Voluntary Greenhouse Gas Reporting Feasibility Study
Executive Summary
ES 1 Introduction
The Ministry of Agricultural and Forestry (MAF) commissioned URS New Zealand Ltd (URS) and Firecone to complete a feasibility study of voluntary greenhouse gas reporting of agricultural emissions. This report contains the results of that study. Voluntary greenhouse gas reporting (VGGR) is the voluntary monitoring and reporting of agricultural greenhouse gas emissions at the enterprise (farm) level.
The objective of this study is to provide a technical evaluation of different VGGR options open to the government, and for each option, to investigate the cost implications, advantages and disadvantages and any implementation risks involved. This study does not provide a cost benefit assessment of a VGGR system against any stated government policy objective. However, MAF may use the results of this study to assess how a VGGR would meet policy objectives, compared to other policy options.
The project team completed this study in three phases. The first phase comprised investigation and context setting required to outline possible VGGR options. The next phase comprises the description of possible VGGR systems, and the costs and outputs of each system. The final phase comprises high level advice to government if they choose to implement a VGGR system and includes consultation guidance, risk identification and a suggested project plan for implementation.
ES 2 Agricultural Sector GHG emissions in NZ
Agriculture is responsible for almost 50% of New Zealand’s greenhouse gas emissions, with emissions forecast to increase. Agriculturally derived CH4 and N2O comprise 33% and 16% of current national C02e emissions. Enteric CH4 emissions account for 98% of all agricultural CH4 emissions and emissions from soils account for 99% of agricultural N2O emissions.
Emissions from agriculture have risen by approximately 1% per year since 1990. On a sectoral basis dairy and sheep are the biggest emitters, followed by beef cattle. Deer and non-ruminant animals (pigs, poultry and horses) are minor emitters.
Methane emissions arise primarily as a by-product of the fermentation of feed in the digestive tract of ruminants. The biggest single influence on emissions per animal is the quantity of feed eaten. Feed type and age also affect emissions per animal.
Nitrous oxide is released from soils in the nitrification/ denitrification process. The quantity of N deposited onto soils is the major determinant of N2O emissions. Soil type, form of N and environmental factors (temperature, rainfall) are also important drivers.
At present there are no mitigation technologies available to farmers to reduce CH4 emissions in a practical and cost effective manner. Individual farmers can influence emissions to a limited degree through individual management decisions that affect individual animal productivity and through the number of animals kept.
Experiments have shown that nitrification inhibitors can substantially reduce N2O emissions but costs are not conducive to extensive farmer uptake. Individual farmers can also influence emissions through a range of management practices e.g. drainage, liming, the use of stand off pads and reducing the
N content of diets although these mitigation practices are not easily captured in emission estimates. Individual farmers can influence estimated emissions through individual management decisions that affect individual animal productivity, since this affects N retention and excretion, and the number of animals kept.
To capture the main drivers of CH4 emissions, a VGGR system requires, as a minimum, to be able to estimate individual animal feed intake in some way and to record animal numbers. The breakdown of animals by age is desirable.
The minimum requirements for estimating N2O emissions are animal feed intake, N content of the feed and animal performance. It is highly desirable that soil and climatic information be incorporated into any estimation method as these have major effects on N2O emissions. As the use of nitrification inhibitors is the mitigation method that is best captured via estimates, it is essential that a VGGR records their use and has routines that quantify their impact.
ES 3 Estimating GHG emissions in NZ
Agricultural GHG emissions cannot be measured at the farm scale, they have to be estimated. The multiple influences on emissions and, in some areas, an incomplete understanding of the processes involved means that any emission estimates are subject to large uncertainties. Choice of estimation method selected for a VGGR will have to balance complexity with data requirements.
Emission factors derived from national emission estimates can be used on-farm but they are unsatisfactory since they offer little helpful information either to the farmer or to government.
New Zealand has a well developed national emissions methodology that can, if desired, form the basis of a farm scale recording system. Adapting the current national inventory model for use at a farm scale is a good option for CH4 given that the current method has the ability to incorporate individual management actions. Adapting the methodology for N2O may be less suitable because of the simplicity of the methodology approached compared to the complexity and multiple drivers of N2O emissions. However the inclusion of a more complex approach to estimating N2O emissions would be possible.
Farm scale models exist for other on farm purposes that could be adapted to predict GHG emissions at the farm scale. Overseer seems to be the most feasible existing model option for use at present since it has an animal component that is similar to the national inventory methodology and an N2O prediction routine that can go beyond the national inventory. It is also being used on farms now as a nutrient budgeting tool. However Overseer would require significant redevelopment to incorporate a central calculation model and database and would require updating to include new information and to simplify the interface. The DNDC (DeNitrification DeComposition) model is hampered by the lack of an animal component. The Dexcel Whole Farm Dairy Model has no soil routine and is restricted to dairy cattle only. The EcoMod model has both an animal and soil component but is restricted to single animal classes only and is more of a research model than an on-farm tool.
To provide a farm scale GHG emissions estimation method for the VGGR, consideration should be given to development of a new model based on the national inventory methodology or adaptation of the Overseer model. Both options are based on the national inventory method, make good use of existing data and could provide a simple interface.
ES 4 Greenhouse gas reporting systems in other countries
A number of voluntary greenhouse gas reporting systems exist internationally. The purpose of each system varies, but is typically to provide emitters with protection of current reductions against future policy initiatives and/or to allow emitters to receive public recognition for their achievements.
For each system, participation levels are low but are increasing. For the systems reviewed participations rates appear to represent approximately 10-15% of total emissions for that State/Country.
While most systems allow for reporting of non CO2 emissions from agriculture participation by agricultural emitters has been minimal. The specific reasons for low agricultural participation in each system have not been reviewed, however it may be related to the time and resource requirement required to estimate non CO2 agricultural emissions. Also there would be little incentive for agricultural organisations to participate in voluntary systems in the relevant countries (Australia, US, Canada) as their emissions would be minor compared to other industrial sources and the benefits of public recognition and capacity building would be less valuable.
A key benefit to participants results from the opportunity to use system resources to calculate emissions and understand mitigation opportunities. This allows participants to prepare for future policy provisions via capacity building and to report their achievements to the public. The international systems reviewed provided this information through a variety of methods including provision of manuals/protocols or online tools to estimate emissions, provision of information online or in publications on mitigation opportunities, creating opportunities for participants to learn from others (e.g. through seminars or publications of case studies on best practice) and/or by allowing participants access to technical advisors. If capacity building is a desired outcome of a NZ VGGR, the system should enable participants to understand the source of their emissions, mitigation methods and effects and be accompanied by adequate training and tools.
The four voluntary systems reviewed provide a range of opportunities for participants to receive recognition from the public for their achievements. This may occur through the use of logos and branding (e.g. Greenhouse Challenge Plus), by enabling participants to report on participation or achievements (e.g. in annual reports) and/or by requiring participants to report on their emissions, mitigation actions and resulting reductions. The opportunity to advertise participation and achievements appears to be a key driver for participants. If public recognition is a desired outcome of a NZ VGGR, the system should enable participants to report their participation to the public, via marketing and branding, participant statements, award schemes, and/or public access to reports.
Two programmes (Greenhouse Challenge Plus and California Climate Action Registry) include online calculation and reporting tools. Online tools simplify the reporting process for participants, provide opportunities for participants to quickly and accurately view their results (i.e. total emissions), and provide opportunities to improve integrity and security of inputs and results.
As participation by farmers in GHG reporting systems in other countries has been very low, careful consideration would be required to identify how to attract or incentive farmers to participate in a NZ VGGR system.
ES 5 Possible incentives and disincentives for farmers
A range of incentives and disincentives exist that will impact on the likelihood of a farmer participating in a VGGR.
Farmers may be incentivised if participating will provide them with information about their emissions, how to mitigate them and how to offset them. Farmers would be further incentivised if the information they receive delivers a co-benefit, for example the ability to improve productivity or nutrient management.
Farmers may also be incentivised if a VGGR system allows them to respond to market concerns over climate change or demonstrate stewardship, via promotion, advertising and verification.
Farmers may also participate if a VGGR system provides a mechanism to protect baseline emission levels against future allocation of emissions units in an emissions trading environment.
Farmers will be less likely to participate if it is difficult or time consuming to gather or input required information. This would occur if farmers are required to provide data they don’t already have access to, the system is complex, they are required to enter data for each farm (as opposed to data for a whole business), information reporting requirements are frequent (every year) and if they are required to collect and enter the information themselves and aren’t able to use a third party (e.g. an agent).
Farmers will be disincentivised if they are concerned about the confidentiality of their information and suspect participation would lead to loss of market competitiveness.
Farmers may not participate if they feel that the VGGR will lead to excessive government regulation or they are suspicious about the government’s motives behind VGGR.
The incentives listed would not appear to be strong enough on their own to outweigh the disincentives sufficiently to encourage a high participation in the VGGR. Incentives to participate would become much stronger if farmers operated in a policy or regulatory environment that penalised emissions and/or rewarded reductions, as the ability to estimate and therefore manage emissions would then become essential to avoid financial penalties.
Design of any VGGR system should aim to maximise incentives and remove disincentives. An assessment framework is provided in this report to assess likely farmer uptake of any particular VGGR system option.
ES 6 VGGR design options
MAF have specified that a VGGR should include the following elements:
• 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 VGGR option that would deliver MAF’s requirements at lowest cost to government could be described as a ‘core’ VGGR system. Variations of that system would cost the government more but would deliver different outputs both to farmers or the government.
In order to assess outputs and costs to government of VGGR options, URS and Firecone identified a possible core (lowest cost) VGGR option and variations to that option, and assessed costs and likely uptake by farmers of each.
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, diet characteristics and soil and climatic factors. Farmers would be able to provide baseline information that would require entry only once. Other information requirements would be annual.
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.
The New Zealand Emission’s Unit Registry (NZEUR) software is unsuitable for the purposes of an agriculture sector VGGR without substantial modification. 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. However, consideration should be given to any benefits of ensuring that the system used to run the VGGR is capable of transferring emissions data to the emissions registry. MAF may also wish to investigate whether it would be possible to place some or all of the administrative functions associated with operating a VGGR within the Ministry of Economic Development.
Benefits to farmers are limited to an ability to better understand their emissions and mitigation options and the ability to benchmark performance. Costs to farmers would be relatively low. 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.
The establishment cost to government of implementing the core system is expected to be in the order of $470,000. Annual operational costs are expected to be in the order of $162,000-$212,000.
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 protect emission reductions via reporting of specific emission reduction projects. 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 expected to be in the range of $15,000-$50,000.
ES 7 Consultation guidance
The New Zealand pastoral industry’s contribution to climate change is an emotive and political issue amongst the industry. Farmers are aware of the subject area but their attitudes and responses are not strongly formed and not always well-informed. With relation to a VGGR, farmers are liable to be influenced by the attitudes and responses of their industry leaders and spokespeople and will rely on advice from professional advisors and peers. We therefore recommend a staged consultation approach designed to engage leadership and influencers first (stage one) and, as feedback from them is received, refine the consultation approach to a point where it can be taken to the farming community (stage two). MAF may also consider forming a partnership with the leadership organisations to take the consultation to the farming community. We also recommend that MAF use the initial industry consultation stage (stage one) to confirm the feasibility of the VGGR and finalise the high level design requirements of the system prior to wide scale consultation with farmers.
The ideal approach for consultation on the VGGR system would be as part of consultation on a wider strategy for the pastoral sector on addressing greenhouse gas emissions and the issue of climate change.
Industry leadership will encompass industry political organisations and sector leaders, for example federated farmers, levy funded organisations, and processors and marketers. Consultation with industry leaders should be in the form of one to one discussions with key individuals within the organisations.
Industry influencers will include agricultural consultants, science information providers, the servicing sector and professional advisors such as accountants, bankers and other advisors. Consultation with industry influencers should be of a more general nature and should be carried out at group functions and field days that involve a wider range of group members.
Stage two consultation with farmers could be considered as bridging the transition between consultation and implementation of the VGGR and therefore will have elements of both consultation and early implementation activities. We do not believe that the VGGR system itself would promote sufficient interest to attract farmer attendance at consultation meetings. It would therefore be best to consult with farmers on this issue as part of normal group activity during other industry initiatives for example dairy discussion groups. The ability to show case the system on an example property would be an advantage at this level of consultation as it would take the concept from the abstract or conceptual level to the practical, increasing understanding and enabling improved feedback.
It will be important for MAF to ensure any time and resources are built into a VGGR project plan to enable adequate consultation and to make changes to the VGGR following each consultation round to improve farmer uptake.
ES 8 Risk identification and mitigation
Risks exist at all stages of the project including the design, procurement, engagement, and testing, resourcing, and operational phases. Key risks include a failure to maximise participation via design, inappropriate procurement processes leading to poor system delivery, inability to engage the industry, inadequate resourcing of promotion, consultation or operation of the system and unsatisfactory review and feedback processes. Mitigation measures exist for all risks identified. A more detailed risk assessment should be completed prior at project commencement.
ES 9 Project plan
Prior to commencement of any VGGR development tasks it will be necessary to prepare a project plan identifying specific actions required to implement the VGGR. These include consultation requirements, VGGR development, promotion of the system, provision of technical guidance and system operation. This report identifies key project plan requirements for the core VGGR option.
ES 10 Conclusion
The results of our work suggest that it is feasible for the government to develop and implement a voluntary greenhouse gas reporting system in order to estimate farm level agricultural greenhouse gas emissions. We estimate that the establishment cost of designing and building the core system would be in the order of $470,000, and the annual operation costs in the order of $162,000 - $212,000.
However, for any VGGR option, participation rates are unlikely to be high in the absence of other policy/regulatory initiatives that motivate farmers to reduce emissions. Careful consideration of the likely uptake by farmers is required prior to proceeding with a VGGR.
A VGGR system that is developed and implemented at lowest cost to government is unlikely to maximise participation rates from farmers. Variations to the system may increase participation rates but at increased costs to government. Careful consultation with industry and a well run procurement process will be important for: ensuring adequate participation by farmers; developing the scheme within the indicative budget; and securing the objectives sought by government. Regardless of variations to the system, participation rates may still be low in the absence of financial incentives.
Further assessment of the feasibility of a VGGR system should be completed following clearer identification of required government objectives for such a system.
ES 11 Limitations
URS New Zealand Ltd (URS) has prepared this report in accordance with the usual care and thoroughness of the consulting profession for the use of the Ministry of Agriculture and Forestry. It is prepared in accordance with the scope of work and for the purpose outlined in the Proposal dated
13 December 2006 and the letter from MAF to URS clarifying the project way forward dated
26 February 2007. The methodology adopted and sources of information used by URS are outlined in this report. URS has made no independent verification of this information beyond the agreed scope of works and URS assumes no responsibility for any inaccuracies or omissions.
This report was prepared between 14 December 2006 and 09 May 2007 and is based on the information reviewed at the time of preparation. URS disclaims responsibility for any changes that may have occurred after this time.
This report should be read in full. No responsibility is accepted for use of any part of this report in any other context or for any other purpose or by third parties. This report does not purport to give legal advice. Legal advice can only be given by qualified legal practitioners.
Contact for Enquiries
Sustainable Land Management and Climate Change
MAF
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 CLIMATE (254 628)
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