Cajamarca is one of the Departments in Peru with highest poverty rates; however, it is one of the Departments with greatest potential for agricultural development through its comparative advantages on milk production. The purpose of this study is to examine the tradeoffs between poverty alleviation and environmental contamination in the context of dairy production in the Department of Cajamarca. The study is based on data from surveys collected between 2000 and 2001 in La Encañada District in Cajamarca. Data were subsequently analyzed using the Dairy Simulation Model and the Trade Off Analysis Approach to evaluate the different technologies suitable for the region to increase milk production (through feed and cattle improvement, or in other words, land use intensification), comparing the income increase with the methane emissions. Finally, data was scaled up to measure the effects of land use intensification in poverty alleviation as well as global warming generated with the methane emissions produced by cattle. The results of the study highlight the importance of reducing poverty in the region through the promotion of milk production with improved technology. Methane emissions produced by dairy cows are higher than the total greenhouse effect of cars in Cajamarca. Even though there is an impact of methane emissions on the environment because of such intensification, there are many benefits that make those technologies desirable. When feed and cattle are improved, there can be an increase up to US$ 411 per year for households with just 1 to 4 cattle, enough to bring a substantial proportion up over the poverty line. Around 67 000 farm households in Cajamarca Dairy watershed belong to this group; thus the impact on poverty can be significant. But it is not the only positive effect, it will also be a reduction in malnutrition and there will also be a reduction of the land pressure in rangeland by improving water management. Considering pros and cons of the technologies proposed, methane emissions, given the urgent necessity to alleviate the poverty of farmers in the region, rye grass improved pastures and improved dairy cow breeds offer a promising alternative for the zone, if irrigation infrastructure and/or credit program are established.