• participation in cost-share and other incentive programs—this can defray the cost of building digesters
• farm’s initial level of methane emissions—this determines the maximum quantity of carbon emissions reductions that can be sold
• carbon price—a higher carbon price makes digesters more profitable for operations that can sell carbon offsets.
Larger operations would be more likely to adopt a digester, and likely would earn substantially higher profits on average than smaller operations. Hence, introduction of a carbon market in a region could enhance existing economies of scale in production and result in further concentration of production on the largest operations. However, smaller livestock operations may be able to achieve a more efficient digester scale by supplementing manure with food waste products or by sharing a digester with other small operations. In addition, if the adoption of methane digesters by smaller operations is a policy goal, several tools exist—such as cost-share subsidies or tax incentives—that could be used to encourage their adoption by small farms.
Additional revenues from the sale of carbon emissions reductions (offsets) could substantially increase the number of operations that would adopt a biogas recovery system. Findings in this study indicate that a carbon price of $13 per metric ton of carbon dioxide equivalent emissions (an initial price estimated under one scenario for a nationwide capand-trade program for greenhouse gases) would:
• induce dairy and hog operations to supply offsets equivalent to about 22 million tons of carbon dioxide annually, amounting to about 62 percent of the current greenhouse gas emissions from manure management in these industries, or about 5 percent of total greenhouse gas emissions from the U.S. agricultural sector
• allow dairy and hog operators as a group to earn up to $1.8 billion in additional profits over 15 years from installing methane digesters.
Currently, the price of electricity and onfarm electricity expenditures are key determinants of digester profitability. However, when carbon prices are above $4 per metric ton of CO2 equivalent emissions, carbon offset sales comprise a larger source of digester revenue than electricity generation. At a price of $13 per metric ton of CO2 equivalent emissions, revenues from emission reduction sales (offsets) contribute 66 percent of gross digester revenues for all dairy and hog operations, electricity sales contribute 8 percent, and cost savings from avoided energy expenses contribute the remaining 26 percent.