Economic and climate effects of farm-level biogas adoption: A stochastic partial budget analysis and life cycle assessment for Swedish dairy farming

Abstract

CONTEXT

There is a growing interest in investments in technology that can help farms to become fossil-free, without compromising their economic incentives, and while significantly reducing greenhouse gas (GHG) emissions. Biogas is an interesting technology in this respect, however, the possible farm-level economic impacts from investing in a biogas-based system are not well understood, yet they are decisive to understand farmers' incentives for adoption.

OBJECTIVE

The objectives are to i) develop a scenario which allows the farms to become fossil-free in their input use, ii) assess the farm-level economic consequences of adoption and iii) quantify change in global warming potential in a 100-year period (GWP₁₀₀) from the biogas-scenario.

METHODS

We use a stochastic partial budgeting approach to simulate farm-level economic benefits and costs associated with changes and uncertainty related to economic effects. We also use life cycle assessment for the quantification of the climate effects, which enable us to examine the potential climate impact in reduction of fossil-based inputs in baseline scenario by transitioning to the biogas scenario. The study is based on simulation for a hypothetical dairy farm with 300 milking cow and a corresponding 325 ha of arable land that produces 75 % mixed grass and 25 % clover.

RESULTS AND CONCLUSIONS

The result shows that transitioning to a biogas-based system will yield an estimated deterministic net annual benefit of 1035 SEK for the hypothetical farm. However, when considering simulated scenario, the net annual benefit could be negative, amounting −5398 SEK. Besides, there could be a gain of 185,000 SEK from yet unpaid carbon credits, which could be shared between the farm and the biogas plant. In addition, the biogas-system also results in a 218.4 t reduction of CO₂ eq. emission. Therefore, if all milk-recorded cows in Sweden were considered to be part of the biogas system, it theoretically will imply a 27 % reduction in GHG emissions from the use of agricultural machinery. Results thus established that adopting the biogas-based system will not only result in cost-neutral to farmers, but also a considerable reduction in methane emissions.

SIGNIFICANCE

The paper provides a joint farm-level economic and climate assessment of transition from conventional dairy farm to a biogas system, highlighting potential trade-offs and synergies between the two outcomes. Our result offers valuable understanding about how market internalisation of fossil-free transition in dairy farming can happen through the creation of economic and business incentives that encourage trading between farmers and biogas plants.