Economic Brief No. (EB-16) 8 pp

February 2011

Carbon Prices and the Adoption of Methane Digesters on Dairy and Hog Farms

Biogas recovery systems collect methane from manure and burn it to generate electricity or heat. Burning methane reduces its global warming potential, thereby reducing greenhouse gas (GHG) emissions. Climate change mitigation policies that effectively put a price on GHG emissions could allow livestock producers to "sell" these reductions to other greenhouse gas emitters who face emissions caps or who voluntarily wish to offset their own emissions. Depending on the direction and scope of future climate change legislation, income from carbon off set sales could make methane digesters profitable for many livestock producers. By modeling the main determinants of producers' decisions to adopt biogas recovery systems, we illustrate how the price of carbon influences this decision and the potential supply of carbon offsets from the livestock sector.

Keywords: Methane, methane digesters, manure, livestock, climate change, greenhouse gases, carbon offset, agricultural economics

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