Greenhouse gas (GHG) emissions from New Zealand dairy farms are significant, representing nearly 35% of New Zealand’s total agricultural emissions. Although there is an urgent need for New Zealand to reduce agricultural GHG emissions in order to meet its Kyoto Protocol obligations, there are, as yet, few viable options for reducing farming related emissions while maintaining productivity. In addition to GHG emissions, dairy farms are also the source of other emissions, most importantly effluent from milking sheds and feed pads. It has been suggested that anaerobic digestion for biogas and energy production could be used to deal more effectively with dairy effluent while at the same time addressing concerns about farm energy supply. Dairy farms have a high demand for electricity, with a 300-cow farm consuming nearly 40 000 kWh per year. However, because only ~10% of the manure produced by the cows can be collected (e.g. primarily at milking times), a maximum of only ~16 000 kWh of electricity per year can be produced from the effluent alone. This means that anaerobic digestion/electricity generation schemes are currently economic only for farms with more than 1000 cows. A solution for smaller farms is to co-digest the effluent with unutilised pasture sourced on the farm, thereby increasing biogas production and making the system economically viable. A possible source of unutilised grass is the residual pasture left by the cows immediately after grazing. This residual can be substantial in the spring–early summer, when cow numbers (demand) can be less than the pasture growth rates (supply). The cutting of ungrazed grass (topping) is also a useful management tool that has been shown to increase pasture quality and milk production, especially over the late spring–summer. In this paper, we compare the energy and GHG balances of a conventional farm using a lagoon effluent system to one using anaerobic digestion supplemented by unutilised pasture collected by topping to treat effluent and generate electricity. For a hypothetical 300-cow, 100-ha farm, topping all paddocks from 1800 to 1600 kg DM/ha four times per year over the spring–summer would result in 80 tonnes of DM being collected, which when digested to biogas would yield 50 000 kWh (180 GJ) of electricity. This is in addition to the 16 000 kWh from the effluent digestion. About 90 GJ of diesel would be used to carry out the topping, emitting ~0.06 t CO2e/ha. In contrast, the anaerobic/topping system would offset/avoid 0.74 t CO2e/ha of GHG emissions: 0.6 t CO2e/ha of avoided CH4 emissions from the lagoon and 0.14 t CO2e/ha from biogas electricity offsetting grid electricity GHGs. For the average dairy farm, the net reduction in emissions of 0.68 CO2e/ha would equate to nearly 14% of the direct and indirect emissions from farming activities and if implemented on a national scale, could decrease GHG emissions nearly 1.4 million t CO2e or ~10% of New Zealand’s Kyoto Protocol obligations while at the same time better manage dairy farm effluent, enhance on-farm and national energy security and increase milk production through better quality pastures.