Methane action plan ADBA response

On the 29th of October the UK Government published its updated Methane Action Plan. Here we take a look at some key points that touch the AD sector.

Agriculture

UK agriculture is responsible for 48% of methane emissions, and has seen a
16% reduction since 1990. This is largely due to productivity improvements and
government initiatives like the Sustainable Farming Incentive and Slurry
Infrastructure grant. The government aims to further reduce emissions by 2030
through measures like promoting Methane Suppressant Feed Products, improving
animal health, and supporting research and development.

The action plan cites how improvements in productivity of livestock have meant less
manure for the same agricultural output. It also asserts the value of the Slurry
Infrastructure Grant, which encourages covering slurry pits with gas-tight covers. The
productivity of agriculture, as a measure of investment to output, could have been
driven further by allowing farmers to capture the methane from the covered lagoons
allowing them to use it for on-farm power. As it is, the regulations for these grants explicitly
exclude any use for energy generation. Therefore, the gas is
flared to the atmosphere: there is no wider decarbonisation benefit to the farm, agriculture, or the
UK. This is surely short-sighted policy design focussed on departmental silos and Treasury
aversion to “over-subsidy”.

There is a notable policy contrast in the USA. The success of the now gutted Biden-era Inflation Reduction Act was less to do with the amount of support for any one sector than the fact that support mechanisms for different outcomes could be stacked on a single project. If a mechanism was in place to support carbon removals, it could be used in conjunction with one that supported low-carbon fuel production. If this were to happen in the UK, officials would be expected to
bend over backwards crafting complex claw-back mechanisms. This risk aversion
driven by Treasury attitudes to “over-subsidy” means that UK legislation takes too long, is over-
complex, and puts UK operators at a competitive disadvantage. Worst of all, on
climate change-related activities, it is simply reducing the potential impact of the
activities. If an activity can deliver multiple public benefits, why should it not be able to receive multiple public support?

Let us take the particular case of British milk. The dairy herd in England represents around 16 kt methane emissions per year from manure alone. Taking 30% of this manure and processing it on farm through small-on-farm AD (SOFAD)[1], would reduce the UK methane emissions by 4.8 kt, or 121 kt CO2e. This is a worthwhile saving. Better yet, this could also have anannual energy saving to the farmer of £100k. Such a win-win policy could unlock many other knotty problems, such as providing a pathway to the eventual removal of “red diesel” – untaxed and therefore subsidised fossil diesel fuel – for farmers.

If the government were to make interest-free 10-year loans available to farmers for
small on-farm digesters, £2 billion over ten years could mitigate £84 million worth of
carbon emissions, assuming an average carbon price of £70. This action would also
save the UK dairy sector £3.7 billion in energy costs, at 2025 prices. If the funding is
prioritised to the top 30% of the dairy farms based on size, the numbers are even more impressive as there are economies of scale in SOFAD. It would save 2.5Mt
CO2e annually or £1.7 billion in CO2 abatement over ten years.

This kind of integrated action would contribute to meeting the methane pledge with around 25% of the targeted savings. It would support the UK dairy sector through lower energy costs, and would provide innovative UK-based SOFAD companies with significant

growth potential and a launchpad for global markets. In short, an integrated rather than siloed approach to this one smallcorner of government would present cost savings, domestic productivity growth, and carbon reductions in an extremely hard-to-abate sector.

If policy focussed on the larger herds as a priority under the methane pledge, with availability spreading more widely through smaller herds over time, the savings for the sector in one year could amount to over £1.4bn. Lower costs mean more profits, and therefore more corporation tax for the Treasury. The UK dairy and cheese sector generates some £13bn in revenue in 2023. This could spur a 9% total factor productivity boost, well above the targets for growth and productivity of the overall economy. The cost of this over one parliament would, in effect, only be £1bn, and over two
parliaments, it could be cost-neutral.

Waste

The UK waste sector is responsible for 31% of methane emissions, and has engineered a 74%
reduction since 1990. This progress is attributed to policies like the Landfill Tax and
Directive, which diverted waste from landfill and incentivised landfill gas capture. The
government plans to continue reducing emissions through collection and packaging
reforms, a Circular Economy Strategy, and research into improved landfill gas
monitoring.

The coherence of message is better on the waste side, though implementation
could be improved. The much-delayed roll-out of compulsory food waste separation
will definitely improve the situation, and is broadly integrated with energy policy as it
relates to AD. However, there is a particularly uncertain future for food waste plants that rely on Renewables Obligation Certificates, Feed in Tariffs (RoC/FiT) and the Renewable Heat Incentive (RHI) as there is currently no transitional arrangement after the end of those schemes.

It is also good news that the Government actively wants to promote landfill gas collection. If this can be integrated into the Green Gas Support Scheme (GGSS) and its follow-on scheme, both for plants supported by the expiring RoCs scheme, and through direct injection from onsite upgraders, this could be worth an extra 5 TWh of biomethane per year or nearly 1% of domestic gas demand while also saving the relevant methane emissions.

Conclusion

We agree with the government that “it is critical that globally and domestically we
use the levers available to us to halt and prevent future global warming and its
associated negative impacts on populations across the world”. This is not least because of
the potency of methane as a greenhouse gas – twenty five times CO2 – and the short time we have to reduce methane in the atmosphere before 2050. Significant reductions by 2030 will have an outsized impact on the potential greenhouse
warming effects.

Actions

Proposed measures include:

• Interest-free loans for farmers to invest in SOFAD technology.
  o Estimated savings of £3.7 billion in energy costs for the dairy sector.
  • Target processing all manure from the largest 30% of dairy farms through on-
  farm anaerobic digestion (AD) by 2030 to reduce methane emissions by 100Kt
  (2.5Mt CO2e) annually
  • Integrating landfill gas initiatives with broader policies on GGSS and future
  framework for biomethane could yield significant additional biomethane, enhancing
  overall energy production.
  • Ensure that the end of RoC/FiT does not happen without a way for existing
  supported plants to transition and retain the food waste processing potential.
  • Ensure the maximum roll out of simpler recycling food waste separation

[1] We assume this would only happen where there are more than 100 head of cattle, since this is approximately the minimum economic scale for small on-farm digesters.