THE Whole Milk for Healthy Kids Actsigned into law in January, restored the eligibility of whole milk for the National School Lunch Program that feeds tens of millions of American girls. New dietary guidelines released by the US Department of Agriculture and the US Department of Health and Human Services recommend three servings of dairy per day, with an emphasis on full-fat products.
The updated policies are a huge win for America’s dairy industry, funneling more federal dollars to the farms — and big companies — that produce milk, cheese and other traditional food products. But these dairy subsidies come at a significant cost to the environment, he says Matthew Rowlingclinical assistant professor at Kellogg and executive director of the Abrams Climate Academy.
“Plant milk typically has a third of the carbon footprint of dairy milk and generally uses much less water,” says Roling. “You’re throwing taxpayer dollars at the incumbent, even though there’s a superior alternative that’s better for our environment because of the political economy we’re in.”
Government subsidies are a powerful lever to support or protect domestic industries. In the US, subsidies have supported farmers since the New Deal, through legislation regularly renewed by bipartisan votes. However, the renewed push for cow-based dairy products may be pushing long-term market trends in vain.
“You see this massive shift in consumer behavior when it comes to things like milk,” Roling says. “So you could make an argument that dairy could be considered a contracting industry.”
This tension about the role of subsidies exists not only in agriculture, but in energy, technology and other sectors. And it has consequences for the environment, health care and companies caught in the crossfire of shifting political priorities.
Here are four ways subsidies can do more harm than good, and policymakers and companies can avoid the most common pitfalls.
Subsidies have downstream effects
The indirect cost of dairy subsidies can be felt every time you visit a coffee shop, where ordering a latte with almond, soy or oat milk will often cost you more than one with traditional dairy.
This “premium” status of alternative milks is not only the result of free market forces and consumer preferences, Roling says. The price of cow’s milk is kept artificially low by farm subsidies, while plant-based milks have not received the same government support.
“It’s a direct transfer of wealth from the taxpayer to the dairy farmer when you have to pay an extra 50 cents for plant-based milk versus dairy milk,” says Roling. “When you think about it, we as taxpayers pay for these things.”
And there’s another hidden cost—to the environment. Dairy, beef and other livestock products are underappreciated contributors to climate change. some value animal bills 15 percent of global greenhouse gas emissions. In contrast, plant milks they produce much less carbon and use much less water.
There are also downstream health effects from subsidizing traditional dairy products – which many adults cannot drink due to lactose intolerance – and other high-fat foods. America’s obesity epidemic can be partly attributed to the prices of less healthy options suppressed by subsidies, Roling says.
“The key question is, what are we as taxpayers paying farmers to grow?” Rowling says. “We incentivize them to make full-fat milk and high-fructose corn syrup, but should we incentivize them to grow broccoli and almonds and Brussels sprouts and lentils?”
Subsidies provide incentives to shift shipments
Another issue with subsidies is that they can make it more profitable for companies to engage in activities that fall outside the scope of the original intent of the legislation that authorized them.
For example, subsidized agricultural products often do not end up in grocery stores and restaurants at all. Today, only a small percentage of the corn grown in the United States is used for human consumption. the vast majority goes to animal feed and fuel.
This was not the intent of the original US farm bill, the Agricultural Adjustment Act of 1933, which provided loans to farmers and supported crop prices during the Great Depression. Since the 1990s, newer versions of the legislation have shifted towards direct payments to farmers and subsidies for specific outputs, such as biofuels.
“I think the original grant was born out of noble intentions,” says Roling. “It’s very easy to look back in time and say we didn’t want to be dependent on foreign interests to feed people, so we created these farm bills. But over time, we started to see the rise of big agricultural interests, and farmers and the agricultural industry thought it was easy to take this legislation and use it to maximize profits and start shifting land use.”
The agricultural industry of 2026 also looks very different from that of the early 20th century. While the sector is still dominated by family farms, many have done so are consolidated into larger enterprisesoften focuses on a limited list of subsidized crops.
“Most of that corn from Indiana to Nebraska ends up in a gas tank, in a cow’s stomach, or as high fructose corn syrup, and none of those results are good for human health or our planet,” says Roling. “But the political power of the incumbents is such that it’s really hard to put the genie back in the bottle or change the way this land is used.”
Subsidies can stifle innovation
Because subsidies are often designed to protect mature industries and their workers—or, more cynically, designed to appease powerful actors in those industries—they tend to favor already established products. This has the potential to create markets that tilt against up-and-coming ideas and companies.
This is true for both plant-based milk and meat alternatives, Roling says. The beef industry is among the leading contributors to climate change and receives billions of dollars in subsidies each year, mostly through animal feed aid. The resulting lower meat prices have made it difficult for newer, more expensive meat alternatives like Beyond Meat and Impossible Foods to compete on grocery store shelves.
If policymakers wanted to encourage the growth of this new market, subsidies should be applied to the underdogs, Roling suggests.
“How do you reduce costs for new market entrants? That’s where the government can step in if you want to change behavior,” says Roling. “Governments can lean in and say, we’re going to subsidize this because the market hasn’t received traditional funding and you’re not going to pay a thousand dollars for a lab-grown hamburger.”
That said, either removing existing subsidies or taxing companies for their negative environmental or health impacts may be more effective.
“If you really want people to change behavior, you need sticks,” says Roling.
Subsidies can cause companies to whiplash
Recent events point to another of the limitations of state subsidies: they are guaranteed only until the next election. Over the past year, the Trump administration and the Republican Congress have dismantled many of the signature programs of the Anti-Inflation Act and CHIPS passed during the Biden administration, leaving many companies in the lurch.
This whiplash underscores the permanence of subsidies, particularly in times of deep political polarization.
“If it directly affects your business, you have to do it carefully, especially if you have a really long-term planning horizon,” says Roling. “If you talk to the private sector, they crave stability and predictability. I think you can’t look at this political moment and say to yourself, ‘well, this is how it’s always going to be.’ Because I don’t think anyone knows what’s going to happen two years from now.”
But the farm bill shows how subsidies can remain for decades if the beneficiary is deemed critical to the American economy. For new companies and industries, learning from the agricultural industry’s public relations and lobbying success can help them emerge on the winning side of future subsidies.
“I think historically, the companies behind these new, better-for-the-planet, lower-profile products and solutions would say, ‘Well, we’re warm and fuzzy and everybody loves us and that should have the day,'” says Roling. “For these companies, you have to fight fire with fire and you have to really engage with your community and politicians and make them see the writing on the wall: that you are the future – not the coal plant or the dairy.”
