The Impact of Climate Change on Indonesian Rice and Coffee Sectors

Rice and coffee are strategic agricultural commodities in Indonesia. Rice is Indonesian main staple food and coffee is globally traded commodity that grown by Indonesian smallholders. There is growing concern regarding its production that sensitive to the change of temperature, rainfall and humidity. Therefore, it is important to conduct a study on the impact of climate change on rice and coffee production in Indonesia. The objective of the study is to assess the impacts of climate change on Indonesian macroeconomic performance and sectoral output. This paper using Computable General Equilibrium model with three simulations of productivity change under two climate scenarios of RCP 4.5 and RCP 8.5. Climate change that reduces rice and coffee productivity affects Indonesia's macroeconomic performance. Climate change will reduce real GDP, real household consumption and exports. On the other hand, climate change will increase Indonesia's imports. Changes in macroeconomic performance in all scenarios of RCP 8.5 are worse than scenario 4.5. It is identified that climate change poses a negative risk to the quantity and quality of rice and coffee output and has a spiraling impact on increasing domestic prices, hence decrease the competitiveness. Climate change also contributed to reducing real income of households particularly for agricultural workers, agricultural entrepreneurs and low-income households in urban areas. Government climate change adaptation policies for rice and coffee are very important to overcome the decline in productivity and production. In addition, government should develop financial support and risk management system targeted towards vunerable groups affected by climate change.