Can Indonesia continue to reduce palm oil deforestation?

In September, Trase held a webinar to launch the findings of its latest assessment of the links between deforestation in Indonesia and the production and export of palm oil, a commodity used worldwide in food, home and personal-care products.

The new data, which covers the period 2018-2020, shows there was an 82% reduction in deforestation over the past decade despite increasing palm oil production.

The webinar audience heard that Indonesia achieved the reductions through its implementation of zero-deforestation commitments (ZDCs) and public supply chain reporting. Although many palm oil companies in Indonesia have long had ZDCs, there was little evidence that they were leading to reductions in deforestation.

The new data shows that exporters with ZDCs have 70% of the deforestation risk per tonne of palm oil than companies without ZDCs. Three quarters of all palm oil exports are traded by companies that adhere to these standards.

“This is a really important result since it represents the first clear evidence of a link between zero-deforestation commitments and lower rates of deforestation on the ground,” said Dr Heilmayr. “Indonesia has really taken a leadership role in adopting these standards in a way that doesn’t exist in other globally traded deforestation-intensive commodities.”

Fastest growing markets source higher deforestation risk palm oil

However, Trase’s analysis reveals a split in the market. China has become the largest importer of Indonesian palm oil, accounting for 16% of exports in 2020 alongside India which has the same share. Domestic use of palm oil within Indonesia has also increased from 32% of production in 2018 to 40% in 2020.

Trase’s analysis shows that Indonesia, China and India source palm oil from supply chains with rates of per-tonne deforestation risk that are 2.4 times higher than those for export to the EU. This means that Indonesia, China and India together account for 61% of all of Indonesia’s deforestation risk.

Several smaller palm oil suppliers including KPN Corp, Astra Agro Lestari and Citra Borneo Indah have grown rapiding from less than 5% of exports to more than 10% in 2018-2020 by supplying China and India. However, they have not fully implemented their ZDCs with public traceability reporting and have a deforestation risk that is 1.7 times higher than average.

New measures needed to secure progress

Despite the overall reduction in land clearance, palm-driven deforestation is continuing at a rate of 45,285 hectares per year in 2018-2020, according to Trase. Two thirds of this is occurring in the Indonesian province of Kalimantan on the Island of Borneo. There has also been an alarming increase in deforestation risk in the province of Papua stemming from a near doubling of palm oil production in the region in 2018-2020.

“Indonesia’s forests are not yet out of danger – 2.4 million hectares of intact forest remain in existing palm oil concessions,” said Timer Manurung, Executive Director of Indonesian conservation group Auriga. “Forest-rich areas in Kalimantan, Papua, Aceh and Sulawesi will face pressure if production expands, especially if new mills are built in areas with fewer mills today.”

Timer said there was no legal protection for these forests. Indeed, they are often considered to be “abandoned areas” which can be cleared for plantations. He called for the Indonesian government to introduce financial incentives for local governments, palm oil companies, and communities including smallholder farmers to protect these forests.

A poll of the webinar audience on what additional measures are needed to continue progress towards zero-deforestation found that almost a third supported the introduction of incentives to protect forests. Just over two fifths of the audience thought that demand-side measures from China and India were needed, as the EU had proposed with its regulation to prohibit imports of commodities produced on deforested land.

“The data shows that the clear market signal from the EU’s demand-side legislation and ZDCs is associated with a reduction in deforestation intensity,” said Helen Bellfield, Deputy Director of Trase, “but there is still a question over what incentives the EU will introduce alongside its regulation.” She said the EU should support partnerships to strengthen the national Indonesian Sustainable Palm Oil (ISPO) standard, and local initiatives that strengthen policies and support the inclusion of smallholder farmers.

Read an Explainer of the key findings: Indonesia makes progress towards zero palm oil deforestation

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Watch a recording of the Trase webinar: Can Indonesia achieve deforestation-free palm oil?