Does the oil palm certification create trade-offs between environment and development in Indonesia?

Environmental and social problems triggered by rapid palm oil expansion in the tropics have spurred the proliferation of sustainability certification systems such as the Roundtable on Sustainable Palm Oil (RSPO). While the RSPO aims to improve the impact of oil palm production on people and environments, its effect on local development, environmental quality, and especially potential trade-offs between socio-economic and environmental outcomes remain unclear. To address this gap, we evaluate whether RSPO certification of large-scale industrial concessions has promoted village development and supported environmental quality in Indonesia, the top global palm oil producer. Using a panel dataset with observations from 11,000 villages in Kalimantan and Sumatra from 2003-2014, we apply rigorous quasi-experimental methods to quantify the RSPO’s impacts on several village development and environmental outcomes. We find that, in the first few years after its implementation, relative to villages with non-certified concessions, on average, RSPO certification reduced deforestation and protected primary forests in Sumatra, lowered village-reported land pollution in Kalimantan and increased the number of private educational facilities in Kalimantan. We found heterogeneity in these effects across slope, a proxy for ecosystem fragility and oil palm profitability. On gentle slopes (<3°), certification reduced deforestation, protected primary forests in Sumatra, and reduced water and land pollution in Sumatra and Kalimantan, respectively. On steeper slopes (3-6°), certification was associated with relatively higher deforestation, fewer private educational facilities in Sumatra, but increased probability of a village having a health center in Kalimantan. Our finding that RSPO certification has heterogeneous effects across key indicators and physical geographies supports better understanding of the mechanisms behind such impacts. Specifically, the bargaining power of local communities and pressure from NGOs, and changes in population density due to migration. Understanding these mechanisms is a prerequisite for improving the design of certification systems and their impacts on the ground.