Voluntary Greenhouse Gas Reporting Feasibility Study
6 VGGR design options
6.1 Introduction
This section describes options to provide a VGGR system for New Zealand pastoral agriculture. The first part of this section describes a ‘core’ VGGR option which would deliver MAF’s stipulated VGGR requirements at the lowest cost to government. The next part provides an assessment of the likely uptake of the core option by farmers, followed by an estimate of the costs to government to develop the core option.
The second part of this section describes variations to the core option, each capable of delivering different outputs to farmers or government. For each variation an assessment of likely uptake by farmers is provided along with estimates of the cost to government (where applicable).
This section concludes with a summary of all design options described and their estimated cost.
URS subcontracted software development company Fronde to cost out the IT components of each option. Appendix A contains a copy of Fronde’s report.
6.2 VGGR requirements
MAF has stipulated that any VGGR option should include:
• a system to report emissions from individual farms, or aggregations of them, to farmers, government and the public
• a registry to receive reports of farms’ emissions
• a system for auditing the reports of on-farm emissions, including options for contracting this activity to third parties
• a system to provide advice to farmers to help them with operating the VGGR system and to enable them to reduce emissions
The core VGGR option described in this section provides the most cost effective method to government of meeting these requirements.
The additional VGGR options outlined in section 6.7 also meet the VGGR core requirements listed above, but provide additional outputs, at increased cost to farmers and/or government. We identified the possible additional outputs from recommendations made earlier in this report (sections 2-5).
6.3 Core VGGR option
This section outlines the core VGGR option. The first part of this section describes the high level concept of the core VGGR option. The remaining parts of this section then describe the core option in more detail including participation, scope, data requirements, the database, reporting, verification, technical assistance and administration.
The core VGGR option outlined in this section provides the most cost effective method to government of meeting MAF’s VGGR requirements.
The core VGGR option will focus on enteric CH4 emissions and N2O emissions from soils, and on the dairy, sheep and beef cattle sectors.
The core VGGR option contains the following key components:
• participating farmers will collect and provide information on their farming operations (such as stock numbers, types, weights, feeding practices, and waste management practices)
• participating farmers will submit that data into a system that, using a prescribed methodology and fixed parameters, can estimate their greenhouse gas (GHG) emissions
• farmers, the government, and to a lesser extent the public, will be able to access the information stored in, or calculated from, the database
This core VGGR option requires the following four key computing components:
• a data entry module – allowing farmers to input data into the system
• a calculation module – converting the data farmers input into the system into GHG estimates
• a central database -which stores the data provided by farmers
• a reporting module – which farmers and other parties can use to get GHG data from the database
Figure 6-1 illustrates the key components of the core VGGR option.
Figure 6-1 Key components of a core VGGR option
6.3.1 Participation
To develop the core design option we have assumed that there will not be any direct government incentives for farmers to join the VGGR scheme, and that it would be open to any farmer based in
New Zealand.
We expect that participation rates in this situation would be relatively low (see discussion in
Section 6.4.4). We would not expect representatives of more than 1-5% of New Zealand’s 45,000 farms to participate; leading to a maximum number of participants of 450 – 2,250. We note that there is considerable uncertainty at this early stage around likely participation levels. Participation could be increased relatively substantially through the use of government incentives.
There would be little or no cost impact if the software components of the system were designed from the outset to cope with much higher participation rates than we currently expect. However, increased participation levels would most likely lead to higher hosting costs, such as increased Central Processing Units (CPUs) to handle extra traffic or extra memory for the database.
If the government pursues the core option, we recommend that the software components of the system be built from the outset to cope with a capacity of 50,000 – 55,000 participants; ensuring that it would be able to cope with all feasible participation outcomes over the next 10-15 years. However, ongoing hardware and staff resources devoted to hosting the system should initially be based on much more conservative participation rates. This approach would give MAF the flexibility to introduce policies to expand participation levels at a later date without undermining the cost effectiveness of the system during the initial years of its operation.
6.3.2 Scope
MAF have directed us to limit the scope of the core VGGR system to the estimation and reporting of agricultural sector emissions of methane and nitrous oxide.
As outlined in Section 3, the simplest way of doing this is to estimate the total methane and nitrous oxide emissions at the level of each participant’s farm and use New Zealand’s national inventory methodology (refer to Figures 6-2 and 6-3). Developing a new model based on the existing national inventory methodology is expected to be simpler and therefore more cost effective than adapting an existing model (e.g. Overseer), and is therefore included in this core option.
The vast majority of New Zealand’s agricultural emissions of methane and nitrous oxide come from three sources:
• methane emissions from enteric fermentation;
• nitrous oxide emissions from animal wastes (manure); and
• nitrous oxide emissions from fertiliser use.
Computer models for estimating emissions from these sources already exist and would be available to any party tasked with developing the software necessary to run a VGGR (see Section 3). This will make it relatively straight forward to re-create the calculations required. In order to minimise costs we have therefore included these three emissions sources only.
Data requirements and data entry arrangements
The level of time and effort required of participants in the VGGR scheme is likely to have a significant impact on participation rates (refer Section 5). We have therefore based our core option on the assumption that the information required from participating farmers will be kept to a minimum; only that information needed to estimate each participants farm-level emissions (using the national inventory methodology) and to manage the VGGR system.
While our core option is based on the IPCC methodology, we also propose to include the requirement to enter local condition information (soil type and climatic information). The addition of this information will increase the data entry requirement for farmers but will significantly increase the accuracy of N2O estimates.
Some information variables (e.g. soil type) will require entry only once as they are unlikely to change significantly over the participation period. We have identified this information as ‘baseline’ and will require farmers (or their agents) to enter this information once only.
Based on these assumptions, farmers would need to provide the data listed below:
Participant information
• the name and role of the person submitting the information
• the name of the owner of the farm
• a farm identifier(s) (for example the valuation roll number, and/or the LINZ certificate(s) of title reference
• the farm address
• location (e.g. GPS or map coordinates)
Baseline information
Soil type – this information could be supplied by the individual farmer (e.g. data taken from representative paddocks on the farm) or taken from soil information held by Landcare.
Climatic factors (rainfall and temperature) - this information could be supplied by the individual farmer if available or taken from the nearest meteorological station (data held by NIWA).
Emissions information
Farmers would need to provide the following information to enable the system to estimate methane and nitrous oxide emissions. For each requirement listed below, farmers would be requested to enter specific information where this is available (e.g. average weight of mature adults by herd). However, it is possible that for some variables some farmers may not easily have access to this information. For data requirements that may not be readily available or easily calculated at the individual farm level (for example diet characteristics) default options would be provided to allow a farmer to enter alternative information. Conversion factors built into the model would then convert the information entered into the required entry information. For example, for diet characteristics, a menu choice of options describing the makeup of the diet (good quality pasture, maize, silage etc) may be offered as a default, and entry of this information then automatically calculates a figure for diet characteristic based on built in conversion factors.
Also, farmers would be requested to report information by monthly variables, but options would be provided to report annual figures if monthly figures are not available.
Methane
• Animal numbers – minimum requirements are annual totals at a specific point (could be taken from June census/survey) broken down by age, sex and reproductive state (use categories in June census/survey). It would be preferable if animal numbers were available at a monthly time scale to avoid having to construct monthly population models.
• Performance characteristics (weight of mature adults, weights at slaughter of growing animals (can be carcass weight), annual milk yield of dairy cattle (information to be provided by average for group e.g. herd), including timing of important events e.g. average calving date, average lambing date, average slaughter date. These data need to be provided at a minimum on an annual basis. As with animal numbers monthly data would avoid the need to construct monthly models of animal weight etc.
• Diet characteristics (digestibility, metabolisable energy content)20 – needed on a monthly basis; values can be taken from individual farm feed analyses or default values can be assumed.
Nitrous Oxide
• All of the above plus
• Diet characterisation to obtain a representative N content of the diet; this is available nationally as an annual average at present but more accurate estimates will result from the use of monthly data
• Quantities of fertiliser applied and quantities of manure applied (not wastes directly deposited by animals) and date of application
• Quantities of nitrification inhibitors applied and date of application.
Information entry
Participants would be required to enter this data annually, through electronic submission in a standardised template. Due to the low internet connection speeds experienced by many farmers, the system should be designed to allow this data entry to be undertaken either:
• online;
• by downloading a software programme containing all entry fields required by the model, filling in the required fields and submitting the file when completed; or
• by downloading a manual form, filling it in, and submitting it by post or email when ready.
Due to possible slow internet connection speeds, the internet pages and downloadable templates should be kept simple, and as small as possible.
Where a farmer has farming operations in more than one area, we recommend that he/she be allowed to decide whether to submit a single return for all of their operations, or two or more separate returns.
Central database and calculation module
The calculation module will be stored centrally containing fixed inputs (such as emission factors) and formulae that are needed to estimate farmers’ emissions. This would ensure that participating farmers only need to enter data on their farming operations and could do so either manually or online. It would also make it easier to update the estimation methodology or inputs at a later date if necessary.
However, we also recognise the importance of enabling farmers to view how their data entry affects their total emission levels. We therefore propose that farmers are given the option of downloading software from the VGGR website, for automatic storage on their computer’s desk top. This will allow the participant to enter information over a period of time, view how their data entries affect their total emissions, then submit the information into the central database once satisfied that all data requirements have been met.
The IPCC methodologies for estimating methane and nitrous oxide emissions are shown in
Figures 6-2 and 6-3 below. Nitrous oxide emissions resulting from fertiliser applications are also fed into the IPCC methodology pathway model. As noted in Section 3 computer models already exist which undertake these calculations. It should therefore be relatively straightforward to build them into a new calculation module.
Figure 6-2 IPCC Methodology for Estimating Methane Emissions (Source: Ministry for the Environment, 2006)
Figure 6-3 IPCC Methodology for Estimating Nitrous Oxide Emissions (Source: Ministry for the Environment, 2006)
6.3.3 Reporting
Farmers
Participation levels will increase if the scheme is useful to participants. A key benefit identified in both the review of voluntary reporting systems in place internationally and incentives for farmers was the ability to build capacity in terms of estimation and mitigation technologies. We therefore recommend that the system be developed to enable farmers to access the following reports on-line:
• emissions at the level of: each participant’s farm or group of farms; each region of NZ; and the country as a whole
• the emissions of a participant relative to a benchmark of the best, worst, or average level of emissions per hectare in the relevant region, or nationally
• emissions through time
• individual emission sources, or total emissions
• individual GHG gases or total emissions of all gases
For those farmers who choose to download the software themselves and enter the information into the downloaded module, the reports identified above, will be available for them to review at any stage during their entry process and following submission of their module into the central database.
At a minimum, participants would need to be able to generate onscreen data reports with these types of information. However, our software development experts’ analysis suggests that the cost of providing more sophisticated reporting functionality, such as the ability to prepare graphs and download the underlying data onto the viewer’s computer, would be relatively modest at around $15,000. Given that the ability of users to access data and benchmark their emissions is one of the key benefits offered by a VGGR, we recommend that this more comprehensive reporting functionality be provided.
For confidentiality reasons we also recommend that only the farmer concerned, and the relevant government agencies, would be able to access reports at the individual farm or farm owner level.
Regional data would be provided only in relation to minimum sample sizes to protect the anonymity of other participants.
Public
In order to preserve business confidentiality, the public would only be able to view reports at a regional level, and would not be able to view an individual farm or farm owner level report.
Government
The administering government agency would have access to data at an individual farm level. Other relevant government agencies (such as the Ministry for the Environment) would have access to the data at the farm level if required (e.g. to contribute to verification of IPCC estimations) however this data would be anonymous and would not be identifiable against a specific farmer or farm unit. All other government agencies would have access to the regional average data only. The confidentiality of farm level information would require assessment in terms of the Official Information Act during the design stage.
Verification
MAF have requested that VGGR options include a system for auditing the reports of on-farm emissions, including options for contracting this activity to third parties.
We recommend that MAF adopt two methods for identifying errors in the data submitted. The first method is aimed at reducing the level of data entry errors made by farmers. We recommend that MAF require the software developers to build a series of basic data checks into the data submission forms used by farmers, which would immediately identify any clear inconsistencies between the different pieces of data entered. Where different aspects of the data provided appeared inconsistent, farmers would be prompted with a warning message and asked whether the data is in fact correct.
In addition we recommend that MAF audit the returns of a small, fixed proportion of scheme participants each year. The purpose of these audits would be to identify any more systemic problems with data collection and any deliberate mis-reporting. If errors are found, the administrative agency would be able to amend the data in question, or if necessary, delete the farmer’s entry for the year in its entirety. These audits could possibly be undertaken by the same people engaged to provide technical on-farm assistance (see 6.3.8 below).
Technical assistance will be important for ensuring adequate participation by farmers in the VGGR scheme, and in helping participants to meet their reporting obligations and reduce their greenhouse gas emissions more generally. We recommend that this assistance be provided in a number of ways:
• web-based technical instructions and a set of questions and answers to act as a first port of call for participants facing technical difficulties
• a toll free, phone based help desk
• a number of farm consultants trained in the use of the system that could visit participating farmers to:
– address any problems around data collection and data entry
– educate and inform participants about their emission levels (in absolute terms and relative to their peers)
– advise on the causes of GHG emissions and possible mitigation measures
– advise on nutrient management / budgeting and options for improving farm productivity
• the provision of occasional seminars and workshops open to all scheme participants that address options for improving nutrient management and reducing greenhouse gas emissions (again run by selected farm consultants)
Farmers would also be free to engage their own agents or consultants to assist them in meeting their requirements under the scheme.
We recommend that MAF contract out the provision of the phone-based help desk service. It is likely that the organisation that wins the tender to develop the overall VGGR system will be well placed to provide that help desk service. We therefore recommend that MAF require tenderers to submit bids for providing a help desk service as part of their overall tenders, but that MAF retain the option of using a different provider if that appears likely to be more cost effective.
We also recommend that the specialist agricultural assistance be provided by a team of government funded, designated farm consultants based around the country, who have received training on use of the VGGR system and ways of reducing GHG emissions more generally. It is likely to be most cost effective to contract with existing, independent farm consultants to provide this service. Our preliminary analysis indicates that on-site farm visits would involve a 2-3 hour engagement with the farm, and travel time, making each consultation a half day exercise. A network of consultants around the country would be needed to minimise travel times. By our estimation this would require a minimum of 12 agents in the North Island and 8 in the South Island. These consultants could also be required to assist farmers to collect specific farm level information required for baseline information entry, e.g. soil type and climatic factors.
Seminars and workshops would also provide a useful adjunct to on farm consultations. Such events can help to:
• raise awareness, and thereby help to encourage farmer engagement
• explain the concepts and science behind agriculture sector GHG emissions and
• develop the modelling and reporting capability within the rural community.
Experience would suggest that in addition to participating farmers, these seminars and workshops be targeted at the people who advise and influence farmer behaviour, such as the rural press and broadcasters, consultants and the servicing sector.
To protect the accuracy of the data in the system, it will be necessary to require each participating farmer to apply for a secure logon and password to enter or amend data. They would also need to be logged on to access reports with information on their individual farm, or farms.
It will therefore be necessary for MAF to provide administrative support for the system. This would involve tasks such as registering new users, resetting passwords, maintaining the information required to operate the system (such as security permissions), and updating and deleting information stored in the database.
In addition, it is likely that MAF will want to undertake activities to promote the scheme (refer Section 9), and staff may occasionally need to travel in relation to the establishment and operation of the scheme.
6.3.4 Co-location with NZEUR
The Ministry of Economic Development (MED) currently hosts around ten different registries, including the NZ Emissions Unit Registry (NZEUR). This section describes the potential benefits and costs of utilising the software application and/or infrastructure arrangements put in place for the NZEUR21.
Software
The registry software used by the NZEUR was developed by an American company, Perrin Quarles Associates (PQA). The system provided by PQA is based on an emission allowances trading system (EATS) originally developed for the U.S. Environmental Protection Agency. That system has been used by the EPA in America to run its NOx and and SO2 trading systems, and more recently by the UNFCCC Secretariat to run its Clean Development Mechanism (CDM) Registry.
The NZEUR advise that the software developed by PQA is unsuitable for the purposes of an agriculture sector VGGR without substantial modification. The software does not currently have the capacity to: store data on farm practices (as opposed to emissions); estimate emissions from other data stored in the system; allow online data entry by users; or allow users to access online reports. Further, the NZEUR software contains many functions relating to the operation of an emissions trading system that would not be needed for a VGGR (such as the ability to store information on permits as well as emissions; and the ability to reconcile emissions against permit holdings and remove permits from individuals accounts). There is unlikely to be any clear benefit in seeking to modify the existing NZEUR software, instead of commissioning the development of a new bespoke VGGR system.
Consideration should also be given to the any benefits of ensuring that the system used to run the VGGR is capable of transferring emissions data to the emissions registry, and if so to stipulate that requirement in its tender documents.
Infrastructure and Systems
As noted, MED runs a number of different registries in addition to the NZEUR. We understand that MED provides a number of the administrative functions supporting these registries jointly, rather than individually for each registry. For example there is one help desk (based in Christchurch) which provides phone assistance for all of the registries, and one ‘revenue team’ which undertakes basic background checks on participants where necessary (such as ensuring they are not bankrupt and do not have any outstanding tax debts).
More generally, even where functions are provided separately for each registry, such as system administrator roles, the economies of scale of providing more than one registry allow MED to manage its human resources more effectively. This is especially important where a task for each individual registry would require substantially less than one full time equivalent position.
For these reasons, we recommend that MAF consider placing some or all of the administrative functions associated with operating a VGGR within MED.
6.3.5 Compatibility with E-Govt. initiative
The E-government Strategy sets out the government’s approach to transforming how public service departments use technology to deliver services, provide information, and interact with people, as they work to achieve the outcomes sought by government.
The E-government vision (at November 2006) is:
New Zealanders will be able to gain access to government information and services, and participate in our democracy, using the Internet, telephones and other technologies as they emerge.
The use of technology will enable a transformation of government as the operation of government is transformed by government agencies and their partners using technology to provide user-centred information and services and to achieve joint outcomes. Further, people's engagement with the government will be transformed as increasing and innovative use is made of the opportunities offered by network technologies.
This report recommends the use of web and email-based user interfaces to allow participants to input data and request information. As such our recommendations are fully consistent with the E-government vision.
The E-Govt. website sets out both mandatory and discretionary requirements for public service departments (State Services Commission, 2005). At this stage, there is nothing in core design that would prove incompatible with the checklist. It should be noted that the core design provides high level indicative information only while the checklist provides much lower-level information that would typically be included within a detailed requirements specification. If the government decided to pursue a VGGR, the next stage of the process would be to provide a complete and detailed list of functional and non-functional requirements for the system. The functional requirements would describe how the system will behave at a detailed level, while the non-functional requirements describe the kind of information provided in the checklist. For example, detailed requirements might specify that the system should be compliant with NZ e-GIF standards or more importantly, which of the specific standards should be adhered to based upon the functional content. The output from the detailed requirements analysis would then feed into the next stage of the process and allow a detailed design to be produced along with an accurate cost analysis.
6.4 Likely uptake by farmers of core VGGR option
This section contains an assessment of the likely uptake by farmers of the core VGGR option using the assessment framework outlined in Section 5.5. The information provided in this section is based on the professional experience and knowledge of the AgriBusiness Group, a sub consultant to the project team. The project team did not consult directly with farmers to complete this section.
Table 6-1 below indicates that in the absence of a financial incentive, incentives for farmers to participate in the core VGGR option are largely limited to the provision of information the VGGR will provide to a farmer around their emissions profile and mitigation opportunities. The core VGGR option largely avoids most of the possible disincentives for farmers to participate.
The majority of farmers in New Zealand are owner / operators. A very high level of concentration of their time and thought goes into operational activities with some time in managerial and very little time in strategic thinking. Any activity, technology or practice that has little to do with operational or managerial thought processes therefore has little chance of coming into the decision making framework of farmers without strong external drivers.
Overall, it would appear that the incentives that do exist would not be strong enough on their own to create a high uptake. Based on knowledge of the farming industry and assessment of similar programmes (e.g. DairyBase and nutrient budgeting), farmer uptake of the core scheme would therefore be expected to be between 1 to 5% of potential participants.
Table 6-1 Assessment of drivers for uptake of core VGGR option
| Subject | Key Questions | Comment | Assessment* |
|---|---|---|---|
| Possible incentives | |||
| Financial incentives | Do any financial incentives exist for a farmer to participate (e.g. an emissions trading regime?) | Not currently | X |
| Demonstrate stewardship | Does the VGGR enable a farmer to both increase and demonstrate an increase in on farm stewardship? | No (certification and auditing provided but no branding/advertising etc). | X |
| Respond to market | Does the VGGR provide an ability to respond to market concerns around climate change? | No | X |
| Protect baseline emissions | Does the VGGR allow a farmer to record emissions baselines and subsequent reductions to protect early reducers against future emission allocations? |
With regard to the use of nitrification inhibitors only | ½ X |
| Provision of information | What information is provided to farmers about their emissions, mitigation opportunities and offset ability? | Emissions profile, information about mitigation provided by roving technical advisors. No offset information. | ü |
| Ability to improve nutrient management or productivity | Does the VGGR provide a co-benefit in terms of the ability to also manage nutrients or improve productivity? | No nutrient budgeting capability. Could improve productivity indirectly, but no specific capability. | X |
| Ability to use third parties | Can a farmer use a third party to collect, model or enter information (as required)? | Yes | ü |
| Increase understanding | Does the VGGR provide information in such a way that through participation, farmers will be better able to understand the science of greenhouse gas emissions and reductions? |
Yes | ü |
| Possible disincentives | |||
| Mitigation opportunities | Do opportunities exist for a farmer to mitigate emissions? | Currently mitigation limited (e.g. nitrification inhibitors , feed pads) | ½ X |
| Direct costs | Will a farmer have any direct costs (e.g. purchase of a computer)? | Farmers would have minimal direct costs as most would already own a computer and have internet access. | ü |
| Time and effort | How complex are the data input requirements? | Simple, with options to use emission factors if required. | ü |
| Does the system provide a farmer with flexibility around the level at which he/she can report (i.e. entity level or whole business level?) | Yes, can submit a single report for all operations or separate reports for each. | ü | |
| Is a farmer required to report a full set of information every year, or do requirements decrease in subsequent years and/or does the frequency of reporting decrease? | Use of baseline information means information requirements decrease. Frequency of reporting does not decrease. | ½ ü | |
| Perception of reduced competitiveness | Will the VGGR enable others to access individual farm level information potentially reducing an individual farmer’s competitiveness? Is confidentiality ensured? | No | ü |
| Suspicision about motives | Is the government being clear information about the current and future use of the system? | Suspicious about motives as no clear decision on purpose of VGGR. | X |
*ü indicates a positive influence on farmer uptake
X indicates a negative influence on farmer uptake
Indicative cost of developing core VGGR option
IT sub consultants Fronde developed an indicative cost estimate for developing and operating the recommended core VGGR option. The cost figures provided by Fronde are based on high level scheme requirements, and it has been necessary for Fronde to make assumptions in order to derive those estimates. The cost figures should therefore be seen as indicative only. Detailed analysis will be required before more accurate cost information can be provided, which we recommend be undertaken during the procurement process. Appendix A contains a copy of Fronde’s report. We have summarised the costs below in this section.
6.4.1 Establishment costs
One off software licence costs
With the exception of the user interface, Fronde considers that a number of technology options are possible for developing a VGGR system. The various options are, by and large, cost neutral from a financial perspective. The choice of platform is therefore likely to be driven by MAF’s technology history, preferences, standards and desired future direction. Table 6-2 provides a summary of technologies that will fulfil MAF’s high level requirements.
Table 6-2 Platform architecture options
| Component | Implementation Options |
| User interface (what the users see) | HTML. HTML is generally used to provide web user interfaces. |
| Programming Language | Microsoft .NET or Java. Either programming language can fulfil the non-visual part of the business requirements. |
| Web and Application server | This is where the user, using an Internet Browser, would submit requests. Good, free and security conscious implementations of these are available and will satisfy your requirements. |
| Database | Microsoft SQL Server Standard Edition or Oracle Standard Edition or any other entry-level enterprise database system. |
Fronde recommend that the core VGGR option uses a large vendor’s entry-level database such as Microsoft SQL Server Standard Edition or Oracle Standard Edition. Smaller free database systems are available. Supporting smaller databases may be more expensive in terms of support, performance tuning, backup and recovery as less people are experience in using these smaller systems. Table 6-3 below provides a summary of the likely licence costs of acquiring suitable software.
Table 6-3 One-off software licence costs
| Component | Cost |
|---|---|
| HTML There is no license cost associated with this component. HTML Interfaces are also generally cheaper to build than other options. |
$0 |
| .NET or Java. There is no license cost associated with these languages. Both have merits and can be more or less cost effective for different reasons. Choosing one would be best done after further analysis. |
$0 |
| Microsoft SQL Server Standard Edition or Oracle Standard Edition. There are additional support costs per year that have been included in the ‘Cost of ownership’ section below. |
*$9,000 |
| Operating System Licences | **$3,500 |
* Indicative cost based on Microsoft SQL Server Standard Edition. Oracle Standard Edition is approximately the same price.
** Based on Windows Server 2003 Standard Edition licenses for two servers.
Development costs
The following table provides a breakdown of the total estimated development cost. The software development effort has been estimated in most detail, and is used as the base value. The other activities are expressed as a relative percentage of that software development effort, based upon standard industry figures. These development costs are based on a review of the algorithms contained within Overseer.
It is important to note that the actual costs for these other activities will vary on a project-by-project basis. The effort figures shown here are used only as a method of calculating an indicative cost, and do not constitute a project plan or measure the elapsed time it would take to implement a system of this nature.
Table 6-4 Software development cost
| High-level Project Task | Percentage of project | Days Effort |
|---|---|---|
| Analysis and Design | 25% | 72 |
| Software Development | 40% | 115 |
| System Testing | 30% | 86 |
| Implementation (Delivery) | 5% | 15 |
| Sub Total | 288 | |
| Project Management | 10% | 29 |
| Total | 317 | |
| Taking a blend rate of $1200 a day to calculate the overall development project cost. | $380,000 | |
Other establishment costs
We have costed the development of a VGGR on the assumption that the system, once up and running, will be hosted by an appropriate organisation. As noted, this requirement could be included by MAF in the broader contract to develop the VGGR system.
This approach negates the need to purchase physical hardware, other than one or two internet enabled computers needed for MAF to undertake its administrative role. We have estimated this cost at $3,500 per computer.
6.4.2 Ongoing costs of ownership and operation
Hosting and licence costs
As noted, we have costed the development of the VGGR on the assumption that the system will be hosted by a suitable external organisation (e.g. Ministry of Economic Development). This negates the need to purchase physical hardware, other than one or two internet enabled computers needed for MAF to undertake its administrative role. However, if MAF preferred it could undertake this role internally for a broadly equivalent cost.
The indicative hosting and licence costs are set out in Table 6-5 below.
| Requirement | Cost per Year |
|---|---|
| Hosting | $50,000** |
| Database license support ~20% | $2,000 |
* reflects the on going costs of hosting, supporting and licensing the system
**Indicative cost for two virtual servers hosted externally. This includes helpdesk and maintenance support.
Technical assistance costs
We have recommended (see Section 6.3.8) that technical assistance be provided through a number of farm consultants trained in the use of the VGGR system. We also recommended that MAF organise occasional seminars and workshops, open to all scheme participants. We would envisage these seminars also being run by farm consultants.
We consider that it is likely to be most cost effective for MAF to provide this technical assistance by contracting with existing farm consultants, rather than attempting to employ suitable staff directly. MAF could enter into an agreement with a number of consultants in different regions around the country, paying for the work they undertook providing technical assistance to VGGR participants, and for any training they needed.
We anticipate that the costs of providing technical assistance would be in the order of $170,000 for the first year with an ongoing per annum cost of $100,000.
We have derived this figure as follows:
• We consider that farm visits by accredited farm consultants would need to involve a 2 to 3 hour engagement. This would mean that each visit would effectively be a half day exercise (from office to office). It would be necessary to have accredited agents in the majority of the major rural servicing centres in New Zealand. We therefore estimate that a minimum of 12 agents would be required in the North Island and 8 in the South Island creating a minimum total of 20 agents.
• We have assumed that all agents would be required to attend a three day centrally provided training exercise to gain accreditation. We have assumed that all of the costs associated with that accreditation process would be met by the scheme. On that basis direct agent training costs would most likely be around $3,500 per farm consultant, leading to an overall accreditation cost of $70,000.
• We estimate that the cost per visit is likely to be around $500, based on 4 hours per visit
• We have assumed that up to 200 visits would be required per year (based on each of the 20 agents carrying out 10 visits)
These figures are summarised in Table 6-6 below.
Table 6-6 Costs for technical assistance
| Component | Cost |
|---|---|
| Agent training | $70,000 |
| 200 visits per year @ $500/visit | $100,000 |
| Total | $170,000 |
Staff costs
As discussed, we have costed the development and operation of the VGGR on the assumption that MAF would contract out the hosting of the system, and would provide the technical assistance required through the use of independent accredited farm consultants.
As a result MAF would only need to provide the core administrative service in-house. Drawing on the experience of MED in providing its range of registry services, we consider that this is likely to require only around half a full time equivalent staff position. We estimate the cost of providing that half time position at $30,000. This does not include further policy development costs.
Other administrative costs
It is very difficult to predict what other administrative costs MAF might face in running a VGGR scheme at this early stage. But it seems likely that MAF would want to undertake some form of promotional activity, and may need to travel in relation to the establishment and operation of the scheme. Drawing on the budget for the NZEUR, we recommend that MAF set aside an indicative budget of $20,000 for publicity and promotions, and a further $10,000 to cover travel and basic office costs such as phone costs, photocopying services, and postage.
The core VGGR option would provide MAF’s requirements of:
• A registry to receive reports for farmer’s emissions
• A system for auditing the reports of on farm emissions, including options for contracting this activity to third parties
• A system to report emissions from individual farms or aggregations of them, to farmers, government and the public
• A system to provide advice to farmers to help them with operating the VGGR system and to enable them to reduce emissions
The core option requires farmers to collect information on their farming operations and annually enter this data online or via email. A central database and calculation system would calculate emissions at a farm level and enable farmers to access this information.
The scope of the core option is limited to methane emissions from enteric fermentation and nitrous oxide emissions from animal wastes and fertiliser application. Farmers would be required to collect information on animal numbers, performance characteristics and diet characteristics.
The central database and calculation module would be based on the existing IPCC methodology for estimating methane and nitrous oxide emissions from agriculture, with updates included to allow for inputs of farm level information for nitrous oxide calculations.
The system would enable farmers to access emissions at their farm level, New Zealand regions and the country as a whole. The system would also provide benchmarking information, individual or total emissions sources, individual GHG or total gases and data on farm management practices provided by other farmers.
The system would be verified via annual audits of a small fixed proportion of scheme participants. Technical assistance would be provided via a help desk, web based instructions and roving technical advisors.
Benefits to farmers are limited to capacity building and the ability to benchmark performance. Direct costs to farmers would be relatively low but time would be required to collect and input the data. Based on uptake of similar programmes in New Zealand and the potential benefits and costs to farmers we anticipate that only 1-5% (450-2,250) of New Zealand farmers would participate in this option.
Table 6-7 summarises establishment costs to government of implementing the core system. These costs are expected to be in the order of $470,000.
Table 6-8 summarises costs to government of operating the VGGR, expected to be in the order of $162,000-$212,000. Note that annual operating costs referred to in Table 6-8 provide only $30,000 for administration costs for MAF staff and $20,000 for publicity and promotion. Section 7 outlines indicative consultation costs. Other costs to MAF may include costs involved in the tendering process, overall project management required to establish the VGGR system.
We stress that the cost estimates provided here are indicative, ‘ball-park’ estimates only. It will not be possible for MAF to develop more robust estimates until further more detailed policy work has been undertaken, and the detailed requirements of the system have been developed. These cost estimates were mostly derived from advice by Fronde, and by drawing on MED’s experience in establishing the NZEUR.
Table 6-7 Estimated establishment costs for core scheme
| Item | Estimated Cost |
|---|---|
| Initial (one-off) software licence costs | $12,500 |
| Software Development | $380,000 |
| Computers (for Administrative Functions) | $7,000 |
| Training of Initial Tranch of Technical Advisors | $70,000 |
| Total | $470,000 |
Table 6-8 Estimated annual operating costs
| Item | Estimated Cost |
|---|---|
| Hosting of System (incl. phone based help desk) | $50,000 |
| Ongoing Licence Costs | $2,000 |
| Technical Assistance Visits (assuming 100 – 200 visits per year) | $50,000 - $100,000 |
| Administrative Staff | $30,000 |
| Publicity and Promotion | $20,000 |
| Other operating expenses | $10,000 |
| Total | $162,000 - $212,000 |
6.5 Design options and their cost implications
This section outlines additional VGGR design options and describes these options in terms of variations to participation, scope and data requirements and entry arrangements. A description of the likely impact of each variation on farmer’s likely uptake and costs to government is provided.
6.5.1 Participation
Delegation of responsibility to a third party
The government could choose to encourage or contract with another key organisation in the agriculture sector, such as Fonterra, to establish and operate the VGGR system. The advantage of this option is that it would reduce, and possibly remove entirely, the establishment and ongoing operational costs facing the Crown. A key agriculture sector agency such as Fonterra might also be able to encourage greater levels of participation.
The change of status of the promoter of the scheme from government to an industry organisation would increase uptake by farmers because there would be less suspicion about the possible motives of the promoter and potential future use. Farmers tend to respond better to industry good motives rather than national public good motives, particularly where there is potential conflict between the two. Uptake would be further increased if the promoter combined the existing benefits of the scheme with a method to respond to market signals around climate change (e.g. promotion of participant achievements through branding).
However, by ceding control of the VGGR scheme to another party, the government might lose confidence over the accuracy of the information provided through the scheme. This option might also limit how the information provided through the scheme could ultimately be used, for example a future regulatory system.
Farm block or paddock level reporting
The government could choose to further ‘future proof’ the system by designing it with the capability to be expanded to allow separate reports for different farm blocks or paddocks. This would require the system to have the capacity to store an even greater number of records. It would also require modification to the data entry modules (as some data would remain consistent across all paddocks) and the ability to link different reports from a single farm together.
This option would provide greater flexibility to farmers and improve the quality of feedback to farmers who selected this option, potentially increasing farmer uptake.
This option would only impose a moderate cost increase on the software development task – in the region of $15,000. In addition, the extra volume of data arising from a greater number of reports could lead to increased hosting costs. However, the size of that impact is not possible to estimate at this early stage.
Direct participation incentives
The government could also provide direct participation incentives to farmers to encourage greater levels of participation. These incentives could take the form of:
• direct financial payments
• other incentives, for example payment by government for technical advisors to take soil samples to provide specific farm information
• participants receiving exemptions from other climate change policies
• participants historic emission reductions efforts being recognised when applying policies in the future (such as when deciding how many permits to allocate to individual farmers under a tradable permit regime)
The impact of any incentives to engage on uptake levels would depend on the design and nature of the incentive. Exemptions and recognition of historic reduction efforts would be expected to greatly enhance uptake levels as farmers would see that it is in their own personal interests to be involved in that activity in order to secure any personal advantage that could result. Direct financial payments would probably have little impact as time is the potentially limiting resource rather than finance.
The primary cost impact of this option would lie in the financial cost to the government of providing the incentive. If the incentive was very successful, this option could also lead to increased hosting costs. It is not possible for us to assess the likely cost impact of this option at this early stage.
Maximisation of market benefits
The government could also help to maximise indirect ‘market’ incentives to participate by establishing a scheme certification regime and branding system. This would ultimately allow farmers to market their product as being more environmentally friendly.
Considerable further work would be needed before deciding to pursue this option. Most importantly it would be necessary to assess whether the act of participating in a VGGR scheme would be enough to establish an effective ‘green brand’. The Australian Greenhouse Challenge Plus programme provides participants with recognition for their reductions through the use of Challenge Plus logos and marketing material. Participants note that this is key driver for their participation (Section 4). Further review of work done internationally (including Greenhouse Challenge Plus) would be useful in this regard, particularly with relation to costs to governments, market perception and resulting impact on uptake. It is not possible for us to assess the likely cost impact of this option at this early stage.
Expansion to other sectors
In the longer term the government may also want to expand the VGGR scheme to include GHG emissions from completely different sectors, such as manufacturing. This would almost certainly require the reporting of different types of data (e.g. CO2 from industrial activities) in addition to increasing the number of participants in the scheme.
It is very difficult to determine what changes to the VGGR system this would require in the absence of a clear understanding of the types of sectors that might be included, and the numbers of participants that are likely. A high level cost estimate of the changes required to the core design, to provide flexibility to allow for the addition of capability to enable other sectors to report is in the order of a 50% increase to the development cost of the core system.
6.5.2 Scope
More accurate estimation methodology
The government could choose to increase the accuracy and completeness of the GHG emission estimates provided through the VGGR system by:
• including a greater number of agriculture sector emission sources (such as the burning of crop residues and tussock)
• including farm’s indirect emissions (such as through electricity and fuel use)
• adopting a more detailed, and therefore more accurate, estimation methodology than currently required by the IPCC for the national inventory.
The first and second changes outlined above would require more farmer inputs and a more complex calculation module. They would also require additional output reports.
The degree of complexity of data requirements could have a negative impact on uptake unless greater value of feedback or output information resulted from it.
It is not possible to estimate the likely cost impact of these changes at this early stage. However, it is likely that those costs would be relatively substantial. Equally importantly, there is a clear risk that the requirement to provide a greater number of inputs could lead to reduced participation rates by farmers.
Choice of estimation methodology
The government could also consider giving farmers a choice over the estimation methodology used to calculate their emissions; giving them flexibility over the number of data inputs they provide (for example as currently provided in the Voluntary Reporting of Greenhouse Gases (Section 4.2.2). This would require the calculation module to include several estimation approaches and have the ability to switch between them as appropriate, increasing complexity. Costs to provide additional estimation methodologies are expected to be in the order of $48,000 per additional methodology.
Incorporate nutrient budgeting
One obvious option in this area would be to give farmers the choice of including all of the data inputs and calculations used in the existing Overseer® model, so that the VGGR could be used for nutrient budgeting purposes as well as for estimating farm-level GHG emissions. In addition to a greater number of inputs, this would require a more complicated calculation module (although an existing model already exists which could be used to develop the new model from) and more complicated reporting arrangements.
The dual capability of the register would add significantly to uptake rates as nutrient budgeting is a much more attractive exercise for farmers in terms of positive drivers. It may be that the register could actually be promoted as a means of calculating and verifying a nutrient budget with greenhouse gas reporting as a secondary benefit.
Fronde estimates that this option could add an extra 5%-10% ($16,500 - $33,000) to the cost of developing a VGGR. Given this cost and the extra reporting burden this option would place on participating farmers, and the fact that the existing Overseer model is already freely available, we question whether there is sufficient benefit to warrant expanding the VGGR to include the full Overseer functionality.
An alternative option would be to add the VGGR capability on to the current Overseer model. This would require redesign of the model to add in the GHG data entry requirements, and modifications to the Overseer model (which is stand alone) to link it up with the central database and calculation module. Costs for this option are likely to exceed costs for development of a new model.
Reporting of emissions reduction projects only
Another option would be to give farmers the right to only report specific emission reduction ‘projects’ rather than the full set of data required to estimate their overall level of emissions. These projects would fall into two types:
• ‘offset’ or ‘sink’ activities; such as tree planting
• ‘mitigation’ activities; such as improved waste management practices
This second project reporting option might prove attractive to farmers wanting to ensure that any efforts they took to reduce emissions would be recognised if the sector was subject to broader climate change controls at some stage in the future. Reporting emission reduction projects only allows a farmer to do this while at the same time minimising data input requirements (i.e. farmers are not required to report all their emissions information, only information required around emission reduction projects)
Fronde’s analysis suggests that this option could be implemented for around $50,000.
6.5.3 Data requirements and data entry arrangements
Third party data sources
The government could choose to design the VGGR system so that some of the data required could be collected from existing third party sources and databases, such as Fonterra, the LIC and the national soils database. The obvious benefit of this option is that it would help to reduce the size of farmer’s reporting obligations. The downsides are that it would make it impractical to hold farmers accountable for the accuracy of all of the data used to estimate their emissions, and that it could make the data reporting process more complex.
It is not possible to cost this option at this early stage; however it is unlikely that this option would reduce costs.
Reduced regularity of reporting
The government could choose to reduce the regularity of participants’ reporting requirements to once every 2 or 3 years. This might be attractive to farmers, as it would reduce their reporting burden. However, this option would not impact on the cost of developing the system, would only have a modest impact on the ongoing hosting costs, and may reduce the level of benefit in terms of capacity building, farmers would receive through participation.
Data entry could also be reduced by the system bringing up the last return and prompting farmers to update the form with changes. This would reduce farmer effort but may mean farmers would be tempted to re-submit old information instead of providing updated information.
6.6 Summary of VGGR design options
A number of VGGR design options exist that would deliver different outputs to the core option. Each option has implications on cost or likely farmer uptake.
Options around participation that are likely to increase farmer uptake include delegation of responsibility for the system to a third party (i.e. industry driven rather than government driven), provision of direct incentives and maximisation of market benefits.
In terms of changes to scope, an ability to allow farmers to complete nutrient budgeting and GHG emission estimation would increase uptake, as would an ability to report specific emission reduction projects (e.g. tree planting).
Allowing a third party to enter information, reducing the regularity of reporting requirements and improving the information feedback to farmers are all also likely to result in increased uptake.
It is not possible to assess cost implications for each option; however options that would increase cost to government include the option to allow reporting by farm block, allowing a choice of estimation methodology, incorporating a nutrient budget ability, allowing reporting of specific emission reduction and improving information feedback to farmers. Increased costs for each of these are listed in Table 6-9 below and are expected to be in the range of $15,000-$50,000. These cost estimates are indicative only.
Table 6-9 Estimated establishment costs for optional additional functionality
| Item | Estimated Cost |
|---|---|
| Participation Options | |
| Delegation to third party | Unknown but reduction in cost likely |
| Allow report by farm block | +$15,000 |
| Direct participation incentives | Unknown but increase likely if successful |
| Maximisation of market benefits | Unknown |
| Expansion to other sectors | Unknown |
| Scope Options | |
| More accurate estimation methodology | Unknown |
| Allow choice of estimation methodology | +$48,000
(for each additional methodology) |
| Incorporate full functionality of Overseer model into VGGR | +$16,500 - $33,000 |
| Allow reporting of specific emission reduction projects only | +$50,000 |
| Data Requirements and Entry Options | |
| Third party data sources | Unknown |
| Reduced regularity of reporting | Unknown but expected to be minor |
| Provide modelling facility | +$15,000 |
20 Performance characteristics & diet characteristics are available nationally at present
21 The information provided in this section is based on a telephone conversation with Tony Offord, NZEUR, March 2007
Contact for Enquiries
Sustainable Land Management and Climate Change
MAF
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 CLIMATE (254 628)
Contact this person
