Linking profitability, renewable energy, and externalities: A spatial econometric assessment of the socio-economic impact of Ohio dairies

Communities living in close proximity to livestock operations may be subjected to economic externalities (third party or spill over effects) like pollution or odors originating from these facilities. Direct environmental contamination is of considerable concern since waste is frequently stored in stacks or pits and may leach or spill into the surrounding environment. There is also the danger that waste may be transported even further across the landscape via runoff. But adequate information about the social costs associated with livestock operations is scarce. Addressing this informational gap constitutes the first objective of this work. Here, economic modeling combined with GIS (Geographic Information Systems) based mapping has been used to analyze the impact of animal agriculture on the environment and local communities.Several hedonic pricing models were developed for three selected counties in the state of Ohio across two different time periods (2000 to 2001 and 2003 to 2004). Hedonic regressions explain the value of a house in terms of its characteristics therefore they can be used to ascertain whether or not an environmental variable has a statistically significant impact on housing values. Because of the spatial nature of the data a neighborhood sampling method as well as explicit spatial modeling was used to derive value estimates. The impacts estimated by both models in terms of prices were quite similar thereby increasing confidence in the robust nature of the results. Marginal prices of Decreasing these impacts by means of employing anaerobic digestion to manage waste and generate energy on farm would provide considerable environmental advantages as well. One moderately sized dairy operation (of about 183 animals) would be able to generate enough electricity to power up to 6 homes (using only 25% of the available material), and decrease greenhouse gas emissions by over 30% relative to conventional coal based electricity production. The dairy sector across Ohio has the potential to power almost 20,000 homes assuming only 25% of the waste material produced is collected and used for generation purposes. Using anaerobic digestion to generate power could decrease greenhouse gas emissions from 1% to almost 14% state wide (depending on what assumptions are made about methane content and conversion efficiency), about 45 to 512 thousand tons of carbon dioxide equivalent, respectively (utilizing only ¼ to ½ the available material). Furthermore, using animal waste to produce renewable energy would not entail removing crop residue from harvested lands and thus potentially decreasing the agricultural productivity of these lands.