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A Battle Is Underway Over California’s Lucrative Dairy Biogas Market

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Every month, Cathy and Lenard Moreno hang fresh disposable fly traps around their backyard. In a few weeks, the plastic bags hang heavy, swollen with as many as 20,000 flies each. 

“That’s just disgusting,” said Lenard Moreno. “We’re constantly battling them.”

The Morenos live in Planada, an unincorporated community in the heart of California’s Central Valley. The region grows a quarter of the nation’s food and produces the largest percentage of its milk. In Planada, there are more flies than people, and certainly more cows

Some residents, including the Morenos, say the dairies that surround them have brought air and water pollution, along with irritating smells and flies. “Nobody says, ‘When I grow up, I want to live next to a dairy,’” said Cathy Moreno, a retired cafeteria cook who organizes against dairy expansion with a group called Defensores, which means ‘Defenders’ in Spanish. “No one says that.” 

The dairy industry has long been an economic engine in the region and the state, but in recent years, some California dairies have seen a windfall unrelated to agricultural products; 131 of them have received state grants to install anaerobic digesters, which produce natural gas from manure

In California, that gas can also receive financial credits intended to curb the climate impact of transportation fuel. The state awards credits to fuels with lower carbon intensity than traditional fossil fuels. By some measures, the program has been a success—the collective carbon intensity of fuels used in California’s transportation sector are nearly 13 percent lower than when the program began in 2011.

But some environmental advocates and residents like the Morenos believe the state is pouring money into a polluting industry under the guise of climate action. Planada doesn’t yet have a digester nearby, but the Morenos worry that the lucrative incentives mean it’s only a matter of time before neighboring farms are pumping out gas in addition to dairy products, further entrenching an industry that they see as an environmental burden. 

The state considers natural gas produced at dairies to be carbon negative, because digesters capture planet-warming methane that would otherwise be released from farms and operators then sell it to end users who would ordinarily buy fossil fuels. But modeling released this summer shows that the state could meet its climate transportation goals without such generous credits for biogas. Now, for the first time in years, California is considering changes to the credit program that helps support digester projects. The stakes are high for both those living near dairies and the industries that have benefited from the incentives; the process could decide whether California continues subsidizing the projects. According to regulatory documents released in December, the state appears set to keep the credits in place for two decades.

Balancing Emissions Reductions and Local Air Pollution

California, though a national leader in climate policy, has faced criticism as it struggles to balance cutting emissions with its pursuit of environmental justice. Last year, as the state was putting the finishing touches on a plan that would guide its climate ambitions in the coming decades, Martha Dina Argüello, executive director of Physicians for Social Responsibility-Los Angeles, said in a press release that the plan was “grossly out of touch with the lived reality of communities that experience suffocating pollution,” because it didn’t do enough to reduce local pollution from industries like refining fossil fuels and agriculture in step with carbon emissions.  

Similar concerns have been connected to many of California’s signature climate programs, from its cap-and-trade market to its plan to phase out gas vehicles. The same is true of the Low Carbon Fuel Standard (LCFS), the program that doles out fuel credits. Environmental groups and communities in the Central Valley have argued for years that they are experiencing increased pollution as a result of the program. The dairies that benefit from the credits are largely concentrated in just a few counties, where roughly one-fifth of residents live below the federal threshold for poverty.

“We cannot be using our own taxpayer money to injure us, impact our health, our environment, our land, our property—we can’t even be outdoors during the summer,” said Patricia Ramos-Anderson, who lives in Santa Nella, an unincorporated Central Valley community. 

California has set a 2045 deadline for its entire economy to reach carbon neutrality, so it’s working to draw down transportation emissions while slashing emissions in many other areas. The California Air Resources Board (CARB), which governs climate programs and manages the LCFS, also has a 2030 target to reduce livestock emissions by 40 percent below 2013 levels. 

Incentivizing dairy biogas tied the state’s transportation and livestock emission goals together, and allowed regulators to reward methane reductions on farms rather than penalize emissions. In the U.S., subsidies are a common tool to encourage the agriculture industry “to behave in the way that we want,” said Michael Wara, director of the climate and energy policy program at Stanford University.

Installing a digester can also provide a new revenue stream in a state where environmental regulations and high cost of operations have made it harder and harder for dairies to survive. Some operations have already departed for locales with looser rules, like Arizona and Texas.  

But even as some dairies have left, California’s overall herd size has stayed relatively flat over the last two decades, which means fewer farms, often with more cows. 

“When you concentrate that many animals, or a very large number of animals, in a small space, then you’re concentrating a lot of potential pollution,” said Aaron Smith, a professor of agricultural economics at the University of California, Davis.

Residents and environmental groups worry that state incentives for dairy biogas will encourage more consolidation and growth—leading to more pollution—because processing more manure means more money. 

California farms were exempt from certain air and water pollution rules until the early 2000s. Though agricultural facilities must now apply for permits that regulate their air and water emissions, the region has well-known water contamination tied to agricultural runoff. The regional water board says not a single dairy is in full compliance with water standards, and the Central Valley has overshot certain federal air standards for decades

“They’re all causing problems irrespective of whether they have expanded or not,” said Patrick Pulupa, the executive officer of the Central Valley Water Board. 

Emissions Reduction Without Biogas

The Air Resources Board began considering changes to the LCFS early this year, in order to align it with strengthened state climate targets. When the board finalizes changes to the program in 2024, residents like Ramos-Anderson and the Morenos want to see it eliminate credits for gas produced at dairy digesters. But rulemaking documents that the board released in December show that, as of now, it plans to keep those credits in place. That’s “disheartening,” said Jamie Katz, staff attorney at the Leadership Counsel for Justice and Accountability, in an email. “If this proposal is adopted, the LCFS will continue to undermine the state’s climate goals and incentivize unsustainable, polluting megadairies in the San Joaquin Valley.”

The agriculture industry, which can benefit from the incentives, has long held sway in California. So in recent months residents have worked to apply their own pressure to the board. The Morenos, Ramos-Anderson and David Rodriguez, who also lives in Planada, have met with state senators in the Central Valley and traveled to Sacramento to support a bill that would have reduced the time period for which dairy biogas was eligible for LCFS credits (the bill was put on hold to let CARB’s rulemaking play out). Rodriguez traveled to Washington, D.C., to speak with federal lawmakers about dairy-related pollution. And in August, residents hosted CARB’s chair for a meeting in a community center near more than two dozen dairies and eight digesters. 

To have more research to support their positions, groups including the Leadership Counsel and the Asian Pacific Environmental Network asked Wara at Stanford to model what the LCFS could look like with lower credits for dairy-produced gas. Wara’s team found that increasing the carbon intensity calculations for that gas (which are currently negative) reduces its use by more than three-quarters through 2030, without missing the LCFS’ overall targets. The state would still be able to reach its transportation emissions goals, in part, because the team’s work showed that regulators’ modeling overestimated how much liquid fuels the state would need as transportation electrifies. Lower liquid fuel demand meant customers would not need to rely so heavily on certain fuels, like biogas, in coming years (the state later updated its fuel assumptions to match Stanford’s).

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The Stanford team also modeled other changes, like putting a cap on production of crop-based biofuels, which can contribute to deforestation.

“The market doesn’t explode when you take these more controversial credit-generating tools out of the market,” said Wara. 

Leslie Martinez, a community engagement specialist at the Leadership Counsel, said the Stanford study provides concrete evidence that it’s possible to listen to communities while still meeting California’s climate goals.  

So far, the board has not taken up those concerns. In September, CARB released an analysis of potential program changes that did not incorporate recommendations from a board convened to advise it on environmental justice or community suggestions. In an email to Inside Climate News, a CARB spokesperson said the agency understands the “long-standing concerns about water and air quality related to dairies,” and “will be incorporating feedback received during its public process.” The December draft of proposed changes  would allow digester projects to continue receiving credits through 2040 or 2045, depending on what the gas they produce is used for. The board is expected to vote on the changes in March.

In public documents, the agency has carved out an integral role for digesters in reducing both transportation and livestock emissions. Digester developers and some dairy owners also contend that the projects provide an important climate benefit.  

“Everything we do is focused on how to have the biggest impact on greenhouse gas reductions as soon as possible,” Neil Black, the president of a digester development company, told Inside Climate News last year

The industry and some CARB staff have also maintained that one of the biggest criticisms of the program—that it causes dairies to expand—is unfounded.

A 2023 analysis from Smith, the agricultural economist at UC Davis, found that since 2019, the number of cows per farm in California has grown at a rate below the growth rate outside of the state, which he said suggests digesters are not compelling herd increases.   

Still, several dairies that benefited from the program do appear to have grown. Dairies are permitted to increase or decrease herds by 15 percent, which regulators have deemed “normal variation” in herd size. An Inside Climate News analysis showed that at least three dairies that have received grants from the state to build digesters and credits for the gas they produce requested to  expand their herds by 15 percent after being approved for grants to fund those projects. 

At least eleven other dairies that received state grants also received county approval to increase or change herd size by more significant percentages (one of these digester projects was later canceled). Two of those dairies planned to increase  the number of milk cows, which produce more manure than other cows, but not the overall number of animals at their dairies. Three other dairies that are currently applying for state digester grants have also been approved for dairy expansions, ranging from 35 percent to 159 percent of their herds, since the state began disbursing those grants.

And at least six dairies that receive LCFS credits received county approval to increase herd size. (Inside Climate News requested dairy expansion permits from the eight counties with digesters installed and received data or partial data from three of these counties, as well as the local water board that helps regulate them).  

In assessing dairy size, California water regulators also do not always count a dairy’s “support stock”—cows that will someday be cycled into milk production. Support stock can increase a facility’s herd size by thousands. One facility that received state funding is allowed to have 3,072 mature milking cows, and has another 3,788 support stock, according to permit documents.  

“How big can they get until we stop them?” said Lenard Moreno, who previously worked as an industrial mechanic. 

Any policy change  will have impact outside of California. Facilities in other states can sell biogas into the California market and receive credit for it, as long as it’s able to be piped into the state. Facilities in states like Louisiana and Nebraska currently sell products that receive LCFS credits. 

Though the board hasn’t incorporated their feedback yet, Martinez at the Leadership Counsel expects residents will continue to make noise. “There’s hope because residents are making their own hope,” she said. “You might not listen to me today, but one day you will, and I’m going to continue to show up.”

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