journal article Agricultural and Resource Economics Review

Carbon Emissions, Renewable Electricity, and Profits: Comparing Policies to Promote Anaerobic Digesters on Dairies

Article excerpt

Anaerobic digesters can provide renewable energy and reduce greenhouse gas emissions from manure management. Government policies that encourage digester adoption by livestock operations include construction cost-share grants, renewable electricity subsidies, and carbon pricing (offset) programs. However, the effectiveness and efficiency of these policies is not well understood. For the U.S. dairy sector, we compare predicted digester adoption rates, carbon emission reductions, renewable electricity generation and sales, and net returns and social benefits of several policies. We find that a carbon pricing policy provides the greatest net social benefit for a range of assumptions about the benefits of carbon reductions and renewable energy.

Key Words: anaerobic digester, carbon offsets, climate change, dairy, methane, renewable electricity, subsidy

(ProQuest: ... denotes formulae omitted.)

Anaerobic digesters that collect and burn methane from manure can provide numerous benefits to livestock producers and the environment. Digesters can supply a renewable source of electricity, reduce odors from manure and the potential for surface water contamination, and recycle manure solids for animal bedding material. By burning methane, digesters also can reduce greenhouse gas (GHG) emissions from manure. Despite these benefits, anaerobic digesters have not been widely adopted in the United States. In 2011, there were only 167 operating digester systems, 137 on dairies and 23 on hog operations (AgSTAR 2011).

Rising fuel prices and an intensifying desire among citizens and government bodies to employ renewable energy and reduce carbon emissions have renewed interest in policies that encourage livestock producers to capture methane emissions from manure to produce energy. A 2010 joint statement by the Environmental Protection Agency (EPA) and the U.S. Department of Agriculture (USDA) announced their intention to provide $3.9 million to encourage farm adoption of biogas recovery systems that generate energy from manure-based methane (EPA 2010a). EPA estimates that 2,645 dairy farms could feasibly generate 6.8 million megawatt hours (MWh) of electricity annually from biogas (EPA 2010b). In addition, cap-and-trade climate legislation recently debated in Congress, such as H.R. 2454, the American Clean Energy and Security Act of 2009 (www.govtrack.us/congress/bills/111/ hr2454), could encourage adoption of farm-based methane digesters because such legislation would allow producers to sell offsets in the carbon market proposed in the act. Under such a system, livestock producers who reduce methane emissions via digester adoption could sell carbon offsets to other GHG emitters such as electric utilities, which face emission caps.

Despite an apparent political desire to encourage biogas capture at livestock facilities, little of the empirical research done so far on how to implement those goals has accounted for costs and benefits or examined the likely success and impacts of policies proposed. An EPA study that identified the 2,645 dairies that would find it "profitable" to adopt digesters explicitly noted that it did not include a cost analysis (EPA 2010b, p. 3) and instead defined profitability on the basis of the size of the operations and the manure management methods they employed. Other studies have examined the economic attractiveness of digesters for particular types of farms (Lazarus and Rudstrom 2007, Leuer, Hyde, and Richard 2008, Stokes, Rajagopalan, and Stefanou 2008, Bishop and Shumway 2009). Though such studies are useful, they may not be sufficiently generalizable to predict nationwide adoption levels. Only Gloy (2011) and Key and Sneeringer (2011a, 2011b) have considered national rates of adoption of digester systems, but those studies focused primarily on climate change policies related to carbon pricing and did not explore alternative policies to promote digester use.

Policies currently in place that aim to make digesters more profitable for operators include: (i) construction-cost subsidies (e. …

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