COMPARING SOCIAL COSTS OF CONVENTIONAL RICE PRODUCTION SYSTEM AND SYSTEM OF RICE INTENSIFICATION: A CASE STUDY OF INDONESIA

Transcription

1 COMPARING SOCIAL COSTS OF CONVENTIONAL RICE PRODUCTION SYSTEM AND SYSTEM OF RICE INTENSIFICATION: A CASE STUDY OF INDONESIA Mohamad Maulana Indonesian Center for Agricultural Socio Economics and Policy Studies (ICASEPS), Indonesian Agricultural Agency of Agricultural Research and Development (IAARD) iyanz2004@yahoo.com

2 Outline: Background Objective and research questions Conceptual framework Study site Data analysis Input-Output inventory and farming cost structure GHSs and non-ghgs emission calculation Damage cost Social cost estimation Policy recommendation

3 Background Agriculture Development focus on increasing rice production. 2013: Basic Strategy of Agriculture Development : sustainable agriculture One of programs: System of Rice Intensification (SRI) Began 2001, in 2013 total organic certified area: 0.02% Support SRI implementation Economic benefits Social costs Internalize externalities

4 Objective and RQs Objective: to compare the social costs of the System of Rice Intensification (SRI) and conventional rice farming system for producing 1 kg unhulled rice. RQ: are the social costs of producing 1 kg unhulled rice using SRI higher than those for conventional rice farming? SRQs: 1. How high are the private production costs for producing 1 kg unhulled rice using SRI and conventional rice farming? 2. How high are the level and the damage cost of Green House Gases (GHGs) and non-ghgs emissions for producing 1 kg unhulled rice using SRI and conventional rice farming? 3. How high are the social cost of for producing 1 kg unhulled rice using SRI and conventional rice farming? 4. What policy recommendations can be offered to the Ministry of Agriculture Republic of Indonesia for expanding the area of rice fields using SRI?

5 Conceptual Framework Interaction between economic and environment Agricultural Farming Policy Conventional Rice Production System System of Rice Intensification (SRI) Production Cost Life cycle Assessment (LCA) Production Cost Negative Environmental Externalities Negative Environmental Externalities Damage Cost Approach (DCA) Externalities Cost Externalities Cost Social Cost Social Cost Comparison Policy Recommendations

6 Data Collection Seeds, Fertilizer, Pesticides, Herbicide, Insecticide Production Fossil Fuel Machines, SRQ 1: How high are the production costs for producing 1 kg unhulled rice using SRI and conventional rice farming? Input Output (Quest.) Fuel Use Labors Price & wages Production Cost Revenue Benefit Seeds Inorganic Fertilizer: Urea, SP-36, KCl, NPK, Others. CH 4 and N 2 O Emissions Organic Fertilizer Production Processes 1 kg unhulled rice Pesticide, Herbicide, Insecticide, Thresher Transportation Tractor SO 2, NO x and PM 10 Emissions

7 Data Collection 1 ha 1 ha R I V E R 3 springs SRQ 2: How high are the level and the damage cost of Green House Gases (GHGs) and non- GHGs emissions for producing 1 kg unhulled rice using SRI and conventional rice farming? ±1 ha ±1 ha LCA Field Observation: Closed Chamber Method Laboratory test Damage costs (literature) Conventional Area 1 Farmer Group 91 Members 50 respondents Irrigation SRI Area 1 Farmer Group 73 Members 50 respondents

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9 Data Collection SRQ 3: How high are the social costs of for producing 1 kg unhulled rice using SRI and conventional rice farming? Social costs = Private/Production cost (SRQ1) + Damage costs (SRQ2) S1 = real cost S2 = all labor as cost Net Private Benefit S3 = S1 + cattle manure as cost Net Social Benefit S4 = S2 + cattle manure as cost SRQ 4: Policy recommendations

10 Data Analysis and Study Site Input-output inventory, Profit: π = TR TC Laboratory analysis: Concentration: CH4 and N2O (GHGs) for C0-35, C36-65, C65-95 Input & fuel use: SO 2, NO x, and PM 10 (non-ghgs) x Emission Factors Calculate Flux: F = dc dt x h x mw mv x ( T ), mg/m2 /day Estimate Emission: Egas = F0 35+F36 65+F66 95 Ls N x H N x ( 10000m2 ), kg/ha/season kg X damage costs, social cost and benefits. Study site: Dlingo village in Boyolali district, Central Java Province, Indonesia

11 Input-Output inventory and farming cost structure (1) Input use per ha No. Type of input SRI Conventional Unit Vol Price/Unit Value Vol Price/Unit Value 1 Seeds kg 34 8, , , ,000 2 Organic Fertilizers kg 3, Chemical Fertilizers: N (Urea) kg 259 2, ,243 P2O5 (SP-36) kg 1 2,200 2, , ,810 K2O (ZA) kg 224 2, ,524 NPK kg 193 2, ,132 Others kg 1 3,000 3,000 4 Chemicals Rp 278,346 5 Gasoline liter 15 7, , , ,926 Total 398,022 3,103,981

12 Input-Output inventory and farming cost structure (2) Labor cost per ha Items SRI Conventional Hours spent Wage per hour Total Hours spent Wage per hour Total Total 1,113 8,573,883 1,087 3,722,171 All labors as cost 1,113 10,287 11,449,802 1,087 10,287 11,182,331

13 Input-Output inventory and farming cost structure (3) Other cost per ha No. Type of other costs Unit SRI Conventional 1 Land Tax IDR 78, ,626 2 Bag IDR 181, ,023 3 Needle and thread IDR 28,731 57,572 4 Pump IDR 124,636 === 5 Others IDR 152, ,658 Total IDR 565, ,879

14 Input-Output inventory and farming cost structure Production: SRI = 6.24 tonnes/ha, Conventional 6.57 tonnes/ha Price: SRI = IDR/kg, Conventional = 4,333 IDR/ha Revenue: SRI = million IDR/ha, Conventional = million IDR/ha Profit: SRI = 18.1 million IDR/ha, Conventional = 21.0 million IDR/ha.

15 GHSs emission estimation mg/m 2 /day Pollutants Flux's category SRI Conventional F CH 4 F F F N 2 O F F

16 GHSs emission estimation kg/ha/season SRI Conventional Type of GHGs Emission CO 2 Equivalent Emission CO 2 Equivalent CH N 2 O

17 Non-GHGs emission estimation No. Sources of non-ghgs emission Chemical Fertilizers: The use of inputs per kg unhulled Emission Factors rice produced Unit SRI Conventional Unit SO 2 NOx PM10 N kg g/kg P 2 O 5 kg g/kg K 2 O kg g/kg NPK kg g/kg Gasoline MJ g/mj Diesel MJ g/mj

18 Non-GHGs emission estimation Type of non-ghgs SRI Conventional Emission H + Equivalent Emission H + Equivalent SO NO x PM

19 Damage costs No. Pollutants Damage Cost for UK ( /kg) 1) Adjusting Factors 2) GDP/cap ratio Population Density Ratio Damage Cost for Indonesia (IDR/kg) 1 CH N 2 O SO , NOx PM ,617.84

20 Damage costs Pollutants SRI Conventional SRI Conventional (IDR/kg) (IDR/ha) CH ,283 33,583 N 2 O , ,359 GHGs , ,942 SO ,132 71,549 NO ,066 PM ,342 Non-GHGs ,609 96,958 Total (GHGs + Non-GHGs) , ,899

21 Social cost estimation No. Items SRI Conventional (IDR/kg) (IDR/ha) (IDR/kg) (IDR/ha) 1 Private Cost S1: Real Cost 1, ,537,697 1, ,419,031 S2: S1+All Labor as cost 1, ,413,616 2, ,879,191 S3: S1+Cattle Waste as cost 2, ,534,637 1, ,078,659 S4: S2+Cattle waste as cost 2, ,410,556 2, ,538,819 2 Damage (External) Cost 9 58, ,899 3 % damage cost to Private Cost S1: Real Cost S2: S1+All Labor as cost S3: S1+Cattle Waste as cost S4: S2+Cattle waste as cost Social Cost S1: Real Cost 1,539 9,596,060 1,173 7,699,930 S2: S1+All Labor as cost 2,000 12,471,979 2,308 15,160,090 S3: S1+Cattle Waste as cost 2,019 12,593,000 1,273 8,359,558 S4: S2+Cattle waste as cost 2,481 15,468,919 2,408 15,819,718

22 Social cost estimation SRI Conventional No. Items (IDR/kg) (IDR/ha) (IDR/kg) (IDR/ha) 5 Revenue 4,433 27,639,755 4,333 28,480,809 6 Benefit Net Private Benefit (5)-(1) S1: Real Cost 2,903 18,102,058 3,204 21,061,778 S2: S1+All Labor as cost 2,442 15,226,139 2,069 13,601,618 S3: S1+Cattle Waste as cost 2,423 15,105,118 3,104 20,402,150 S4: S2+Cattle waste as cost 1,961 12,229,199 1,969 12,941,990 Net Social Benefit (5)-(4) S1: Real Cost 2,894 18,043,695 3,162 20,780,879 S2: S1+All Labor as cost 2,433 15,167,776 2,027 13,320,719 S3: S1+Cattle Waste as cost 2,413 15,046,755 3,061 20,121,251 S4: S2+Cattle waste as cost 1,952 12,170,836 1,926 12,661,091

23 Conclusions Production cost: System of Rice Intensification: 1,529 IDR/kg or 9.54 million IDR/ha. Conventional system: 1,128 IDR/kg or 7.42 million IDR/ha. The production cost of SRI is higher than conventional system due to the higher use of outside family labor that caused SRI farmers should pay total labor cost 2.3 times higher than conventional farmers.

24 Conclusions The quantity of CH 4 and N 2 O emission: Reduce CH 4 emission from 31.5 kg/ha/season to 18.9 kg/ha/season or 21.4%. Decrease N 2 O emission from kg/ha/season to kg/ha/season or 79.9%. The quantity of SO 2, NOx and PM 10 emission: Conventional system: , and kg/ha/season SRI system produced: , , and kg/ha/season

25 Conclusions Damage cost of CH 4 and N 2 O emission: Conventional system: 5 IDR/kg and 24 IDR/kg. SRI: 3 IDR/kg and 6 IDR/kg. Damage cost of SO 2, NOx and PM 10 emission: Conventional system, , and IDR/kg. SRI: , , and IDR/kg Total damage cost of GHGs and non-ghgs of producing 1 kg unhulled rice by applying SRI is 9 IDR/kg unhulled rice or 75.1% lower than implementing a conventional system (44 IDR/kg unhulled rice). Converting to 1 ha, the total damage cost of practicing SRI is 58,363 IDR/ha, however, by implementing conventional system, the total damage cost could reach 280,899 IDR/ha.

26 Conclusions The social cost of producing 1 kg unhulled rice: System of Rice Intensification: 1,572 IDR/kg unhulled rice. Conventional system : 1,289 IDR/kg unhulled rice. By counting all labors used in a production system as costs (S2), SRI s social cost is lower than conventional system and SRI farmers benefit is higher. By including cattle waste as cost (S3), SRI s social cost is higher than conventional system and conventional farmers benefit (NPB & NSB) is higher. By internalizing all labor and cattle waste as cost (S4), SRI s social cost is lower than conventional system but SRI farmers net social benefit is higher (per kg).

27 Policy Recommendations The results of this study shows that: Production costs of organic practice (SRI) is higher than conventional practices. SRI is more environmentally friendly than conventional system in terms of producing CH 4, N 2 O, SO 2, NOx and PM 10 emissions. This research provides data and information about the economic benefit of implementing SRI and the government is recommended to provide incentive (subsidy) for farmers who implement organic practice or SRI. (1) creating a floor price for organic rice products; (2) developing domestic market; (3) providing a price subsidy; (4) agricultural machinery

28 Policy Recommendation No. Items Unit Value 1 Damage cost IDR/ha 280,899 2 SRI area 2015 ha 200,000 3 Total Damage Cost IDR 56,179,800,000

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