1.

INTRODUCTION
Rice is a main staple food for more than a half of the world population

(Gnanamanickam, 2009; IRRI, 2015). It is about 3 billion people depend on rice in 2015
and it is estimated 9 billion people will depend on rice by 2035 (IRRI, 2015). It also
means that rice production is important and any possible threat on rice production will
affect a lot of people around the world. For this reason, scientists has been attracted to
understand the impact of climate change on rice production.

Rice grows well near its optimum temperature (Yoshida, 1981), but it will
experience a lower yield when observed temperature is higher than its optimum
temperature. In other words, rice yields gradually increase up to their temperature
thresholds, but its yields tends to be lower beyond its temperature thresholds
(Ackerman & Stanton, 2012; Lobell & Lobell, 2010; Rosenzweig et al., 1996).

Since observed maximum temperature has closed to its rice threshold (Devkota,
2011) and observed minimum temperature has exceeded its rice threshold (Peng et al.,
2004; Welch et al., 2010) rice is highly vulnerable to climate change. Although a higher
concentration of carbon dioxide is associated with climate change, an increase of crop
yields associated with a higher carbon dioxide concentration is limited (Ackerman &
Stanton, 2012; Ainsworth, 2008; Lobell & Field, 2007; Tebaldi & Lobell, 2008), since
crops require other inputs such as nitrogen and water to support their photosynthesis.

Some studies have assessed the impact of climate change on crop across the
world. For example, some studies point out that an increase of temperature due to
climate change can decrease rice yields in some parts of the world such as South East
Asia South Asia and Southern Africa (Lobell et al., 2008; Lobell et al., 2011; Lobell &
Gourdji, 2012). Those studies also affirm that many crops such maize, rice and sorghum
are susceptible to the negative impact of high temperature, even the negative impacts

of temperature is more pronounced than that of precipitation (Lobell et al., 2008; Lobell
et al., 2011; Lobell & Gourdji, 2012).

Studies outlined above successfully identify the negative impact of climate change
on crop yields. But, those studies failed to combine production factors and climate in
estimating the impact of climate change on crop yields. The latter is important as
(Quiroga & Iglesias, 2009; Wang et al., 2012) claim that a statistical model combining
climate and factor productions can estimate the impact of climate more appropriately
and can show the relative importance of agricultural management and climate.

In the case of Indonesian rice, many studies claim that Indonesian rice is
vulnerable to El-Nino, because El-Nino could significantly reduce rainfall and delay the
monsoon onset (Naylor et al., 2001, 2002; Falcon et al., 2004; Naylor et al., 2007;
Naylor & Mastrandrea, 2009). Although IPCC (2013) projects that Indonesia is likely to
experience an increase temperature, studies about the impact of climate change on
Indonesian rice is limited. For example, Lobell et al. (2011) already estimated that
Indonesian rice yield had reduced between (0-5) percent by 2008. However, that study
(Lobell et al., 2011) fails to consider the different impacts of minimum temperature and
maximum temperature on rice. The latter is important as some studies (Lobell et al.,
2007; Lobell & Gourdji, 2012) claim that employing minimum and maximum
temperature is better than that of average temperature.

To best our knowledge, despite a lot of studies explaining the impacts of climate
change on crops, no empirical studies have employed any econometric method to
assess the impacts of climate change on Indonesian rice production. In particular, there
is unavailable econometric study estimating the impact of increasing temperature on
Indonesian rice production.

Therefore, the primary objective of this study is to obtain a statistical model

combining factor productions and climate in understanding the impacts of climate
change on Indonesian rice yields. This study is similar to existing studies (Lobell et al.,
2011; Lobell & Gourdji, 2012; Quiroga & Iglesias, 2009; Wang et al., 2012). But, this
study will apply a statistical model combining production factors, minimum and
maximum temperature in assessing the impact of climate change on rice yields.

To achieve the purposes of this study, three consecutive steps will be taken. Firstly,
estimating the impact of climate on rice yields using statistical models. Secondly,
projecting rice yields by embedding climate projections from CMIP 5 or the fifth
assessment report (IPCC, 2013) into statistical models. Thirdly, conducting sensitivity
analysis of the impact of climate change on rice yields.
One main caveat of statistical models in estimating the impact of climate change is
a linear interpolation of the impact of temperature on rice yields (Lobell & Burke, 2010).
Lobell and Burke (2010) suggest that the application of statistical models is still
beneficial if future temperature is higher as much as 1 0C than observed temperature.
Beyond that, statistical models may underestimate the impact of climate on rice yields.

To tackle this caveat, sensitivity analysis will be conducted on two following

methods. Firstly, estimating the impact of climate change rice yields using a statistical
model (Lobell et al., 2008; Lobell et al., 2011). Secondly, estimating the impact of
climate change rice yields using a statistical model and decrease rice yields about 10%
for every 10C increase of temperature (Peng et al., 2004; Zhang et al., 2014). A
comparison rice yields based on the two methods diverge will provide an assessment of
when the statistical model is still appropriate to measure the impact of climate change
(Lobell & Burke, 2010).

HOMEWORK_2