California Methane Digesters Largely Dependent on Government Credits
Beginning in 2024, California dairy farms will have to begin reducing the amount of methane they emit from manure, and by 2030, reductions must reach 40%.
Analysis by two University of California-Davis economists suggest that such an effort is largely reliant and dependent on government credits. In fact, they calculate that up to 93% of the revenue to operate a methane digester to produce pipeline injectable natural gas would come from state and federal government credits, and just 7% from the actual sale of fuel.
“…investment in digesters, because they depend heavily on revenue created by government policy, rather than on market-based sales of natural gas, are highly vulnerable to the risk of policy change or even minor technical adjustments in environmental regulations,” says Hyunok Lee and Daniel Sumner.
On the other hand, “dairy digesters can survive and even thrive in California if policy uncertainty is mitigated and policy-generated revenue flows are assured,” they say.
Failing that, though, unprofitable digesters could accentuate the trend of California dairies leaving the business or moving to other states. If that happens, California methane regulations would fail to reduce emissions by shifting them to other states “while also eroding the economic viability of the California dairy industry,” they say.
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