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Impact of California's LCFS on Dairy Herd Expansion

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  • Chen, Jialiang
  • Lade, Gabriel

Abstract

Environmental advocates argue that California’s Low Carbon Fuel Standard (LCFS) is expanding U.S. dairy herds by paying farmers to capture manure methane, while regulators dismiss these concerns as speculative. We exploit the historical placement of natural gas facilities relative to dairy farms and historical LCFS credit prices to examine the impact of the policy on county milk-cow inventories from 2012 to 2025. We find that a 10 percent increase in the credit revenue per unit of biogas raises herd sizes by approximately 1.2 percent for complier counties. The estimate is robust to excluding California. National herd inventories have held steady between 9.3 and 9.5 million head since 2018, suggesting the policy reallocated dairy cow locations rather than expanding aggregate herd sizes.

Suggested Citation

  • Chen, Jialiang & Lade, Gabriel, 2026. "Impact of California's LCFS on Dairy Herd Expansion," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404445, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404445
    DOI: 10.22004/ag.econ.404445
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