Curbing methane emissions from Italian cattle farms. An agroeconomic modelling simulation of alternative policy tools

Methane (CH4) emissions from cattle farms have been prioritised on the EU agenda, as shown by recent legislative initiatives. This study employs a supply-side agroeconomic model that mimics the behaviour of heterogeneous individual farms to simulate the application of alternative economic policy instruments to curb CH4 emissions from Italian cattle farms, as identified by the 2020 Farm Accountancy Data Network survey. Simulations consider increasing levels of a tax on each tonne of CH4 emitted or of a subsidy paid for each tonne of CH4 curbed with respect to the baseline. Individual marginal abatement costs are also derived. Besides, to consider possible technological options to curb emissions, a mitigation strategy is simulated, with different levels of costs and benefits to appraise the potential impacts on the sector. Relevant reductions in operating income are foreseen, the most substantial in farm types and size classes characterised by lower levels of carbon productivity. The introduction of the mitigation strategy shows that the outcome in terms of mitigation potential, without undermining production level, highly depends on the implementation costs, but can also vary widely due to heterogeneous farms’ economic performances. Policy implications are also derived.