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Investing in Methane Digesters on Pennsylvania Dairy Farms: Implication of Scale Economies and Environmental Programs

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  • Leuer, Elizabeth R.
  • Hyde, Jeffrey
  • Richard, Tom L.
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    Abstract

    A stochastic capital budget was used to analyze the effect of net metering policies and carbon credits on profitability of anaerobic digesters on dairy farms in Pennsylvania. We analyzed three different farm sizes—500, 1,000, and 2,000 cows—and considered the addition of a solids separator to the project. Results indicate that net metering policies and carbon credits increase the expected net present value (NPV) of digesters. Moreover, the addition of a solids separator further increases the mean NPV of the venture. In general, the technology is profitable only for very large farms (1,000+ cows) that use the separated solids as bedding material.

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    Bibliographic Info

    Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

    Volume (Year): 37 (2008)
    Issue (Month): 2 (October)
    Pages:

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    Handle: RePEc:ags:arerjl:45662

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    Related research

    Keywords: anaerobic digester; stochastic capital budget model; dairy farm; alternative energy; Environmental Economics and Policy; Livestock Production/Industries;

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    1. Burtraw, Dallas & Palmer, Karen & Shih, Jhih-Shyang & Siikamäki, Juha, 2006. "Air Emissions of Ammonia and Methane from Livestock Operations: Valuation and Policy Options," Discussion Papers dp-06-11, Resources For the Future.
    2. Jeffrey R. Stokes & Rekha M. Rajagopalan & Spiro E. Stefanou, 2008. "Investment in a Methane Digester: An Application of Capital Budgeting and Real Options," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(4), pages 664-676.
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    Cited by:
    1. Key, Nigel D. & Sneeringer, Stacy E., 2012. "Carbon Emissions, Renewable Electricity, and Profits: Comparing Policies to Promote Anaerobic Digesters on Dairies," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(2), August.

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