Beyond the price tag: The hidden cost of rice in the Philippines

Rice is commonly perceived as an expensive staple food in the Philippines. However, market prices often exclude substantial environmental and social externalities generated during production.

Building on Teodoro C. Mendoza’s 2021 True Cost Accounting (TCA) study of Philippine rice production, this paper reassesses whether rice remains “expensive” when climate, water, ecosystem and other hidden costs are incorporated into its economic valuation.

Using the U.S. Environmental Protection Agency’s updated Social Cost of Carbon (SCC) estimate of $190 per metric ton of carbon dioxide for 2020 emissions and adjusting it to approximately $239 per metric ton of CO2 in 2026 values, the analysis recalculates the societal cost of conventionally and organically grown rice.

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The results suggest that while consumers in October 2026 pay approximately ₱49.79 per kilogram for regular milled rice in Philippine markets, the true societal cost of conventionally produced rice may reach ₱446 to ₱516 per kilogram, or roughly nine to 10 times the observed retail price.

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Organic rice systems, although requiring more farm management, have substantially lower societal costs of approximately ₱231 per kilogram.

These revised estimates remain conservative because biodiversity loss, pesticide-related health impacts, groundwater contamination and long-term soil degradation are still incompletely quantified.

The paper challenges conventional notions of affordability and shows that society absorbs the hidden costs of chemically intensive rice production through environmental degradation, climate damage and future economic losses.

The real price of a staple

Rice occupies a unique place in Philippine society. It is not merely a commodity but the country’s principal staple food and a foundation of food security policy.

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Consequently, public debate frequently focuses on keeping rice prices affordable for consumers. Government interventions often emphasize imports, tariff policies, subsidies and price stabilization mechanisms intended to reduce the retail price of rice.

However, an important question remains largely unaddressed:

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Is rice truly expensive, or does it appear cheap because its market price conceals significant costs borne by society?

Traditional economic accounting measures only private production costs and market transactions. This framework excludes many environmental and social damages generated during cultivation, including greenhouse gas emissions, excessive water use, ecosystem degradation, biodiversity loss and adverse health impacts.

These unpriced consequences represent economic costs transferred from producers and consumers to society at large.

In his 2021 study, True Cost Accounting of Rice Production Systems in the Philippines, Mendoza introduced a TCA framework for Philippine rice production and found that conventional rice production imposes societal costs far exceeding market prices.

Since that study was completed, significant developments have occurred in climate economics, particularly the revision of the Social Cost of Carbon by the U.S. EPA. These updates warrant a re-estimation of the societal cost of rice in the Philippines.

This paper updates Mendoza’s calculations to 2026 values and evaluates whether rice remains economically affordable when its full societal cost is considered.

What the market price leaves out

In its Price Situationer of Selected Agricultural Commodities for the first phase of October 2026, the Philippine Statistics Authority reported a national average retail price of ₱49.79 per kilogram for regular milled rice.

To most consumers, this appears relatively affordable. A family purchasing 20 kilograms of rice monthly spends approximately ₱996 a month.

However, the retail price represents only the monetary price paid at the point of sale. It does not account for:

• methane emissions from flooded rice fields;
• nitrous oxide emissions from synthetic fertilizers;
• depletion of freshwater resources;
• ecosystem degradation;
• declining biodiversity;
• public health impacts from agrochemical exposure; and
• future climate damage.

These costs are externalized rather than eliminated.

In The Economics of Climate Change: The Stern Review, published in 2006, economist Nicholas Stern described climate change as the greatest market failure in human history because major environmental damages remain unpriced. Rice production exemplifies this phenomenon.

Mendoza’s 2021 study compared conventional, chemically intensive rice production with organic rice cultivation using a total cost accounting approach.

The study estimated the following societal costs:

Conventional rice, 2021 prices

Component	Cost per kilogram
Market cost	₱37
Social Cost of Carbon	₱161-₱196
Water footprint	₱69
Ecosystem service loss	₱15
Total	₱282-₱317

Organic rice, 2021

Component	Cost per kilogram
Market cost	₱28
Social Cost of Carbon	₱75
Water footprint	₱34.50
Ecosystem service loss	₱15
Total	₱152.50

The study found that the societal cost of conventional rice was approximately twice that of organic rice.

Mendoza also noted that biodiversity and health costs were not fully incorporated, suggesting that the estimates were conservative.

A major change since 2021 has been the revision of the Social Cost of Carbon.

In its 2023 Report on the Social Cost of Greenhouse Gases: Estimates Incorporating Recent Scientific Advances, the U.S. EPA identified a central SCC estimate of $190 per metric ton of CO2 in 2020 dollars using a 2% discount rate.

The figure is substantially higher than older SCC assumptions used in many previous studies.

After adjusting the EPA estimate to 2026 purchasing power, the SCC rises to approximately $239 per metric ton of CO2 in 2026 dollars.

Using an exchange rate of approximately ₱60.60 per U.S. dollar, this corresponds to about ₱14,500 per metric ton of CO2.

Compared with Mendoza’s original SCC benchmark of roughly $120 per metric ton of CO2, the revised 2026 SCC is nearly double. Consequently, climate damages attributed to rice production increase substantially.

Applying the updated SCC multiplier yields the following revised societal costs:

Conventional rice, 2026

Cost component	Cost per kilogram
Market cost	₱41
Carbon cost	₱321-₱391
Water cost	₱69
Ecosystem cost	₱15
Total societal cost	₱446-₱516

Organic rice

Cost component	Cost per kilogram
Market cost	₱31
Carbon cost	₱150
Water cost	₱34.50
Ecosystem cost	₱15
Total societal cost	₱231

These figures indicate that conventional rice production generates substantial hidden costs that are not reflected in market transactions.

The disparity between the market price and societal cost is striking.

Measure	Conventional rice
Retail price, 2026	₱49.79/kg
True Cost Accounting estimate	₱446-₱516/kg

The midpoint of the TCA estimate, ₱481 per kilogram, is about 9.66 times the 2026 retail price of ₱49.79 per kilogram.

Thus, the retail price paid by consumers represents only about 10% of the midpoint of the estimated true societal cost.

In economic terms, rice may appear cheap only because future generations, taxpayers, ecosystems and public health systems absorb the majority of its production costs.

The costs absorbed by nature and society

Conventional agriculture receives what may be termed “ecological subsidies.”

These subsidies are not paid by governments but by natural systems. Examples include atmospheric absorption of greenhouse gases, groundwater extraction, soil nutrient depletion, biodiversity loss, destruction of pollinator habitats and degradation of aquatic ecosystems.

Because these damages are not billed directly to producers, rice remains artificially inexpensive in the marketplace.

If producers were required to pay the full ecological cost of their emissions and resource use, the price of conventional rice would be about 9.66 times higher, based on the midpoint of the TCA estimate.

The revised estimate of ₱446 to ₱516 per kilogram remains incomplete.

The U.S. EPA notes in its 2023 report that Social Cost of Greenhouse Gas estimates do not capture all climate damages. Mendoza’s framework likewise did not fully monetize biodiversity and health impacts.

Biodiversity costs include:

• decline of beneficial insects;
• reduction of bird populations;
• loss of aquatic organisms in rice paddies; and
• deterioration of soil microbial diversity.

Health costs include:

• pesticide poisoning;
• chronic neurological exposure;
• endocrine disruption;
• health care expenditures; and
• lost labor productivity.

International True Cost Accounting studies have also examined the external costs of food and agricultural production.

The Economics of Ecosystems and Biodiversity initiative’s 2018 report, Measuring What Matters in Agriculture and Food Systems, addressed the environmental and social costs associated with food systems.

The United Nations Food and Agriculture Organization likewise examined hidden agrifood system costs in its 2023 report, The State of Food and Agriculture 2023: Revealing the True Cost of Food to Transform Agrifood Systems.

Including health and biodiversity damages would likely raise the societal cost of conventionally produced rice even further. A conservative estimate suggests total costs could exceed ₱500 to ₱600 per kilogram of rice.

RELATED STORY: ‘Food Nationalism’: The politics of what Filipinos eat

Why organic rice may cost society less

Organic rice systems produce substantially lower external costs because they generally require fewer synthetic fertilizers, have lower fossil fuel dependence and agrochemical use, generate lower greenhouse gas emissions, and improve soil biological activity.

Although organic rice often commands a higher market price, its societal cost remains considerably lower.

The updated estimate of approximately ₱231 per kilogram represents less than half the societal cost of conventional rice.

This finding supports a fundamental conclusion:

Higher market prices do not necessarily imply higher social costs.

Indeed, organic rice may be economically cheaper from society’s perspective despite appearing more expensive to consumers.

Rethinking what ‘affordable’ rice means

The findings have profound implications for Philippine food policy.

Current policy largely focuses on reducing visible consumer prices through imports and market interventions. However, such measures do not address the hidden costs embedded in production systems.

Policy reforms should include:

1. Adoption of True Cost Accounting in agricultural planning.
2. Incentives for low-emission rice production.
3. Expansion of organic and regenerative farming systems.
4. Monetization of environmental externalities in policy appraisal.
5. Payment for ecosystem services.
6. Investments in methane-reducing rice technologies.
7. National accounting frameworks incorporating environmental depreciation.

Without such reforms, low rice prices may simply represent the transfer of costs from consumers today to society tomorrow.

When cheap rice comes at a higher cost

The evidence suggests that rice in the Philippines is not truly cheap.

While consumers currently pay approximately ₱49.79 per kilogram for regular milled rice, updated True Cost Accounting estimates indicate that conventionally produced rice imposes societal costs of approximately ₱446 to ₱516 per kilogram.

These values are roughly nine to 10 times greater than the observed market price.

The principal driver of this discrepancy is the underpricing of environmental externalities, particularly greenhouse gas emissions, water use and ecosystem degradation.

Updating Mendoza’s 2021 framework with the U.S. EPA’s revised Social Cost of Carbon substantially strengthens the conclusion that conventional rice production relies on hidden environmental subsidies.

Organic rice systems have significantly lower societal costs of approximately ₱231 per kilogram, even before accounting for additional ecosystem benefits.

Consequently, future food policy should move beyond narrow concerns about retail affordability and incorporate broader societal costs into economic decision-making.

The apparent affordability of rice is largely an accounting illusion. Society ultimately pays the difference through climate change, environmental degradation, biodiversity loss and public health impacts. /dm

About the author

Teodoro C. Mendoza is a retired professor and scientist at the Institute of Crop Science, College of Agriculture and Food Sciences, University of the Philippines Los Baños in Laguna.

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The was based on a paper prepared for the 2nd Regional Sustainable Organic Food System Conference, with the theme “Scaling Sustainable Organic Food Systems through Soil Health, Biodynamics/Organic, Farmer-Led Innovations and Policy Institutionalization,” scheduled for Nov. 18-20, 2026.