Carbon Markets and Methane Digesters: Potential Implications for the Dairy Sector

Abstract

Anaerobic digesters that capture and burn manure methane can provide a renewable source of energy and reduce greenhouse gas emissions. Paying producers for these emission reductions—either directly or through a carbon offset market—could substantially increase digester adoption. However, there is likely to be wide variation in the scale, location, and characteristics of adopters, so these policies could have long run structural implications for the livestock sector. Using a model of digester profits and data from a nationally-representative survey of dairy operations we estimate the likely distribution of digester adoption and profits under different carbon price scenarios.