The new data shows that exporters with zero-deforestation commitments, consistently sourcing with 70% of the per metric ton (t) deforestation risk of their competitors.
“This is the first clear evidence of a link between zero-deforestation commitments (ZDC) and lower deforestation risk in palm oil supply chains,” said Dr Robert Heilmayr of the University of California Santa Barbara (UCSB), who led the Trase research. “However, there is still room for progress on deforestation. Eighty-five percent of the palm oil is exported by groups with ZDCs,” said Dr Heilmayr at the launch event.
“Deforestation for palm oil in Indonesia has declined significantly in recent years, and our data show that the greatest declines have occurred in supply chains governed by zero-deforestation commitments,” said Trase Director Toby Gardner. “However, these achievements are fragile and rising palm oil prices and the growing role of traders who have lower levels of public transparency threaten to undermine progress.
“Accelerating the implementation of existing commitments and ensuring that standards are raised across the sector, including through regulatory measures, is essential to maintain progress and continue to curb deforestation of these vitally important ecosystems.”
— Toby Gardner, Director of Trase at SEI
Indonesia is the world’s largest palm oil producer
In 2021, Indonesia produced 46 million tons of crude palm oil, making it the world’s largest palm oil producer. The palm oil industry has grown to become an important part of Indonesia’s economy, representing 4.5% of GDP and lifting millions of Indonesians out of poverty. Much of this growth has been fuelled by international demand for palm oil products. Indonesia is the world’s largest exporter of crude and refined palm oil, exporting over 58% of its production and contributing 59% of total global exports.
Declining deforestation despite growth in production
The expansion of oil palm plantations has been an important driver of deforestation in Indonesia for the past 20 years, accounting for one-third (3 million hectares, ha) of Indonesia’s loss of old-growth forest. This deforestation, alongside peatland drying and associated fires, is an important contributor to global climate change and biodiversity loss, as well as poor local air quality.
“Trase data shows that Indonesia is making impressive progress. But the story of Brazil after 2012 warns us that gains in forest protection are fragile, and easily lost. This is the time to intensify both government and private sector efforts, such as strengthening the ISPO standard and stepping up implementation of ZDCs, including more detailed traceability reporting.”
— Helen Bellfield, Deputy Director of Trase at Global Canopy
Because many of Indonesia’s current palm oil supply chains start with production on recently deforested lands, every 1000 t of palm oil produced in 2020 was associated with an average of 3.24 ha of deforestation risk ranging from zero ha per 1000 t for the best performing 10% of production, to 18.2 ha per 1000 t for the worst-performing 10% of production.
However, Indonesia has achieved a remarkable reversal in deforestation trends, including deforestation for palm oil production. In 2018–2020, deforestation for palm oil was 45 285 ha per year – only 18% of its peak in 2008–2012. Importantly, deforestation has fallen during a period of continued expansion of palm oil production. Although the decline in deforestation has been linked to a drop in the market value of crude palm oil, the recent spike in palm oil prices has not yet been accompanied by a boom in palm-driven deforestation – a cause for cautious optimism.
Oil palm-driven deforestation has declined for nearly a decade
Despite declining rates of deforestation, 2.4 million ha of intact forest remains within Indonesia’s oil palm concessions. This large area of forest designated for palm oil production underscores both an opportunity for conservation, as well as the potential risk that further oil palm expansion may pose to Indonesia’s rainforest. A fundamental challenge over the coming decade will be to meet continued growth in demand for products derived from palm oil while ensuring that deforestation continues to decline.
Indonesia, China and India
Due to their large demand for Indonesian palm oil and its relatively high deforestation-risk intensity, the three markets of Indonesia, China and India, purchased palm oil representing 60% of Indonesian palm oil’s deforestation risk during the time period 2018 to 2020.
Domestic demand grows for Indonesian palm oil
Since 2013, India, China and the EU have been Indonesia’s largest palm oil export markets, together purchasing 49% of 2013–2020 exports. However, the relative importance of each of these markets has changed. In 2013, India (29% of exports) and the EU (17% of exports) were the biggest importers of Indonesian palm oil. By 2020, exports to India (16%) and the EU (12%) had declined and China had become the largest importer of Indonesian palm oil, increasing its market share from 11% of exports in 2013 to 16% in 2020.
Importantly, Indonesian palm oil is increasingly used within Indonesia. Domestic use of palm oil for either local consumption or downstream manufacturing increased from 32% of production in 2018 to 40% in 2020.
About the study and launch event
SEI’s Trase team developed the new data in collaboration with Global Canopy, the University of California Santa Barbara, Auriga Nusantara and other Trase partners.
Key findings were presented at a launch event with international speakers held on 15 September 2022, organized in collaboration with Auriga Nusantara, Trase’s lead partner in Indonesia, and the Sustainable Districts Association (LTKL), whose head of secretariat Gita Syahrani moderated the event.
Deforestation risk is a metric describing past deforestation embedded in the trade of palm oil. It is calculated through a retrospective approach that aggregates past deforestation within the footprint of currently productive palm plantations. More information on the methods for calculating this is available on request.
Founded by Global Canopy and SEI, Trase is a data-driven transparency initiative and global partnership that maps the international trade and financing of agricultural commodities, providing tools that enable companies, financial institutions and governments to address tropical deforestation.