Reconciling oil palm economic development and environmental conservation in Indonesia

A value chain dynamic approach

Herry Purnomo*, Beni Okarda, Ahmad Dermawan, Qori Pebrial Ilham, Pablo Pacheco, Fitri Nurfatriani, Endang Suhendang

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Palm oil makes a significant contribution to the economies of Indonesia and Malaysia through private corporations, state-owned companies and smallholders, with the two countries supplying 85% of the global palm oil. Indonesia has 14 million hectares (ha) of oil palm; its palm oil exports were valued at USD 23 billion in 2017 and USD 21 billion in 2018. Both domestic and international communities, particularly the European Union (EU), have raised concerns about its sustainability and impact on forest conservation. For example, the European Parliament in 2017 issued a resolution to restrict the ability of EU countries to count palm oil-based biodiesel imports toward their renewable 2030 energy targets. This paper describes palm oil value chains in Indonesia at the national level, using value chain analysis and system dynamics modeling. The model is used to understand how the moratorium, peatland conservation, agrarian reform, and the EU biodiesel ban affect plantation expansion and production, employment, CO2 emissions, smallholder incomes, the private sector, and government. The model provides scenarios to make Indonesian palm oil more sustainable through intensification, no-deforestation, and no-peat strategies, as well as through land swapping. There are trade-offs between economic development and environmental conservation, but win-win solutions are available. Scenarios that build synergies between Indonesian palm oil development and forest conservation can help guide the new frontiers of oil palm development in Asia, South America, and Africa.

Original languageEnglish
Article number102089
JournalForest Policy and Economics
Volume111
DOIs
Publication statusPublished - Feb 2020

Fingerprint

value chain
Elaeis guineensis
palm oils
supply chain
economic development
Indonesia
conservation
oil
economics
European Union
scenario
biodiesel
European Parliament
agrarian reform
renewable energy
ban
synergy
smallholder
import
Malaysia

Keywords

  • Biodiesel
  • European Union
  • Palm oil
  • Smallholders
  • Sustainable development
  • Value chains

Cite this

Purnomo, Herry ; Okarda, Beni ; Dermawan, Ahmad ; Ilham, Qori Pebrial ; Pacheco, Pablo ; Nurfatriani, Fitri ; Suhendang, Endang. / Reconciling oil palm economic development and environmental conservation in Indonesia : A value chain dynamic approach. In: Forest Policy and Economics. 2020 ; Vol. 111.
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abstract = "Palm oil makes a significant contribution to the economies of Indonesia and Malaysia through private corporations, state-owned companies and smallholders, with the two countries supplying 85{\%} of the global palm oil. Indonesia has 14 million hectares (ha) of oil palm; its palm oil exports were valued at USD 23 billion in 2017 and USD 21 billion in 2018. Both domestic and international communities, particularly the European Union (EU), have raised concerns about its sustainability and impact on forest conservation. For example, the European Parliament in 2017 issued a resolution to restrict the ability of EU countries to count palm oil-based biodiesel imports toward their renewable 2030 energy targets. This paper describes palm oil value chains in Indonesia at the national level, using value chain analysis and system dynamics modeling. The model is used to understand how the moratorium, peatland conservation, agrarian reform, and the EU biodiesel ban affect plantation expansion and production, employment, CO2 emissions, smallholder incomes, the private sector, and government. The model provides scenarios to make Indonesian palm oil more sustainable through intensification, no-deforestation, and no-peat strategies, as well as through land swapping. There are trade-offs between economic development and environmental conservation, but win-win solutions are available. Scenarios that build synergies between Indonesian palm oil development and forest conservation can help guide the new frontiers of oil palm development in Asia, South America, and Africa.",
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Reconciling oil palm economic development and environmental conservation in Indonesia : A value chain dynamic approach. / Purnomo, Herry; Okarda, Beni; Dermawan, Ahmad; Ilham, Qori Pebrial; Pacheco, Pablo; Nurfatriani, Fitri; Suhendang, Endang.

In: Forest Policy and Economics, Vol. 111, 102089, 02.2020.

Research output: Contribution to journalArticleAcademicpeer-review

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AU - Purnomo, Herry

AU - Okarda, Beni

AU - Dermawan, Ahmad

AU - Ilham, Qori Pebrial

AU - Pacheco, Pablo

AU - Nurfatriani, Fitri

AU - Suhendang, Endang

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KW - Biodiesel

KW - European Union

KW - Palm oil

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