Environmental, Economic, and Social Consequences of the Oil Palm Boom

Abstract

Rising global demand for vegetable oil during the last few decades has led to a drastic increase in the land area under oil palm. Especially in Southeast Asia, the oil palm boom has contributed to economic growth, but it has also spurred criticism about negative environmental and social effects. Here, we discuss palm oil production and consumption trends and review environmental, economic, and social consequences in different parts of the world. The oil palm expansion has contributed to tropical deforestation and associated losses in biodiversity and ecosystem functions. Simultaneously, it has increased incomes, generated employment, and reduced poverty among farm and nonfarm households. Around 50% of the worldwide oil palm land is managed by smallholders. Sustainability trade-offs between preserving global public environmental goods and private economic benefits need to be reduced. We discuss policy implications related to productivity growth, rainforest protection, mosaic landscapes, land property rights, sustainability certification, and smallholder inclusion, among others. Expected final online publication date for the Annual Review of Resource Economics, Volume 12 is October 5, 2020. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

The environmental impacts of palm oil in context

“…1 ), 204 Mha of extra land, or nearly six times as much, would be required. This simple calculation glosses over nuances of substitutability 93 or differential yield increases among crops, but illustrates the magnitude of differences between land needed by oil palm and other oil crops 94 .…”

New evidence regarding the effects of contract farming on agricultural labor use

“…Here, we investigate the effects of contracts between large processing companies and smallholder farmers on agricultural labor use, including household labor and hired labor, in Ghana's palm oil sector. This is an interesting empirical example, because international palm oil companies are increasingly investing in Africa, so that the search for socially‐inclusive business models is important from a rural development policy perspective (Byerlee, Falcon, & Naylor, 2017; Qaim, Sibhatu, Siregar, & Grass, 2020).…”

“…This situation is now gradually changing. In South East Asia, the land for future oil palm expansion is limited and production growth increasingly conflicts with tropical rainforest conservation objectives (Qaim et al., 2020). Hence, to meet the further rising international demand, palm oil companies have also started to invest in Africa.…”

The environmental impacts of palm oil in context

“…If, the addition instead all came from soy, yielding about 0.7 tons of oil per ha 1 , 179 Mha of extra land, or nearly six times as much, would be required. This simple calculation glosses over nuances of substitutability 93 or differential yield increases among crops, but illustrates the magnitude of differences between land needed by oil palm and other oil crops 94 .…”