Impact of California's LCFS on Dairy Herd Expansion

Jialiang Chen and Gabriel Lade

No 404445, 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri from Agricultural and Applied Economics Association

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.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 74
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea26:404445

DOI: 10.22004/ag.econ.404445

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