Risks and opportunities from key importers pushing for sustainability: the case of Indonesian palm oil

Abstract

Growing concerns in the major importing countries on the socio-environmental sustainability of oil palm farming may affect the import demand of palm oil and hence the economy of the exporting countries. This paper develops a comparative static, partial equilibrium model to examine the impact of potential reductions in EU imports of Indonesia's palm oil on palm oil output, prices, factor markets, trade, deforestation, and peatland conversion in Indonesia. Results suggest that there would be only small impacts on the major environment-economic variables in Indonesia in a scenario with a moderate reduction EU import demand, for example, due to sustainability concerns. However, the impacts would be more profound if sustainability concerns also affect other import regions and trigger a similar decline in import demand in other markets. The way forward for Indonesia and other palm oil producers and exporters is to adopt a common set of sustainability criteria, encompassing the elements of transparency, regulatory compliance, best agricultural practices, environmental responsibility, the livelihood of small farmers, as well as human and community rights.

Effects of demand-side restrictions on high-deforestation palm oil in Europe on deforestation and emissions in Indonesia

“…Previous studies have examined the distal impacts of demand-side policies on palm oil production (e.g. Britz and Hertel 2011, Elliott 2015, Jafari et al 2017, Taheripour et al 2019, Hsiao 2021. However, these studies considered the effects of policies on palm oil in aggregate; they did not differentiate between highdeforestation and low-deforestation palm oil.…”

Selected Factors Influencing China's Palm Oil Import Demand from Malaysia

“…Turner & Buongiorno (2004) through the pooled OLS method also revealed that country's import demand is highly elastic toward price changes. As referred to Malaysia's closest competitor which is Indonesia a unit increase in its palm oil export price will turn down the export demand by 0.33 percent (Jafari, Othman, Witzke, & Jusoh, 2017). Thus, it proves that export is highly elastic toward price changes (Hussain, Hussain, & Alam, 2020).…”

Green consumer behaviour influences Indonesian palm oil sustainability

“…Improving structures will enhance technical economy, which will enable livelihoods and actors to improve palm oil sustainability. However, Jafari et al (2017) indicate that trade interventions, e.g., sustainable consumption, will be more profound when imposed in all importing countries. POPETS also modelled the impact of increasing trade interventions via institutions.…”