Innovative new financing models help dairy companies slash methane emissions

Cutting methane pollution is the single fastest, most effective strategy we have to slow the rate of warming. The benefits to the climate will be almost immediate.

If we are to meet net zero targets, companies need to take innovative approaches to slash both carbon dioxide and methane pollution.  The dairy industry is particularly well positioned to address this challenge. Livestock production is responsible for over 30% of U.S. methane emissions, with manure from pork, beef and dairy cows as a top source. 

Investing in improved manure management systems on dairy farms that capture methane is an immediate step companies can take to rapidly decarbonize their supply chains. The problem is the technologies available to reduce methane from manure, like anaerobic digesters, require significant capital investments, from farmers or companies, across the dairy value chain. As a result, implementation has been slow.

A new report from Transform to Net Zero and Environmental Defense Fund addresses this cost-barrier by introducing innovative financing models for scaling manure management technologies and practices. The report presents several paths forward that dairy companies can take to reduce manure methane emissions and meet net zero targets.

Growing momentum from the dairy industry to address methane

As the dairy industry, and really all food and agriculture companies, work toward a net zero future, methane must be at the center of their climate strategies. While it doesn’t need to be reduced to zero by midcentury like carbon does, companies should set a target to reduce methane by 20-30% by 2030.

The Innovation Center for U.S. Dairy launched the Net Zero Initiative, an industry-wide effort that will help U.S. dairy farms of all sizes and geographies implement new technologies and adopt economically viable practices for reducing their climate impact. The Global Dairy Platform is also driving global climate ambition through the Pathways to Dairy Net Zero initiative. The initiative, which includes companies such as Danone and Nestle, already has the support of more than 80 organizations representing over 30% of global milk supply. Both initiatives are providing tools and pathways focused on reducing methane emissions through improved manure management practices. 

There are a variety of manure management systems currently available. These systems range in size, infrastructure, cost and other aspects, and not all systems will be well suited for all farms. Each farm is unique and will require a different intervention depending on farm production capacity, farmer interest and need, and local climate and policy conditions. 

Anaerobic digesters are one technology readily available today to capture methane emissions. The EPA estimates that in 2020 alone, manure-based anaerobic digesters reduced GHG emissions by 5.29 million metric tons of CO2 equivalent.  And yet, as of 2021, there were only 265 biogas recovery systems on dairy farms, far less than the 8,100 that EPA’s AgStar estimates could be supported on U.S. dairy and swine operations.

New ways to finance methane solutions

While there is general consensus among companies in the dairy and agricultural industry of the need to mitigate manure methane, the cost of enhanced manure management systems and unclear guidelines on carbon accounting for methane reductions makes it a financial challenge for companies to embed these practices in their climate and net zero strategies. 

Fortunately, new innovative financing models are coming to market that can help companies overcome these financial barriers. They include:

• Scope 3 Stacking: A dairy company and other partners operating in the same value chain share the financing for an AD and share the carbon reductions proportional to their investment.
• RNG and Methane Mitigation: Companies in the same value chain identify common geographic areas and invest in joint projects. Companies can claim carbon reductions through multiple green e-certification schemes.

Community engagement is key

Regardless of the technology chosen, community engagement is essential during the development and implementation of manure management initiatives to ensure an equitable distribution of benefits and to avoid perpetrating existing environmental injustices. There are a variety of localized impacts, such as water quality, pollution and odor, associated with the dairy value chain. These harms often disproportionately impact low-wealth and communities of color, who tend to live in closer proximity to livestock farms. Solutions should aim to address local pollution challenges in concert with the climate impacts. 

Reducing agricultural methane emissions is urgent and necessary for meeting climate goals. Companies with dairy value chains should collaborate with their suppliers to evaluate the proper manure management strategies that work for the farm and surrounding community.

To learn more about how dairy companies can reduce methane emissions, download the new report