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Reconciling oil palm economic development and environmental conservation in Indonesia: A value chain dynamic approach

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

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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  • Purnomo, Herry & Okarda, Beni & Dermawan, Ahmad & Ilham, Qori Pebrial & Pacheco, Pablo & Nurfatriani, Fitri & Suhendang, Endang, 2020. "Reconciling oil palm economic development and environmental conservation in Indonesia: A value chain dynamic approach," Forest Policy and Economics, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:forpol:v:111:y:2020:i:c:s138993411930022x
    DOI: 10.1016/j.forpol.2020.102089
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    15. Dwi Prasetyani & Evi Gravitiani & Malik Cahyadin & Aulia Hapsari Juwita & Selfia Bintariningtyas, 2024. "Two Decades of Palm Oil Business - Environmental Quality Nexus: A Bibliometric Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 14(1), pages 290-300, January.
    16. Arya Hadi Dharmawan & Dyah Ita Mardiyaningsih & Faris Rahmadian & Bayu Eka Yulian & Heru Komarudin & Pablo Pacheco & Jaboury Ghazoul & Rizka Amalia, 2021. "The Agrarian, Structural and Cultural Constraints of Smallholders’ Readiness for Sustainability Standards Implementation: The Case of Indonesian Sustainable Palm Oil in East Kalimantan," Sustainability, MDPI, vol. 13(5), pages 1-20, March.
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