California could lock in disastrous dairy methane rules, advocates warn

One of California’s biggest sources of methane pollution — its massive dairy industry — operates almost entirely without regulation. In fact, not only do the state’s largest dairies face no penalties for emitting methane, they can actually profit handsomely from those emissions.

If the staff of the state’s air regulator get their way in an upcoming meeting, the loophole that has created this situation could stick around for decades to come.

Under state law SB 1381, which passed in 2016, California must reduce emissions of methane — a greenhouse gas that is shorter-lived but far more potent than carbon dioxide — 40 percent below 2013 levels by 2030. To meet that goal, the California Air Resources Board (CARB) places emissions limits on several of the state’s main sources of leaking methane, including landfills, wastewater treatment plants, and the oil and gas industry.

But the state’s dairy industry, which emits enormous amounts of methane, has so far been exempt from such regulations — that is, until this year, when SB 1381 permitted CARB to start working on those rules.

Now, in anticipation of an early November meeting, CARB board members have instructed agency staff to develop a formal plan for doing just that.

“We were given a task in SB 1383 to take a deeper look at whether or not it’s necessary to do something different in order to reach our methane targets,” CARB Chair Liane Randolph said at a September CARB meeting.

At the same November meeting, the board will also consider changes to the state’s Low-Carbon Fuel Standard, which mandates that fossil fuel importers, refiners, and wholesalers purchase credits to reduce the carbon intensity of their operations.

Credits are sold by providers of low-carbon fuels or transit options, from biofuel makers to electric vehicle charging operators. The $4 billion-per-year program’s aim is to make polluters help pay for the state’s transition to cleaner forms of transportation.

So, what do dairy farm methane regulations have to do with low-carbon fuels?

Under the LCFS program, dairy farmers can generate credits by using anaerobic digesters to capture the methane that seeps out of their manure lagoons and turn it into renewable natural gas, or RNG. Credits produced in this way are counted as carbon-negative, meaning they’re treated as if they remove carbon from the atmosphere. That makes them very attractive to the fossil fuel firms that need to reduce the on-paper carbon-intensity of their operations.

This is a lucrative situation for the biofuel sector as well as for the state’s politically powerful dairy industry; some researchers have found that certain dairies may make as much revenue from selling LCFS credits as they do from selling milk. Meanwhile, RNG project developers and oil and gas companies are investing billions of dollars in dairy biogas projects earning money through the program.

But this subsidy goldmine would crumble if CARB regulated dairy emissions in the same way it regulates other major sources of methane in the state. Energy analysts, climate scientists, and environmental justice advocates who have long opposed how LCFS treats dairy biogas believe that would be a good thing. They say the rules create a perverse incentive that subsidizes air and water pollution from mega-dairies, undermines the clean-transit goals of the LCFS program, and threatens to infect even larger federal clean fuels incentive programs for decades to come.

That’s why, according to these groups, it’s essential that CARB staff respond to the board members’ directive by putting together a robust plan for regulating methane emissions from dairy farms. However, last week CARB staff instead proposed amendments to the LCFS program that could undermine the long-awaited regulatory push before it even begins.

The proposed change? To exempt any dairy methane digester projects that now exist, or that break ground before 2030, from being subjected to any ​“law, regulation, or legally binding mandate requiring […] greenhouse gas emission reductions from manure methane emissions.”

Advocates who’ve been fighting to regulate factory farm methane emissions described this move as an attempt to shield the dairy biogas industry from state regulatory oversight.

“This is another example of a rogue staff that has an agenda,” Tyler Lobdell, a staff attorney for nonprofit Food & Water Watch, told Canary Media. ​“That agenda is to appease the financial interests in big ag and these factory farm gas developers at all costs — including by ignoring direction from their own board.”

CARB spokesperson Dave Clegern disputed this characterization of the impact of the proposed change in LCFS rules. ​“There is nothing that would preclude regulating all dairies in the LCFS amendments,” he told Canary Media in an email.

Advocates disagreed with that assessment, however. ​“The point we’re making is not that it’s precluding CARB’s ability to regulate, because they do have that authority,” said Nina Robertson, a senior attorney for nonprofit legal advocacy group Earthjustice. ​“The point is that the potency and effectiveness of the regulation will be eliminated.”

Treating dairy methane as a pollutant, or as a fuel? 

To understand how this proposed amendment would undermine CARB’s regulatory power, it’s important to grasp how the LCFS program now treats dairy methane projects, said Jamie Katz, staff attorney with the Leadership Counsel for Justice & Accountability, a nonprofit working with communities living near dairies in the San Joaquin Valley.

Today, CARB offers dairy biogas producers at least one 10-year ​“crediting” period during which they can generate and sell credits subject to generous avoided methane crediting rules, Katz explained. The idea is to encourage investment in low-carbon fuel projects by giving them some certainty on recovering costs.

Once that 10-year period is up, projects can seek out a 10-year extension of those same terms. They can repeat the process again 10 years later. If granted, these extensions allow projects to earn money on steady terms for up to three decades.

If CARB regulates dairy methane emissions, the opportunity to extend these terms could disappear. Current LCFS rules bar livestock or landfill methane-capturing operations from seeking additional crediting periods if laws or regulations limiting methane emissions from those industries are put into effect.

In other words, ​“if CARB were to implement regulations, you get to finish out your 10-year crediting period, and then you’re done,” Katz said.

But advocates fear that the recently proposed amendment from CARB staff would preempt these crediting period rules and allow dairy methane projects built over the coming years to lock in favorable terms until 2050 or later.

“That effectively means that dairy digester projects that break ground before 2030 would be able to get up to two or three avoided methane crediting periods,” even if state law requires livestock operators to reduce their methane emissions, Katz said. Or, in other words, dairies that break ground on digester projects and seek an LCFS pathway would operate under a totally different regulatory standard than other dairies.

The perverse impact of dairy biogas on climate policy

Under the LCFS program’s current rules, dairy biogas is flooding the state with an alternative fuel whose usefulness as a climate solution is dubious at best, critics say. Regulation-proofing dairy methane digester projects would lock in this status quo for decades — and be a disaster for California climate policy, advocates say.

As an example of how critics say current LCFS rules warp environmental and economic reality, take the cases of electric trucks or clean hydrogen: Right now, fuel-burning trucks or fossil fuel-based hydrogen can be considered cleaner than EV trucks or hydrogen made with carbon-free electricity — so long as the operators of those gas trucks or dirty hydrogen projects purchase LCFS credits from dairy biogas projects.

That’s because LCFS considers RNG produced by livestock manure methane projects to be carbon negative. The argument in favor of this treatment is that without these biogas projects, methane — which is far more potent than CO2 over a 100-year period — will continue to flood into the atmosphere from the manure lagoons at commercial dairy operators.

Paying dairies to capture methane they create may be one option for mitigating these emissions. But critics say LCFS’s approach has undermined the alternative option of regulating dairies to drive them to take action to reduce methane emissions. They also point out that the negative carbon intensity metrics created to justify this treatment are not based in reality — dairy biogas projects do not actually remove greenhouse gases from the atmosphere.

As Jeremy Martin, Union of Concerned Scientists, wrote in a February blog post, ​“a negative CI score would suggest an almost magical climate solution that pulls several carbon dioxide molecules from the atmosphere for each one that comes from the tailpipe of a truck running on dairy biomethane.”

If dairies were instead forced to reduce their methane emissions under regulations, like other industries are, they wouldn’t be able to count every single unit of methane they captured as if it was a net gain for the climate. They’d only be rewarded for whatever they did above and beyond any emissions limits set by CARB — as is the case for landfill and wastewater RNG projects under LCFS.

LCFS does offer a small negative carbon-intensity score for methane captured from diverted food and plant waste, as well, but not on the order of livestock manure, as the chart below shows. 

By rewarding dairies for every ton of methane they capture, current LCFS policy creates a perverse incentive for dairies to grow in size and manage their manure in ways that increase, rather than decrease, their methane emissions, energy experts say.

This arrangement has allowed dairy biogas credits to flood the LCFS market, making it harder for more effective climate solutions like electric vehicle projects to raise revenue through credits sales. In recent years, biomethane has supplied nearly one-fifth of the program’s total credits despite it being used in less than 1 percent of the state’s transportation fleet, according to Aaron Smith, a professor at University of California at Berkeley who has conducted long-running studies of the program.

Environmental groups and communities living near the state’s sprawling and polluting dairies say this special treatment has spurred billions of dollars of investment in an industry that is largely harming rather than helping the fight against climate change.

And almost all of that money is flowing to large-scale projects, making small dairies less competitive, Lobdell said. Extending that option for large dairies to exempt themselves from future regulations on the sector at large ​“will put those biggest polluters at really a shocking market advantage against sustainable dairy operations,” he said.

Meanwhile, the RNG project developers and oil and gas companies heavily invested in dairy biogas projects are seeking to embed rules similar to LCFS in federal tax credits for clean hydrogen and for ​“fuel-neutral” clean energy production.

“There’s a clear national campaign to nationalize the fugitive biogenic methane crediting process,” said Danny Cullenward, a climate economist and lawyer and senior fellow at the University of Pennsylvania who serves as vice chair of California’s carbon market advisory committee.

Cullenward co-authored a February opinion piece warning that applying LCFS’s treatment of dairy biogas and other forms of unregulated methane emissions to federal programs would ​“end up subsidizing fossil fuel projects, stifling the nascent green hydrogen industry and locking in emissions-intensive infrastructure for decades to come.”

“It’s subsidy season,” Cullenward told Canary Media. ​“The LCFS is being designed for the subsidy recipients — and they’re very happy for the most part in what they’re seeing.” 

These broader implications make what CARB decides to do next with the LCFS program a pressing matter not just for California, but the entire country.

‘Carrots’ or ​‘sticks’ for dairy methane pollution?

This tension over the LCFS program’s treatment of dairy methane has been building for years.

In 2022, CARB rejected a petition from environmental justice groups demanding that it eliminate negative carbon-intensity scoring for dairy biogas projects. In early 2024, CARB rejected another petition demanding that it take up a rulemaking under SB 1381 to regulate those emissions.

And nearly 50 groups, ranging from state and national environmental organizations to representatives of people living in communities burdened by dairy pollution, asked CARB in a May letter to undertake its SB 1381 ​“obligation to regulate that methane rather than subsidize its creation.”

The issue came to a head at the September meeting when CARB board members and staff were briefed by members of CARB’s Environmental Justice Advisory Committee (EJAC). That group, formed in 2007 and made permanent in 2022 to advise the agency on how to align its policies with the needs of communities harmed by pollution, has proposed a dramatically different approach to restructuring the LCFS program — including a call to end its favored treatment for dairy methane.

“Without regulations, and without changes called for in the LCFS by EJAC, we will simultaneously fail to reach our livestock methane goals and continue to undermine our pathway to clean transportation,” Phoebe Seaton, co-founder and co-executive director of the Leadership Counsel for Justice & Accountability, said at the September meeting.

Kevin Hamilton, an EJAC member representing the nonprofit Central California Asthma Collaborative, added that the existing rules treat the manure lagoons of mega-dairies in some of the most polluted air basins of California as if ​“they are some sort of sacred cow — no pun intended — that actually has happened accidentally.” Landfills and wastewater treatment plants ​“don’t get this same sort of golden-child approach.”

“We gave this industry eight years to get its act together and figure out a way to do this,” Hamilton said. ​“Instead, what they did was build a ton of infrastructure, and much of it does not actually benefit the people who are doing the work on these dairies. It’s more of an avoidance strategy.”

At the September meeting, several CARB board members agreed that they believe the time has come for the agency to carry out its obligations under SB 1381.

Board member Diane Takvorian, who has previously raised concerns about air and water pollution caused by the state’s growing dairy herds and manure lagoons, proposed voting in November on a resolution to ​“begin rulemaking and rule development in 2025, with a goal of considering adoption by 2028 and implementation to start in 2030 if it’s adopted.”

Dr. John Balmes, a CARB board member who leads research into respiratory effects of ambient air pollutants at University of California San Francisco, said he was ​“100 percent in agreement” with Takvorian’s proposal. ​“I think it’s time that we start a direct regulation of dairy methane. I don’t know how it’s going to play out, but we have to start the process. It is, in my view, already on the late side.”

CARB board member Cliff Rechtschaffen, a former California utility regulator, agreed that the time had come ​“to start a rule development, with all the requirements and complexities and data, because we’ll need that going beyond 2030, for sure.”

But board members also expressed concern that regulating livestock methane or ending the current negative carbon-intensity treatment for dairy biogas could undermine the economics of what has become the state’s primary method for managing those emissions.

As Smith noted in a January blog post, the cost of an anaerobic digester is about 10 times the market value of fossil gas it replaces. Without LCFS credit revenues, dairy methane digesters would struggle to remain profitable.

“I too, look forward to a roadmap or work plan to reduce the intensity of livestock methane rule,” said board member Davina Hurt. At the same time, ​“we have said, in order to meet our goals, we need many more digesters to come online, and sometimes I think that gets buried in our conversations. I’m wondering, how do we get those projects to come online and be viable outside of crediting?”

Rechtschaffen echoed those concerns. He proposed working with CARB staff to see if ​“limiting the avoided methane credit to no more than one crediting period makes sense.”

CARB chair Randolph made clear that she intends to keep those considerations in mind when reviewing the agency’s next decisions for the LCFS at its meeting scheduled for November 7 and 8.

“I do think that as we think about the time between now and 2030 it is very important to encourage the development of those projects,” and ​“to ensure that they are financially viable,” she said. ​“Those are the things that I’ll be thinking about in November.”