How to Save US Dairy: Immediate Aid and Long-Term Solutions

EXECUTIVE SUMMARY The US dairy industry has struggled with falling demand and low and volatile prices for decades, and in 2019, the US lost 3,281, or around 9%, of its dairy farms. Now, the COVID-19 pandemic has intensified the sector’s economic hardships; the pandemic could result in losses of $8.2 billion for dairy farmers. At the same time, dairy farmers are grappling with the sector’s large environmental footprint, growing awareness of which has further reduced consumer demand. To make US dairy farms economically and environmentally sustainable over the long term, the federal government should do the following:

Align dairy supply with domestic and international demand by 1) increasing funding for USDA FAS export programs and 2) creating a supply management program.

Facilitate dairy farm diversification and transitions by 1) reducing financial burdens to encourage new investments; 2) facilitating equipment and cattle sales; and 3) providing technical assistance and improving productivity of new ventures.

Increase adoption of financially and environmentally beneficial manure management by 1) promoting deployment and third-party ownership of anaerobic digesters and 2) increasing adoption of alternative manure management practices.

Combined, these policy interventions would offer a financial life raft to dairy farmers, saving and creating tens of thousands of jobs, while also reducing dairy sector greenhouse gas emissions by tens of millions of metric tons carbon dioxide equivalent.

“With dairy farm closures accelerating despite billions of dollars in government support, it has become increasingly apparent that US dairy’s current model is unsustainable.”

AUTHOR

Caroline Grunewald Dan Blaustein-Rejto

JULY 2020 INTRODUCTION Failing to address these impacts harms both the environment and the dairy sector’s economic sus- Even in the decades leading up to the COVID-19 tainability, since growing public concern has in- pandemic, the dairy industry was in decline, spired shifts to plant-based alternatives and will marked by decreasing per capita milk consump- likely promote consumption of cell-based milk tion,1 shrinking milk sales,2 and volatile prices. when products become commercially available.16 In fact, dairy farmers’ costs of production often exceeded the price they received.3 The pandemic In response to these dire challenges, the feder- has further intensified economic strains by clos- al government should restrict supply to prevent ing down schools and restaurants and reducing overproduction and depressed prices, while also overall demand. Milk production now outruns increasing funding for export promotion pro- consumption by 10%,4 farmers are dumping ex- grams; assist farmers who wish to diversify their cess milk,5 and dairy losses attributable to the operations or transition to other types of agricul- COVID-19 crisis could exceed $8.2 billion.6 tural production; and for continuing dairy farms, invest in programs and technologies that increase The United States Department of Agriculture incomes, create jobs, and address environmental (USDA) has responded by purchasing $317 million impacts. Combined, these interventions would of dairy products for the first round of the Farm- provide immediate support to farmers, create and ers to Families Food Box Program7 and pledging to save tens of thousands of jobs, and drastically re- purchase an additional $288 million in the second duce the dairy sector’s footprint. round.8 The USDA has also sent direct aid to dairy farmers through the Coronavirus Food Assistance Program (CFAP) — as of the end of June, almost PROPOSAL 1: ADJUST SUPPLY one-third of CFAP funds had been disbursed, and ACCORDING TO DOMESTIC 9 dairy farmers had received just over $1 billion. AND INTERNATIONAL While welcome, this aid will not make farmers whole or accomplish what decades of support in DEMAND the form of pricing regulations, milk purchases, Cost: $2.6 million per year in addition to supply and revenue protection programs have failed to management program costs do. Despite receiving around $22.2 billion in di- 10 rect and indirect subsidies in 2015 and over $47 Climate benefit: smaller domestic footprint from less million in the form of USDA cheese purchases excess production; smaller global footprint from dis- 11 between 2016 and 2019, dairy farms continue to placed production in countries with environmentally close. In 2019 the US lost 3,281, or around 9%, of its intensive dairy sectors dairy farms.12 Job protection: up to around 50,000 jobs saved Some dairy rescue proposals from other organi- per year17 zations call for more targeted aid, and the Nation- al Milk Producers Federation and International Traditionally, export promotion and supply man- Dairy Foods Association’s “Proposed NMPF-IDFA agement have been viewed as alternatives — ex- Milk Crisis Plan for USDA” even advocates for tying port promotion and trade liberalization tend to 13 aid to limits in production. However, these pro- go hand-in-hand, whereas effective supply man- posals focus on immediate aid and fall short of agement, which limits production based on mar- addressing long-term sustainability in ways that ket conditions and projected demand, requires would increase dairy farms’ self-sufficiency and some level of import restrictions. But the two can reduce government spending.

To date, aid has also overlooked another pressing challenge for dairy farmers — dairy production’s large land, water, and carbon impacts, which exceed those of most other foods and beverages.14,15 2 complement each other. Operating in tandem, ex- Service programs — the Market Access Pro- port promotion would increase the quantity that gram (MAP) and Foreign Market Develop- supply-managed dairy farmers can produce by ment Program (FMD) — and a policy memo increasing demand, and a well-designed supply produced by the Dairy Advisory Committee management system would calibrate production recommends expanding support for these to that demand. programs.24 In FY2020, the US Dairy Export Council received around $4.6 million from While export promotion has long been a priority MAP25 and around half a million dollars for industry and union groups, support for supply from FMD.26 A total increase of around $2.6 management has also gained momentum in re- million for the programs would allow MAP cent years. The National Farmers Union, for exam- and FMD to increase their US Dairy Export ple, has proposed establishing milk prices based Council contributions by 50%.27 on cost of production and retail prices,18 and in 2019 the Wisconsin Farm Bureau Federation voted Objective 2: Reduce Overproduction of Dairy to consider a supply management program modeled after Canada’s system.19 A dairy crisis plan • Establish a supply management program: released in April by the National Milk Producers There are different types of supply man- Federation (NMPF) and the International Dairy agement systems, but in recent years, US Foods Association (IDFA) proposes a 3-month-long dairy producer groups and advocacy orga- supply management program that would pay pro- nizations seem most interested in a producers $3 per hundredweight for 90% of their program modeled after Canada’s supply man- duction, provided they cut production by 10%.20 agement system. Canada’s program has three basic rules or “pillars”: 1) production Canada already employs a robust and long term control, which entails setting production supply management program, and while critics quotas for each province and directing pro- point to Canada’s higher dairy prices and its small- vincial marketing boards to allocate pro- er share of the international market21, the US and duction among farmers; 2) pricing mech- Canada’s export shares are fairly proportionate to anisms, which involves farmers, through the countries’ shares of worldwide dairy produc- their provincial marketing boards, col- tion.22 Also, while Canada’s farmers receive higher lectively negotiating minimum farmgate and more stable farmgate prices, retail prices tend prices with processors; and 3) import con- to be only somewhat higher than in the US and trols, or tariff-rate quotas that impose high are comparable to other major dairy-producing customs tariffs on imports above a certain countries like Australia and New Zealand.23 Still, level.28 As a stopgap while a supply man- by increasing the price of dairy products, a sup- agement program is being developed, Con- ply management system would likely have a small gress could consider implementing the negative impact on US dairy exports, so increasing NMPF and IDFA’s proposal to pay producers investment in export promotion programs will be $3 per hundredweight for 90% of their pro- key for maintaining, and even expanding, the in- duction, provided they cut production by ternational competitiveness of supply-managed 10%.29 Doing so would provide immediate US dairy. aid and ease the transition to a more for- mal supply management system. Objective 1: Increase International Demand for US Dairy

• Increase MAP and FMD funding ($2.6 million): The US Dairy Export Council conducts overseas market development, international trade agreements and negotiations, and collection of market information and statistics. Much of the Council’s funding comes from two USDA Foreign Agricultural 3 Policy Design Considerations temporarily produce less or purchasing excess dairy and distributing it to low-income A supply management program must be carefully communities. These contingency plans re- designed to achieve its price stabilization and sup- semble current and former support pro- ply reduction objectives and to avoid unintended grams, but they would be much smaller consequences. Below is a list of principles to en- and sporadically operated programs be- sure that the program accomplishes these goals. cause they are decoupled from supply man- Also included are a few principles aimed at opti- agement quota estimates and would not mizing global environmental outcomes and im- incentivize overproduction. proving overall welfare. Promote accessibility for aspiring young and dis- Minimize a supply management program’s im- advantaged dairy farmers by: pact on trade dynamics by: » reducing quota costs: Under Canada’s sup- » avoiding interference with existing and fu- ply management system, dairy farmers ture FTA commitments: The US should not must hold production permits called quo- let a supply management program prevent tas. One criticism of Canada’s supply man- the country from entering into future free agement system is that the high price of trade agreements (FTAs), since FTAs have quotas, which were initially distributed the potential to yield global environmental free of cost, can serve as a barrier to entry and economic benefits. for new farmers. The US should strive to avoid this unintended consequence and Ensure that supply management both supports should consider the following two policy dairy farmers and cuts oversupply by: design options: scaling the price of quotas based on new farmers’ abilities to pay, and » setting a target price before estimating ex- reserving a proportion of subsidized quo- port potential: Set a target price based on tas for young and disadvantaged farmers. production costs and market conditions and then determine the appropriate quota Promote economic sustainability along the supply based on projected domestic and interna- chain by: tional demand at that price level. This will ensure that dairy farmers receive an accept- » considering dairy processors: Farther up able price, and it will relieve policymakers the supply chain, dairy processors are also and program coordinators from having to struggling to stay afloat. Within the past weigh the tradeoffs between raising prices year, both Dean Foods and Borden Dairy domestically and limiting export opportu- have declared bankruptcy,30 and if farmgate nities. prices increase more than retail prices, pro- » promoting impartiality of demand esti- cessors’ margins will shrink farther. One mates: Dairy quotas should be based on option moving forward could be to support projections of domestic and internation- dairy cooperatives interested in operating al demand by an impartial third-party to their own processing facilities. Alternative- avoid dairy industry-influenced overesti- ly, the federal government could consider mates. implementing two of the NMPF and IDFA’s » creating a contingency plan: Because an proposals: a recourse loan program and a international shock or inaccurate annual forgivable loan program to support proces- projections could result in a sudden drop sors. in demand and excess supply, policymakers should develop a system for either slow- ing or absorbing dairy production until it aligns with actual demand levels. Options for dealing with unexpected excess supply include the government paying farmers to 4 Boost demand and support consumer welfare by: per kilogram of product, is far below the global average, and it is around 2.5 times lower than dairy » redirecting DPDP funds to food security production in South America and Asia.35 If US ex- initiatives: Unless it is deemed to play an ports and food aid displace more environmentally important food security role, the US should intensive dairy production in other regions, dairy’s phase out the Dairy Product Donation Pro- global environmental footprint would shrink. gram (DPDP), which funds government purchases of dairy products for donation to Investing in low-income countries’ dairy sectors, nonprofit organizations that serve low-in- in addition to promoting exports, will boost income populations. The US should redirect- comes in those countries and help their dairy DPDP funds to food security programs like farmers compete more fairly in the international WIC and SNAP31, which, unlike DPDP, would market. The environmental benefits of helping not provide overproduction incentives32 low-income countries modernize their dairy sys- and would increase the welfare of low-in- tems would also be substantial, since, compared to come individuals by allowing them to pur- pasture-based, low-input dairy systems, modern chase food of their choosing. If policymak- dairy systems require several-fold less water and ers determine that DPDP does provide an land and also produce several-times less manure essential food security service, the DPDP and GHG emissions.36 should purchase up to a predetermined limit, which can be factored into the quota A downside of exporting dairy globally is that US calculations. dairy farmers face more variability in demand and prices.37 This variability can lead to large dis- Promote global environmental sustainability im- ruptions for the dairy industry — farmers respond provements by: to high prices by adding more cows to production, but they often collectively overshoot the mark,38 » investing in low-income countries’ dairy and when prices fall, they can’t simply stop cows sectors: In addition to exporting dairy from producing milk. Therefore, a spike in prices products, the US should export beneficial can precipitate years of depressed prices. Supply information and technology, double-down management addresses this problem by limiting on commitments to support research for growth to levels that domestic and international and in developing countries, and invest in demand can absorb. dairy system intensification in low-income countries. Supply management would also reduce the environmental footprint of US dairy by eliminating Economic and Environmental Benefits the unnecessary water, feed, land use, and GHG impacts that are generated by overproduction. While there is some disagreement about the ef- 33 fectiveness of export promotion expenditures, Finally, a supply management program, by stabi- most studies have found that it’s a worthwhile lizing prices, would produce economic benefits investment. One study found that dairy export for farmers, the federal government, and US tax- promotion programs generate over half of annu- payers. Because a supply management system will al exports and are highly profitable for farmers, limit excess growth in response to temporary price with benefit-cost-ratios ranging from around 8.5 signals, it will prevent farmers from inadvertently 34 to 30.1. The same study concluded that the US is contributing to years of depressed prices. Also, be- underinvesting in export promotion since bene- cause supply-managed dairy farmers collectively fit-cost-ratios were positive at the margin. negotiate farmgate prices, they will no longer have

In addition to supporting prices and farmers’ incomes by boosting demand, expanded export markets also have the potential to mitigate environmental impacts. The emissions intensity of US dairy production, in terms of kilograms of CO2e 5 to accept prices that fall below their costs of pro- A concerted government effort to facilitate diver- duction. A more economically sustainable dairy sification is necessary because there are several industry will also indirectly benefit consumers, large barriers to diversification for the average whose taxes currently fund expensive dairy sup- dairy farmer, including the risk of additional debt port programs, like Dairy Margin Coverage, which for financing, the likelihood of stranded assets in 2019 cost more than $300 million.39 in shifting production, and the need for special- ized skills and knowledge that might lie outside a Export promotion programs have traditionally farmer’s area of expertise. been more politically popular than supply management proposals, in part because of the former’s The government can help dairy farms overcome compatibility with free markets and the latter’s these barriers to diversification by 1) reducing ex- perceived incompatibility. But the agricultural isting financial burdens, 2) facilitating the sale of sector, and the dairy industry in particular, already extra equipment and cattle, and 3) providing tech- rely on government intervention and support. In nical assistance to improve the profitability of recent years, with dairy farm closures accelerat- new farm ventures. ing despite billions of dollars in government support, it has become increasingly apparent that US dairy’s current model is unsustainable. Now is an PATH TO DAIRY FARM opportune time to expand export promotions and DIVERSIFICATION create a supply management program so that the two collaborate to stabilize prices, grow demand, and reduce government expenditures. C RD PROPOSAL 2: FACILITATE DAIRY

FARM DIVERSIFICATION PROVIDE GRANTS Cost: around $530.4 million40 in addition to debt forgiveness, debt consolidation, and equipment and CREATE cattle sale costs EASEMENT PROGRAM TRDD T Climate Benefit: up to 3.4 MT CO2e per hectare41 from avoided farmland conversion REDUCE DEBT CREATE Job Protection: up to around 50,000 jobs per year42 EUIPMENT BUYBAC

In today’s context of shrinking dairy demand, the CREATE best path forward for some dairy farmers will be CATTLE TRANSPORT reducing the size of their dairy operations and di- PROGRAM versifying with other types of agricultural produc- ORMTO tion. RRR Diversification is widely touted as a way toim- prove the financial viability of farming opera- ESTABLISH tions, and it is especially advantageous for small CTA DAIRY TAS FORCE and mid-sized farmers who, unable to capitalize on economies of scale, can benefit from economies of scope. The governor of Wisconsin, a major dairy state, recently acknowledged that fruits and vegetables are one of the few growing and profitable agriculture sectors in the state, and he called for helping farmers diversify.43 6 Objective 1: Reduce financial burdens to grant programs that support farm diversi- facilitate new investments fication. North Carolina’s WNC Agricultural Options program awarded grants to 40 farm • Create a dairy farmland protection pro- businesses,52 helping expand their opera- gram (up to $438.6 million per year44): In tions to include a variety of new, high-value addition to preserving farmland, agricul- crops, from wine grapes to heirloom small tural conservation easements can help grain.53 Alternatively, Congress could direct farmers pay off debt and upgrade their the USDA to increase funding for the Val- operations.45 However, funding for ease- ue-Added Producer Grant Program and to ments is scarce, and easements are often dedicate a portion of that funding to diver- only available to farms whose land has sifying dairy farms. high conservation value.46 A national conservation easement program that specifi- Objective 2: Facilitate equipment and cattle cally targets dairy farms could be modeled sales after New York State’s Farmland Protection Implementation Grant, which awards ease- • Create an equipment buyback program: ments to dairies that are taking one of the Maintaining and repairing equipment is following steps: diversifying their farm op- a financial burden for dairy farmers, and erations; converting to a non-dairy farm capital recovery of machinery and equip- operation; or continuing dairy but transi- ment accounts for almost 20% of the aver- tioning to new ownership after modifying age dairy farm’s total costs.54 A dairy equip- operations to improve financial sustain- ment buyback program would relieve dairy ability. Easements should keep farmland farmers of unnecessary financial burden if affordable and accessible to new and dis- they require less or different equipment af- advantaged farmers by including Option ter diversifying their operations. The USDA to Purchase at Agricultural Value (OPAV) re- can resell the equipment at a discounted strictions. rate to other dairies and to craft brewer- ies, which often make use of recycled dairy • Reduce farmer debt47: Senator Gillibrand’s equipment. Relief for America’s Small Farmers Act can serve as a basic model for dairy farmer loan • Create a cattle transport program: Dairy forgiveness.48 The Act offers one-time Farm cows are also capital assets — cattle cost be- Service Agency (FSA) loan debt forgiveness tween $500 and $1000 to keep55 and depreci- of up to $250,000 to farms with incomes ate at around $250 per year56 — but the fed- under $300,000.49 Credit card debt is also eral government isn’t well equipped to buy a huge burden for farmers — commercial and resell cattle. Instead, it can subsidize banks hold over 41% of farm sector debt,50 transportation of livestock to interested and credit card debt has high interest rates. buyers, either by establishing a public-pri- The USDA can offer relief to a wider range of vate partnership with a livestock transpor- farmers by consolidating their credit card tation company or by creating a cost-share debt into no-interest FSA loans. Congress program, in which the government reim- should consider making debt forgiveness burses farmers for a portion of the trans- and consolidation contingent on the adop- portation costs. tion of conservation practices or technologies.

• Provide grants ($85.5 million per year51): Congress should direct the USDA to establish a national grant program for dairy farmers interested in diversifying their farm operations. Several states, including Pennsylvania and North Carolina, have 7 Objective 3: Provide technical assistance to would ensure that the government invests in improve productivity of new farm ventures farms with the potential for long-term financial sustainability. This, in turn, would reduce reliance • Create a dairy diversification taskforce on government aid and income support programs. ($6.3 million per year): Consultations and other forms of assistance provided by the Requiring that easements include OPAVs would NRCS Conservation Technical Assistance promote a path to land ownership for young and (CTA) Program increase the likelihood that tenant farmers, improving their economic stabili- agricultural practices are implemented ty and encouraging investments in their land. correctly and boost productivity and profitability. Creating a dedicated CTA dairy Many diversification options are environmentally diversification task force would improve efficient — hazelnut trees, for example, don’t re- the Program’s capacity to help all inter- quire irrigation, are drought resistant, and their ested dairy farms diversify. To finance the roots prevent erosion, and beekeeping supports task force, Congress should authorize an local bee populations, which provide essential eco- increase of $6.3 million, or less than 1%, in system services. Saving dairy farms from develop- CTA funding.57 Offering one-on-one consul- ment would also yield climate benefits. Preventing tations to dairy-to-crop farmers will maxi- dairy farms from being converted into residential mize the efficiency of these interventions and other types of development could prevent up by ensuring that government aid and assis- to 3.4 MT CO2e per ha from land use change,63 and tance have their desired impact. around 66% of dairy land is in the path of development.64 Economic and Environmental Benefits A diversification program would also be -politi For dairy farmers, the main economic benefits of cally feasible. The idea of debt forgiveness is not diversification58 include: new — the FSA has forgiven loans in the past for various reasons, and there are well-established » higher incomes due to new revenue streams student loan forgiveness programs. Also, there are » spreading downside risk across multiple already numerous examples of buyback programs enterprises at the state level. The Texas Commission on Envi- » reduced reliance on disaster programs to ronmental Quality, for example, hosts the Texas 59 supplement incomes Emissions Reduction Plan (TERP) Rebate Grants » reduced feed costs by supplementing live- program, which pays farmers to upgrade older stock feeds with home-grown grains diesel vehicles and equipment.65 Finally, the CTA » recycling manure by applying it as fertiliz- already has widespread support, including from er to crop fields respected, non-partisan organizations.66 There are many examples of dairy farmers diversifying their operations, in some cases as a last-ditch effort to save their farms. Dairy farmers have successfully increased their revenue streams and reduced risks by expanding to many different types of production, shifting toward bees,60 hemp,61 wine grapes, and hazelnut, almond, and walnut trees.62

Setting struggling dairy farmers up for sustained success would also increase the effectiveness of government aid and reduce long-term government expenditures. A well-funded CTA task force, for example, would improve the success rate of farm diversification ventures, and making easements contingent on farm diversification efforts 8 PROPOSAL 3: INCREASE ADOP- many small farmers and for the nearly 40 percent of dairy farmers who rent their land.72 Because US TION OF ECONOMICALLY AND dairy farms are diverse, an effective manure man- ENVIRONMENTALLY BENEFICIAL agement strategy should also support a variety of other environmentally and financially beneficial MANURE MANAGEMENT practices, including compost bedded pack barns PRACTICES (the use of composted manure as bedding) and solid separation (the removal of solids, which can Cost: $234.3+ million annually, averaged over 10 be dried and used as compost or bedding, from liq- years67 in addition to costs of R&D funding and clean uid manure). fuel standards Objective 1: Increase Deployment and Climate Benefit: on average, at least 7.1 MMT Third-Party Ownership of Anaerobic Digest- CO2e per year of funding68 ers (on average, 3.7 MMT CO2e per year of funding73) Job Creation: over a thousand temporary and permanent jobs created and saved each year69 • Reestablish an investment tax credit ($15.7 million74 annual average over 10 Manure management represents both a lucrative years): Congress can reduce upfront costs opportunity and a pressing challenge for dairy and incentivize deployment by creating farmers. Without proper manure management, an investment tax credit (ITC), such as the manure emits large amounts of methane and ni- 30% ITC for biogas and nutrient recovery trous oxide, two potent greenhouse gases, and pol- projects proposed in Senators Brown and lutes the air and water. Farmers can reduce these Roberts’ Agricultural Environmental Stew- impacts, increase their incomes, and reduce finan- ardship Act. The ITC would not exclude cial costs by adopting sustainable manure man- first-party operators, but it would likely agement technologies and practices. more successfully spur outside investment and third-party ownership, which in many One promising technology, the anaerobic digester ways is the more desirable model.75 Based (AD), reduces emissions and runoff by converting on past performance, re-establishing the biodegradable materials like manure into biogas tax credit could help spur development of and digested solids, while also providing econom- about 35 ADs annually. ic and health benefits to farms and rural communities. • Create a manure transport program ($49.5 million per year76): Digesters work best on Although over 8,000 US dairy and swine farms farms with at least 500 cows, but smaller could host ADs, there are fewer than 300 ADs in farms can still benefit by transporting ma- operation on US livestock farms,70 largely because nure to a nearby digester or participating installing, operating, and repairing ADs is expen- in a centralized digester cluster. Because sive, complex, and time-consuming.71 In response manure transport costs can be prohibitive- to these challenges, AD third-party ownership and ly expensive,77 developing a national ma- operation is becoming increasingly popular, but nure transport cost-share program would there are barriers to AD deployment regardless of increase digester-less farms’ access to exist- ownership structure. High capital, operation, and ing markets for AD products. A similar pro- management costs and low renewable gas and gram in Maryland provides grants covering electricity prices discourage investment across up to 87.5% of manure transportation and most of the country. Increasing deployment of ADs will therefore require both reducing costs and creating stable markets for AD products.

ADs are not a panacea, however. Even with policy interventions, ADs will remain out-of-reach for 9 handling costs, or up to $18 per ton of ma- Objective 2: Increase Adoption of Alternative nure transported.78 Manure Management Practices (3.5 MMT CO2e per year of funding85) • Invest in R&D: The EPA, USDA, and DOE’s Biogas Opportunities Roadmap identified Since cost is the main barrier preventing dairy “lack of technical and applied research and farmers from adopting such practices, the federal development” as a key barrier to growth government should: of the biogas industry.79 As part of a long- run strategy, Congress can increase fund- • Establish a manure management grant ing for AD and biogas research and devel- program ($169.1+ million per year86): A ma- opment, with the goal of making ADs and nure management program, similar to the biogas production cheap80 and eventually California Department of Food and Agri- reducing the need for an ITC and cost-share culture’s Alternative Manure Management programs as the technology becomes more Program (AMMP), would award grants for cost-competitive. Investing in R&D and in- non-digester manure management prac- frastructure now will help position farm- tices. Many of the practices would involve ers, businesses, and utilities to benefit in transitioning from wet manure to dry ma- the event that a new national clean fuel nure handling, which reduces methane standard is implemented. emissions and run-off. The Agriculture Resilience Act, introduced by Rep. Chellie • Assist states in creating clean fuel stan- Pingree in February, proposes creating a dards: The federal government can promote national alternative manure management AD deployment by awarding categorical program with mandatory annual funding grants to states that adopt clean fuel stan- of $1 billion.87 Scaling up California’s pro- dards. Grants would cover development gram, however, would only require around and administrative costs of programs that, $170 million per year and would free up like California’s Low Carbon Fuel Standard government funding for the other initia- (LCFS) program, generate credits81 based on tives proposed in this report. a fuel’s carbon intensity (CI) or incentivize refineries to continue to decrease their • Increase investment in R&D: As with ADs, fuel’s CI in some other way.82 The LCFS has increased R&D investment to develop effectively incentivized third-party owner- technologies and strategies and to im- ship and private investment in the renew- prove the efficiency of existing ones would able natural gas (RNG) that ADs can produce boost adoption rates and effectiveness. In- — in California the Renewable Fuel Stan- creased R&D into topics such as air quality, dard and LCFS have added $25 and up to $66 soil health, and water impacts will also in- per one thousand cubic feet of RNG, respec- crease the benefits to the environment and tively.83 Clean fuel programs are already local communities. Over time, R&D invest- being considered in Washington, Colorado, ments will decrease the cost of alternative South Dakota, Minnesota, Iowa, and New manure management, eventually reducing York State,84 and the availability of a federal the need for grants. grant would encourage these states to offi- cially adopt LCFS programs and would incentivize other states to follow suit.

10 Economic and Environmental Benefits ADs and alternative manure management also spur off-farm rural economic benefits.90 These Regardless of the ownership structure, AD deploy- benefits include: ment will yield on-farm economic benefits. De- » supporting businesses in the nutrients, pending on the specific arrangement, benefits to manure solids, and energy markets farmers could include revenue from: » creating additional on-farm jobs to handle » biogas, electricity, and heat production for manure and implement new practices sale and on-farm use » creating thousands of off-farm high-pay- » discounted energy rates from a third-party ing jobs and generating billions of dollars operator in capital deployment for construction » tipping fees for accepting waste from non- » making rural communities more pleasant farm waste streams places to live and work by controlling odors » byproducts, such as organic nutrients and and reducing localized pollution animal bedding to use or sell

Biofuel, Manure Electricity, & Heat

AD Animal Bedding

Off-Farm Organic Nutrients Waste

In states with an LCFS or similar policy, the poten- The job creation potential of manure manage- tial benefits from producing AD biogas are even ment is substantial. ADs create contracting, site greater. The California Air Resources Board esti- work, concrete, plumbing, electrical, permitting, mates that, for a standard 2,000 cow farm in the and engineering jobs. The biogas projects support- San Joaquin Valley, LCFS credits alone can increase ed by the ITC could generate up to $104.4 million a farm’s revenue 11%.88 Farmers who enter into in capital deployment for construction, up to 870 third-party operator agreements would not re- short-term construction jobs, and up to 57 addi- ceive all of these benefits, but they also wouldn’t tional permanent jobs per year.91 An alternative bear the costs and risks associated with operating manure management program would also create ADs. thousands of jobs, since most manure management techniques are labor intensive, and some The variety of eligible projects would ensure that practices, such as solid-liquid separation and dairy farms of all kinds can benefit. Alternative scrape manure system, involve equipment that manure management grants would allow strug- needs to be constructed and installed. gling farmers to invest in more efficient equipment and technology and thereby meet air and Alternative manure management and ADs also water regulations affordably. Implementing alter- yield environmental benefits. An alternative ma- native manure management practices can also increase farmers incomes and reduce costs — compost bedding pack barns reduce farmers’ bedding costs89; applying compost to fields can increase soil health and yields; and farmers can sell extra bedding and compost for additional income. 11 nure management program would avoid 3.5 MMT port promotion programs would help to create CO2e per year of funding and more with a higher new markets for US dairy products, but — given funding level, and on average, the AD deployment the popularity of plant-based alternatives on the strategies would mitigate more than 3.7 MMT per rise and cell-based milk on the horizon — demand year of funding.92 Both programs would help pro- would likely continue to fall. New investments tect humans and animals from pathogens and made possible by grants and debt reduction and increase crop yields by converting manure into new income streams would allow dairy farmers to more accessible forms. thrive despite this reality.

ADs also generate other environmental benefits Finally, the dairy industry must address its sub- by accepting food waste and enabling the produc- stantial environmental impacts, which contribute tion of renewable natural gas (RNG) from biogas, to falling demand and are compounded by over- which has a carbon footprint at least 80% lower production. Manure management would reduce than gasoline.93 Critics of ADs and clean fuel stan- dairy production’s environmental intensity, and dards have raised concerns that developing stable supply management, trade promotion, and farm RNG markets could have negative environmental diversification would shrink dairy’s domestic and consequences by competing with electrification international environmental footprint. efforts, but policymakers can avoid this tradeoff by prioritizing the use of RNG in sectors that are In addition to providing long-term economic and difficult to electrify and by phasing out the ITC environmental solutions, the policy interventions program as AD capital and operation costs de- proposed here provide immediate relief to strug- crease. gling producers. Supply management and export promotion would quickly boost and stabilize farmgate prices, and farm diversification and ma- CONCLUSION nure management programs would create jobs, reduce farm-level costs, and offer grant money and The crisis facing the US dairy industry — manifest- debt reduction. ed in low farmgate prices, bankruptcies, and fore- closures — has been exacerbated by the COVID-19 pandemic but springs from long-running underlying problems. Unfortunately, government aid to the dairy sector has focused almost exclusively on the symptoms and, in some cases, has intensified underlying problems — by incentivizing overproduction, for example. This report offers a new approach in directly addressing underlying problems and tying economic aid to improvements in economic and environmental sustainability, which will reduce the need for future government expenditures.

Overproduction is a major challenge for dairy farmers, and the policy interventions proposed here address the challenge in several ways: increased export promotion funding would increase demand, and supply management would align supply with demand; and a farm diversification strategy would help supply-managed dairy farmers find productive uses for newly available time, land, and other resources.

Falling demand is another pressing challenge. Ex- 12 ENDNOTES

1 Dickrell, J. Licensed U.S. Dairy Farms Dropped 8.8% Last Year - AgWeb. Ag Web (2020). Available at: https://www.agweb. com/article/licensed-us-dairy-farms-dropped-88-last-year. (Accessed: 15th July 2020)

2 Houck, B. America’s Obsession with Oat Milk is Hurting the Dairy Industry. Eater (2019). Available at: https://www. eater.com/2019/3/26/18282831/milk-sales-fall-2018-plant-based-alternatives. (Accessed: 15th July 2020)

3 American dairy farmers depend on government subsidies. Markets Insider (2018). Available at: https://markets.busi- nessinsider.com/news/stocks/american-dairy-farmers-depend-on-government-subsidies-1015126442. (Accessed: 15th July 2020)

4 Abbott, C. USDA to buy as much excess milk and meat as possible, says Perdue | Food and Environment Reporting Network. FERN’s Ag Insider (2020). Available at: https://thefern.org/ag_insider/usda-to-buy-as-much-excess-milk-and-meat- as-possible-says-perdue/. (Accessed: 15th July 2020)

5 Newman, J. & Bunge, J. Farmers Dump Milk , Break Eggs as Coronavirus Restaurant Closings ... Farmers Dump Milk, Break Eggs as Coronavirus Restaurant Closings ... The Wall Street Journal (2020). Available at: https://www.wsj.com/articles/ farmers-deal-with-glut-of-food-as-coronavirus-closes-restaurants-11586439722. (Accessed: 15th July 2020)

6 NMPF Appreciates USDA’s Aid Efforts, Encourages Further Assistance. National Milk Producers Federation (2020). Available at: https://www.nmpf.org/nmpf-appreciates-usdas-aid-efforts-encourages-further-assistance/. (Accessed: 15th July 2020)

7 USDA Approves $1.2 billion in Contracts for Farmers to Families Food Box Program | Agricultural Marketing Service. Agricultural Marketing Service (2020). Available at: https://www.ams.usda.gov/press-release/usda-approves-12-billion-contracts-farmers-families-food-box-program. (Accessed: 15th July 2020)

8 USDA. Coronavirus Food Assistance Program. (2020).

9 USDA. Coronavirus Food Assistance Program. (2020).

10 American dairy farmers depend on government subsidies. Markets Insider (2018). Available at: https://markets.busi- nessinsider.com/news/stocks/american-dairy-farmers-depend-on-government-subsidies-1015126442. (Accessed: 15th July 2020)

11 Urbi, J. The government cheese phenomenon and the American cheese stockpile today. CNBC Politics (2019). Avail- able at: https://www.cnbc.com/2019/02/11/government-cheese-phenomenon-usda-american-cheese-surplus.html. (Accessed: 15th July 2020)

12 Dickrell, J. Licensed U.S. Dairy Farms Dropped 8.8% Last Year - AgWeb. Ag Web (2020). Available at: https://www.agweb. com/article/licensed-us-dairy-farms-dropped-88-last-year. (Accessed: 15th July 2020)

13 Proposed NMPF-IDFA Milk Crisis Plan for USDA Situation. (2020).

14 According to the EPA’s U.S. Greenhouse Gas Emissions and Sinks: 1990-2018, dairy cattle’s burps and manure amount to around 13% of all agricultural emissions. Dairy cow manure resulted in 32.3 MMT CO2e of methane and 6.1 MMT CO2e of nitrous oxide; dairy cow enteric fermentation resulted in 43.6 MMT CO2e; agricultural activities produced a total of 618.5 MMT CO2e.

15 Poore, Joseph, and T. Nemecek. “Reducing Food’s Environmental Impacts through Producers and Consumers.” Sci- ence 360 (June 1, 2018): 987–92. https://doi.org/10.1126/science.aaq0216.

16 Finn, T. Move Over, Fake Meat—Cow-Less Milk and Cheese Are On the Way. Bloomberg Government (2019). Available at: https://about.bgov.com/news/move-over-fake-meat-cow-less-milk-and-cheese-are-on-the-way/. (Accessed: 15th July 2020)

17 These are the same at-risk dairy jobs that dairy diversification and other interventions could save. The more of the policies that are implemented, the closer the actual number of jobs saved will be to 50,000.

18 Kaika, A. It’s Time to Reform the U.S. Dairy Industry. National Farmers Union (2019). Available at: https://nfu. org/2019/06/18/its-time-to-reform-the-u-s-dairy-industry/. (Accessed: 15th July 2020) 19 Davis, J. Major Wisconsin Farm Groups Open To Creating Dairy Supply Management Program | Wisconsin Public Ra- dio. Wisconsin Public Radio (2019). Available at: https://www.wpr.org/major-wisconsin-farm-groups-open-creating-dairy-supply-management-program. (Accessed: 15th July 2020)

20 Proposed NMPF-IDFA Milk Crisis Plan for USDA Situation. (2020).

21 According to the FSA, the US makes up around 5% of total dairy exports by value, whereas Canada makes up only 0.4% (Informa Economics 2010)

22 The US and Canada’s shares of worldwide dairy production are around 15% and 2%, respectively. (calculated using FAOSTAT 2014 “livestock processed” production data for the US, Canada, and the world and for the following items: but- ter, cow milk; cheese, skimmed cow milk; cheese, whole cow milk; milk, dry buttermilk; milk, skimmed condensed; milk, skimmed cow; milk, skimmed dried; milk, skimmed evaporated; milk, whole condensed; milk, whole dried; milk, whole evaporated).

23 Myths and Facts about Supply Management. Alberta Milk Available at: https://albertamilk.com/for-industry/supply-management/supply-management-facts-myths/. (Accessed: 15th July 2020)

24 United States Department of Agriculture Report of the Dairy Industry Advisory Committee. (2011).

25 MAP Funding Allocations. USDA Foreign Agricultural Service (2020). Available at: https://www.fas.usda.gov/programs/market-access-program-map/map-funding-allocations-fy-2020. (Accessed: 15th July 2020)

26 FMD Funding Allocations. USDA Foreign Agricultural Service (2020). Available at: https://www.fas.usda.gov/programs/foreign-market-development-program-fmd/fmd-funding-allocations-fy-2020. (Accessed: 15th July 2020)

27 To $6,961,532 for MAP and $785,019 for FMD.

28 Heminthavong, K. Canada’s Supply Management System. Library of Parliament (2015). Available at: https://lop.parl. ca/sites/PublicWebsite/default/en_CA/ResearchPublications/2015138E. (Accessed: 15th July 2020)

29 Proposed NMPF-IDFA Milk Crisis Plan for USDA Situation. (2020).

30 Bloomberg. Milk Processors Are Going Bankrupt as Americans Ditch Dairy. Ag Web (2020). Available at: https://www. agweb.com/article/milk-processors-are-going-bankrupt-americans-ditch-dairy. (Accessed: 15th July 2020)

31 The NMPF advocated for improving SNAP and WIC programs in the “Proposed NMPF-IDFA Milk Crisis Plan for USDA”

32 Cessna, J., Kuberka, L., Davis, C. & Hoskin, R. Growth of U.S. Dairy Export. (2016).

33 Olukoya, O. Y. EFFECTIVENESS OF U.S. DAIRY EXPORT PROMOTION PROGRAMS IN SELECTED COUNTRIES. (2008).

34 Song, L. & Kaiser, H. M. An economic evaluation of market development programmes for US dairy products. Appl. Econ. 48, 212–221 (2016).

35 FAOSTAT. Available at: http://www.fao.org/faostat/en/#home.

36 Capper, J. L., Cady, R. A. & Bauman, D. E. The environmental impact of dairy production: 1944 compared with 2007. J. Anim. Sci. 87, 2160–2167 (2009).

37 Cessna, J., Kuberka, L., Davis, C. & Hoskin, R. Growth of U.S. Dairy Export. (2016).

38 Higgins, J. Growing number of dairy farmers want U.S. to regulate milk supply. UPI (2019). Available at: https://www. upi.com/Top_News/US/2019/09/20/Growing-number-of-dairy-farmers-want-US-to-regulate-milk-supply/4851568852753/. (Accessed: 15th July 2020)

39 USDA. United States Department of Agriculture FY 2021 BUDGET SUMMARY.

40 $524.1 million for Objective 1 + $6.3 million for Objective 3 = $530.4 million.

41 According to the EPA’s Inventory of U.S. Greenhouse Gas Emissions and Sinks, over the past 20 years cropland-to-settlement conversion resulted in an average of 2.4 MT CO2e of net CO2 flux per ha (5.9 MMT CO2e of net CO2 flux / 2,452 thousand hectares), and grassland-to-settlement conversion resulted in an average of 3.4 MT CO2e of net CO2 flux per ha (11.3 MMT CO2e of net CO2 flux / 3,352 thousand hectares).

42 In 2019, the US lost 3,281 dairy farms. Assuming each farm had 15.2 employees, based on the national average as re- ported by US BLS Quarterly Census of Employment and Wages, an estimated 49,861 jobs were lost. If conservation easements, grants, technical assistance, and other aid had been available to those farms, the jobs might not have been lost. In fact, additional jobs could have been created, since farms might have diversified or transitioned to more labor-intensive types of agricultural production.

43 Barrett, R. Struggling Dairy Farmers Build Future With Creative Thinking. Milwaukee Journal Sentinel (2019). Available at: https://pulitzercenter.org/reporting/struggling-wisconsin-dairy-farmers-building-future-hazelnuts-special- ty-milk-goats-and. (Accessed: 15th July 2020)

44 NYS has a $30 million program, and NYS accounts for around 7 percent of US milk production (according to NASS/ USDA data), so scaling up to the national scale would require $438.6 million (30 million / .0684). A national dairy farmland protection program, paired with grants, debt reduction, and other policy interventions, could be funded at less than $438.6 million. However, if entering into a conservation easement is a prerequisite for debt forgiveness, a funding level of $438.6 million would likely be appropriate.

45 Phelps, J. R. Defining the Role of Conservation in Agricultural Conservation Easements. Ecol. Law Q. 44, 12–15 (2017).

46 Hammonds, T. Conservation Easements: The Top Tax Tool in the Farmer’s Estate Planning Toolbox. Cornell Small Farms Program (2017). Available at: https://smallfarms.cornell.edu/2017/04/conservation-easements/. (Accessed: 15th July 2020)

47 Without comprehensive farmer debt data, it’s difficult to estimate the potential cost of a debt forgiveness and consolidation program. However, compared to several other proposals included in this report, the costs would likely be mini- mal, since the Farm Service Agency (FSA) only holds 2.5% of total farm sector debt (Who Holds Farm Debt, Market Intel 2019), and the costs of consolidating credit card debt into FSA loans would be recouped over time as loans are repaid.

48 As Family Farms Face Economic Crisis Due To COVID-19 Outbreak, Gillibrand Announces Landmark Legislation To Provide Direct Relief. (2020). Available at: https://www.gillibrand.senate.gov/news/press/release/as-family-farms-face-economic-crisis-due-to-covid-19-outbreak-gillibrand-announces-landmark-legislation-to-provide-direct-relief. (Accessed: 15th July 2020)

49 In FY 2019, the average net cash income for US dairy farms was around $328,000.

50 Who Holds Farm Debt? Market Intel (2019). Available at: https://www.fb.org/market-intel/who-holds-farm-debt. (Ac- cessed: 15th July 2020)

51 North Carolina’s WNC Agricultural Options program paid an average of $5,400 to 40 farms. This is much lower than the maximum grant value under the Value-Added Grant Program -- $250,000. If a dairy diversification program’s grants averaged somewhere in the middle, at around $50,000, and the program anticipated providing grants to around 5%, or 1,709, of the 34,187 US dairy farms per year, the program would cost around $85.5 million per year.

52 WNC AgOptions – Preparing Western North Carolina for the Future of Agriculture. Available at: https://www.wnca- goptions.org/. (Accessed: 15th July 2020)

53 West, K. Diversification grants help a new generation of farmers maintain family land. Mountain Xpress (2019). Available at: https://mountainx.com/living/diversification-grants-help-a-new-generation-of-farmers-maintain-family-land/. (Accessed: 15th July 2020)

54 USDA ERS - Milk Cost of Production Estimates. Available at: https://www.ers.usda.gov/data-products/ milk-cost-of-production-estimates/. (Accessed: 15th July 2020)

55 How Much Does A Cow Cost in the USA? (2020). Available at: https://animalcare.folio3.com/blog/how-much-does-a- cow-cost-in-usa/. (Accessed: 15th July 2020)

56 Berger, A. Cow Depreciation for Cow-Calf Producers. UNL Beef (2014). Available at: https://beef.unl.edu/cow-depreciation-for-cow-calf-producers. (Accessed: 15th July 2020) 57 The CTA’s average budget per client is around $736 (the FY2020 budget was $736 million, and in 2018 CTA provided assistance to over 1 million clients). If we assume that, in any given year, no more than 25% of dairy farms will reach out to CTA for assistance, that would mean a potential increase of $6.3 million in program costs ((34,187 farms / 4) * 736).

58 Diversification strategy for small and medium-sized farms. Agroecosystem Management Program Available at: https://amp.osu.edu/research/mellinger-farm-agricultural-diversification-research. (Accessed: 15th July 2020)

59 Kime, L. F. & Hyde, J. Diversification of Your Operation, Why. PennState Extension (2016). Available at: https://extension.psu.edu/diversification-of-your-operation-why. (Accessed: 15th July 2020)

60 Wagoner, R. Mixing it up: dairies diversify for success. Farm and Dairy (2020). Available at: https://www.farmanddairy. com/top-stories/mixing-it-up-dairies-diversify-for-success/595300.html. (Accessed: 15th July 2020)

61 Laca, A.-L. Illinois Dairy Farmers Diversify Into Growing Hemp. Dairy Herd Management (2019). Available at: https:// www.dairyherd.com/article/illinois-dairy-farmers-diversify-growing-hemp. (Accessed: 15th July 2020)

62 Barrett, R. Struggling Dairy Farmers Build Future With Creative Thinking. Milwaukee Journal Sentinel (2019). Available at: https://pulitzercenter.org/reporting/struggling-wisconsin-dairy-farmers-building-future-hazelnuts-special- ty-milk-goats-and. (Accessed: 15th July 2020)

63 According to the EPA’s Inventory of U.S. Greenhouse Gas Emissions and Sinks, over the past 20 years cropland-to-settlement conversion resulted in an average of 2.4 MT CO2e of net CO2 flux per ha, or 0.97 MT per acre (5.9 MMT CO2e of net CO2 flux / 2,452 thousand hectares), and grassland-to-settlement conversion resulted in an average of 3.4 MT CO2e of net CO2 flux per ha, or1.36 MT per acre, (11.3 MMT CO2e of net CO2 flux / 3,352 thousand hectares).

64 Freedgood, J., Hunter, M., Dempsey, J. & Sorensen, A. Farms Under Threat: The State of the States. (2020).

65 Rebate Grants Program. Texas Commission on Environmental Quality (2020). Available at: https://www.tceq.texas. gov/airquality/terp/rebate.html. (Accessed: 15th July 2020)

66 Eidebergm, C. Conservation Technical Assistance should not get lost in the shuffle. Environmental Defense Fund (2017). Available at: http://blogs.edf.org/growingreturns/2017/05/12/conservation-technical-assistance-should-not-get-lost- in-the-shuffle/. (Accessed: 15th July 2020)

67 Combined cost of the AD initiatives ($65.2+ million) and the alternative manure management program ($169.1+ million)

68 3.67+ MMT CO2e + 3.45 MMT CO2e for objective 1 and 2, respectively

69 Job creation potential of AD objective: The USDA, EPA, and DOE’s Biogas Opportunities Roadmap estimates that installing 11,000 AD biogas systems would generate around $33 billion in capital deployment and create 275,000 short-term and 18,000 permanent jobs. That amounts to $3 million in capital deployment, 25 short-term jobs, and 1.6 permanent jobs per system. If the ITC can support an average of 34.8 new digesters per year, we would expect $104.4 million in capital deployment, 870 new short-term jobs, and 57 additional permanent jobs each year. These are likely overestimates because the Roadmap’s potential projects are not limited to on-farm ADs, and if the off-farm projects trend larger, they might bias the job creation estimate upwards. The capital deployment estimate is likely biased upwards for the same reasons.

Job creation potential of alternative manure management objective: In 2019, $31.4 million funded 50 projects, so the average funding level per project was around $628,000. Therefore, $169.1 million in grant funding could support around 269 projects per year. Manure management is labor intensive, so each project would likely create at least one permanent job. That amounts to at least 269 permanent jobs per year and 2,690 by year 10. Receiving funds to upgrade their facilities and meet environmental standards could also save the jobs of people already working on those farms.

70 Market Opportunities for Biogas Recovery Systems at U.S. Livestock Facilities. (EPA, 2018).

71 Kotin, A., Noble, M. & Merrill, J. Diversified Strategies for Reducing Methane Emissions from Dairy Operations. (2015).

72 Bigelow, D., Borchers, A. & Hubbs, T. U.S. Farmland Ownership, Tenure, and Transfer. (2016).

73 According to the most recent AgStar data, the 222 dairy AD projects operating or in construction in the US are expected to reduce emissions by approximately 4.7 MMT CO2e annually, an average of 21,110.4 MT CO2e/yr per project. We assume that during a 10 year period with the ITC, 348 new digesters would be developed. If each digester has a minimum lifetime of 5 years, that would amount to total GHG emissions mitigation of 36.7 MMT CO2e, or an average of 3.7 MMT CO2e per year of funding. This estimate does not account for our proposals for R&D funding, manure transport, and clean fuel standards, so it is likely a conservative estimate.

74 According to Klavon, K. et al., the average AD capital investment cost is $1.5 million. If every candidate farm installed an anaerobic digester, the cost could be around $3.65 billion (8,113 candidate farms * $1.5 million * 0.3 tax credit = $3.65 billion). However, it’s highly unlikely that 8,113 farms would install ADs. A more realistic estimate is based on how many ADs were installed on livestock farms during the previous ITC from 2004 to 2016. According to AgSTAR, the number of on-farm digesters increased by 174, from 59 to 233, during that time. If R&D investments and clean fuel standards result in an increase of at least two times that, livestock farm ADs would increase by 348, from 288 to 636. In that case, the ITC would cost around $156.6 million (348 * $1.5 million * 0.3), or $15.7 million per year over a 10 year period.

75 When ADs are maintained and operated by third-party specialists, the investment is lower (Kotin, A. et al.) and farmers who otherwise wouldn’t have had the bandwidth to operate ADs can receive heavily discounted energy rates and other benefits. All of these factors make third-party ADs more attractive and accessible, thereby increasing deployment and helping to maximize potential benefits.

76 In 2019, Maryland spent $426,032 in total financial assistance to transport dairy manure (MDA 2020). Maryland only produces 0.43% of US milk (Cook 2020), so scaling to the national level would require $99.1 million ($426,032 / 0.0043 = $99.1 million). With increased funding for alternative manure management practices, farmers will not need to transport as much of their manure, so a national manure management fund could start at half that, or $49.5 million.

77 Pratt, S. There might be money to be made in manure, but it will cost you to transport it. The Western Producer (2014). Available at: https://www.producer.com/2014/12/there-might-be-money-to-be-made-in-manure-but-it-will-cost-you- to-transport-it/. (Accessed: 15th July 2020)

78 Maryland Department of Agriculture. Maryland’s Manure Transport Program.

79 Biogas Opportunities Roadmap. (2014).

80 Policy Options to Facilitate Renewable Natural Gas Use and Development. (2019).

81 Renewable Natural Gas Project Economics. M.J. Bradley & Associates (2019). Available at: https://www.mjbradley.com/ sites/default/files/RNGEconomics07152019.pdf. (Accessed: 15th July 2020)

82 LCFS Pathway Certified Carbon Intensities . California Air Resources Board Available at: https://ww2.arb.ca.gov/resources/documents/lcfs-pathway-certified-carbon-intensities. (Accessed: 15th July 2020)

83 Policy Options to Facilitate Renewable Natural Gas Use and Development. (2019).

84 Lane, B. Insights: States with Low Carbon Fuel Standards & Those Considering One. The Jacobsen (2020). Available at: https://thejacobsen.com/news_items/states-considering-lcfs/. (Accessed: 15th July 2020)

85 The California Climate Investments 2020 Annual Report assumes that the minimum project lifetime is 5 years and estimates that AMMP’s average cost per MT of CO2e reduction is $49 over a five year period. Each year of funding, therefore, will avoid at least 3.5 MMT CO2e ($169.1 million / $49/t). If the program is funded for 10 years, it will result in at least 35 MMT CO2e mitigation.

86 In 2019 the CDFA’s final funding recommendation for AMMP was around $31.4 million (CDFA 2019 Alternative Manure Management Program Applications). According to USDA NASS data, California accounts for around 19% of total US milk production (Cook 2020), so an appropriate funding level for a national program would be around $169.1 million (31.4 / 0.1857). AMMP received more project applications than it was able to fund, so a national program could increase the number of projects (and, therefore, the GHG reduction and job creation potential) by raising funding above $169.1 million.

87 Pingree, C. H.R.5861 - 116th Congress (2019-2020): Agriculture Resilience Act. (2020).

88 Valdes-Donoso, P. Dairy manure regulations and economic implications for dairy farms in California. (2019).

89 On average, bedding costs around $0.35 per hundredweight, according to Shoemaker 2019. 90 EPA AgSTAR. The Benefits of Anaerobic Digestion.

91 The USDA, EPA, and DOE’s Biogas Opportunities estimates that installing 11,000 AD biogas systems would generate around $33 billion in capital deployment and create 275,000 short-term and 18,000 permanent jobs. That amounts to $3 million in capital deployment, 25 short-term jobs, and 1.6 permanent jobs per system. If the ITC can support an average of 34.8 new digesters per year, we would expect $104.4 million in capital deployment, 870 new short-term jobs, and 57 additional permanent jobs each year. These are likely overestimates for two reasons: first, while the policy proposals in this report will likely incentivize AD projects with and without biogas, each of the potential AD projects in Biogas Opportunities Roadmap includes a biogas system, and the installing a biogas system likely increases job creation potential; second, the Roadmap’s potential projects are not limited to on-farm ADs, and if the off-farm projects trend larger, they might bias the job creation estimate upwards. The capital deployment estimate is likely biased upwards for the same reasons.

92 According to the most recent AgStar data, the 222 dairy AD projects operating or in construction in the US are expected to reduce emissions by approximately 4.7 MMT CO2e annually, an average of 21,110.4 MT CO2e/yr per project. We assume that during a 10 year period with the ITC, 348 new digesters would be developed. If each digester has a minimum lifetime of 5 years, that would amount to total GHG emissions mitigation of 36.7 MMT CO2e, or an average of 3.7 MMT CO2e per year of funding. This estimate does not account for our proposals for R&D funding, manure transport, and clean fuel standards, so it is likely a conservative estimate.

93 Tomich, M. & Mintz, M. Cow Power: A Case Study of Renewable Compressed Natural Gas as a Transportation Fuel. Argonne National Laboratory, Energy Systems Division (2017). Available at: https://afdc.energy.gov/files/u/publication/cow_ power_case_study.pdf. (Accessed: 15th July 2020)