Palm oil is a major source of biodiesel, the most common biofuel used in the European Union. It is also used in food, cosmetics and other products. Indonesia and Malaysia together are the world’s top producers of palm oil, accounting for nearly 90% of global production. The sector plays a pivotal role in Indonesia’s national economy, but although it has been shown to ease poverty for some, it has also had major negative impacts.

This policy brief, based on a forthcoming SEI working paper, gauges the impacts of palm oil plantations from the perspective of local communities and identifies governance issues. It finds that local communities in Central Kalimantan Province have severe grievances, reporting that plantations pollute local rivers, lakes and aquifers, harming their drinking water and killing fish, and also dry up community wells.

Existing governance mechanisms largely do not address these grievances, and there are several weaknesses in how the province regulates water resources. There are also conflicts of interest between different levels of government over forest resources which affect how palm-oil cultivation is governed.

The brief also notes that there is an urgent need for solid data on how water is used in palm oil plantations, and on the impacts of plantations on water supplies. Because public agencies are under-resourced they cannot adequately monitor water flows and quality. To meet this need, new and cost-effective impact-assessments are required. These assessments also need to be credible in the eyes of stakeholders.

Download the policy brief (PDF: 3.3MB)