Comparing Social Costs of the Conventional Rice Production System and System of Rice Intensification: A Case Study of Indonesia

Abstract

The rice production process generated negative environmental exter­nalities. These externalities were considered as a cost and not accounted by mar­ket price and the economic value of externalities was indefinite. The objective of this study was to calculate and internalize negative externalities costs into pro­duction costs of the System of Rice Intensification and conventional rice produc­tion system. The quantities of externalities measured in this research were CH4, N2O, SO2, NOx, and PM10. This research used Life Cycle Analysis (LCA), damage cost approach, and social costs concept. This research was conducted at Dlingo Village in Boyolali District, Central Java Province. The results showed that the private cost per kg unhulled rice was 1,529 IDR and damage cost was 9 IDR/kg. Social costs of producing 1 kg unhulled rice was 1,539 IDR or 9.60 million IDR/ha/season. SRI’s farmers received net social benefit 18.04 million IDR/ha/season. Considering that the target of extended area for SRI in 2015 was 200,000 ha, the government could receive environmental benefits 44.51 billion IDR. The benefits can be obtained through world carbon trading process and used as incentives for organic farmers.