Spatial impacts and sustainability of farm biogas diffusion in Italy

In Italy, farm biogas plants have boomed in the last five years. Upward trends of fossil fuel prices, price volatility of agricultural products, adverse meteorological conditions, and higher climate change mitigation commitments at the farm level may have contributed to biogas success (Carrosio, 2013). In 2009, the Italian government has introduced feed-in tariffs for renewable energy production. In the case of biogas, that incentive remunerates eligible producers with a 15 year flat price for each unit of electricity (€ 0.28/kWh) plugged into the national grid and, according to recent research (e.g., Chinese et al., 2014), have been the main driver of biogas diffusion. Major eligibility criteria are producing on-farm at least 51% feedstock and outsourcing the rest within 70km. These two prescriptions can raise the demand for both land and agricultural labour in plants’ neighbourhood, which, in turn, would result in relevant spillover effects due to marshallian externalities. To the best of our knowledge, no study has assessed the ex-post impact of farm biogas diffusion on the viability of EU’s rural areas, despite ongoing policy debates at the single member state and Community level. So far, economic analysis have mainly delivered ex-ante impact assessments of the diffusion of agroenergy on the viability of rural areas, with some papers having addressed spatial spillover effects, and most ex-post assessments have concentrated on domestic plants in developing countries. In this paper, we consider the diffusion of agricultural biogas installations in Italy as a treatment to actual adopting farms. Provided comparable farm features, non-adopters form the control group. Measuring treatment effects can help estimate the contribution of farm biogas’ diffusion the viability of rural areas. The study entails the use of sustainability indicators, selected for their ability to provide measurable approximations for the impact of biogas diffusion on (i) the maintenance of farming activities and (ii) agricultural labour, (iii) the demand for land, and the drivers of High Nature Value farming. Spillover effects are analysed on areas neighbouring to agricultural biogas installations applying a spatial difference in differences model to a compound dataset, made up of (i) data from the last two Italian Agricultural (2000 and 2010) and Population (2001 and 2011) Censuses, and inventory data from the Italian Biogas Consortium about currently operating farm biogas plants and their relative rated power and heat potential. Data are aggregated at the municipality level, with Italian municipalities being the observations, for the purposes of describing the patterns of change at the meso level enabling and of capturing relevant changes drove by biogas diffusion. Preliminary results confirm previous literature on the reliance of the Italian biogas sector on state’s incentives. According to model’s outputs, energy production is a viable option for rural viability due to increased and more stable margins of farming activities, given the reduced dependence on agricultural markets and income differentiation; beyond energy selling, biogas producers can avoid the costs for the disposal of agricultural waste by recovering energy from it, can use biogas processing by-product (digestate) for soil fertilization, and can sell part of the digestate to neighbouring farms Nevertheless, higher margin firms are special purpose enterprises, with no agricultural background, created with the purpose of producing renewable energy to benefit from the 15 year-flat state incentive. Given the prevalence of the use of marginal land for energy cropping, overall environmental impacts are positive, compared to energy production from fossil fuels, and competition with food and fibre cropping is not relevant. However, nitrogen leaching after digestate distribution and odour emissions can be significant. Moving to energy security, current electricity production is not that high to significantly contribute to national 2020 targets and heat production is still underused.