Help the Farmers - "Carrots are better than Stick"

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I read a report from Sierra club addressing the environmental issues in Finger Lakes area. They stated that larger farms called CAFO's raise thousands of animals and contain huge amounts of manure stored in lagoons.Conventional approach to address potential issue of pollution is to hire more Government employees to monitor these farms and fine them for violations.
What could be a Greener approach that can provide better results?
These farms are agribusinesses that create jobs and help local economy. Why not ask the existing government agencies to work together and help them implement renewable energy generation system that can convert manure waste into bio-gas and power generation. For example in New York State- the Empire State development and County Industrial Development Agencies could work with Environmental Facilities Corporation(EFC) and seek the Revolving loan funds for Anaerobic Digester project implementation.The loan gets repaid from the savings in energy costs and waste gets treated so it does not smell or cause pollution. This would be the carrot approach.
Which one is better? Any comments?
Ram