Making oil palm ‘carbon efficient’
By Sonya Dewi, Andree Ekadinata, Arif Rahmanulloh, Ni’matul Khasanah, Subekti Rahayu, Meine van Noordwijk and Suseno Budidarsono
Establishment of oil palm plantations is one of the most important drivers of land conversion in Indonesia. Increasing the carbon efficiency of these plantations and integrating them into land-use planning for low-emissions development will substantially contribute to reducing emissions while maintaining economic growth at the local level and eventually at the national level.
Using land in a way that efficiently minimizes carbon emissions is a common responsibility agreed among nations through the United Nations Framework Convention on Climate Change.
This is especially relevant for Indonesia, with its 2009 presidential commitment to reduce emissions by up to 41%. However, recognizing the need for economic development and equitable livelihoods, the commitment includes growth of 7%.
Oil palm covers around 8 million hectare or approximately 5% of the nation’s land area. Indonesia is the world’s biggest exporter of palm oil. The commodity has been the centre of controversy mostly because of the conversion of natural forests into oil palm plantations.
To answer the question, ‘Is oil palm a carbon-efficient land use?’, we studied 23 oil palm plantations in Indonesia by using an opportunity-cost analysis, which estimates the cost of forgone opportunities.
The opportunity cost of land-use change is defined as the amount of financial gain per ton of carbon dioxide equivalent (CO2eq) emitted from a particular change in land use, such as removing a forest and replacing it with an oil palm plantation. The higher the financial gain (for example, in USD) per ton CO2eq emitted, the higher the opportunity cost. A higher opportunity cost implies a higher cost of abating the emissions caused by the land-use change.
In our research, we referred to the results of the opportunity-cost analysis as ‘carbon efficiency of plantations’ rather than ‘opportunity cost of plantations’ because we focused on the potential for increasing carbon efficiency, that is, improving the ratio between profit and emissions and increasing profit while reducing emissions.
We found that on mineral soils, emissions from converting forests into plantations ranged 2.5–32.7 ton CO2eq per hectare per year. The source of the variation was mainly the original forest cover and other types of ‘aboveground carbon stock’ that existed at the site prior to conversion.
On peatland, emissions from conversion and continuing emissions from the drained peatland ranged 12.33–73.6 ton CO2eq per hectare per year across eight of the 23 plantations that had some peatland. Emissions varied by the percentage of peat within the plantations in combination with the original aboveground carbon stock.
We wanted to know whether emissions always corresponded with real financial gain. That is, was it worth it converting a forest into a plantation? We found that the carbon efficiency varied within and between plantations (from less than USD 5 to greater than USD 20 per ton of CO2eq). The opportunity costs were calculated for each change of land use for each zone (mineral and peat). The quantity of emissions associated with a particular level of opportunity cost were also quantified.
This analysis provided the first approximation of carbon efficiency and abatement costs and was a step towards making general comparisons across sectors (for example, energy and waste) that produce greenhouse gases and have carbon on international carbon markets.
From this process, we found that the proportion of emissions associated with a profit of less than USD 5 per ton of CO2eq emitted varied between 3.2% (for highly carbon-efficient plantations) and 99.9% (for less carbon-efficient plantations). For the most carbon-efficient plantation, only 8.6% of emissions were associated with less than USD 20 per ton of CO2eq emitted.
We also found that plantations with a higher net present value (NPV)* of oil palm per hectare also tended to have higher efficiency of carbon emissions but the same level of NPV could also bring variable carbon efficiency at the wider plantation level. The relationship was stronger for plantations that were on both mineral and peat soils.
When carbon efficiency of a plantation was low (less than USD 20 per ton of CO2eq), increased efficiency correlated strongly and positively with reductions in emissions. When carbon efficiency was higher, the correlation was less marked, but remained strong and positive. This showed that even though the two measures reflect different scales and assumptions, they are not totally related empirically, which provides a way to reconcile international and national methods of defining the sustainability and ‘greenness’ of a product, in this case, oil palm.
So what should be done?
Policies and/or best practices that encourage the production of oil palm as part of low-emissions development should ideally devise a clear indicator linking land use and carbon efficiency. This would show the financial gain from each unit of greenhouse gas emissions occurring during the development and cultivation of oil palm in plantations. Developing an indicator that is focused on the plantation is an effective way to show the links between emissions, drivers and actors, as it defines an operational scale attributable to a single actor rather than isolating emissions from any particular unit of commodity.
Furthermore, to contribute to the sustainability of the broader landscape, ecosystem services that aren’t just about climate regulation should also be promoted (biodiversity maintenance and watershed protection, for example). Landscape configurations, such as promoting habitat corridors, riparian areas and forest patch mosaics, should also be considered, rather than the current common practice of uniform, monocultural landscapes.
In comparison with emissions savings that address the concerns of customers about the ‘greenness’ of a specific product, carbon efficiency addresses the local and national concerns of producers about wider issues of landscape sustainability. This makes maintaining carbon efficiency less restrictive than just attaining emissions savings because it recognizes the need for a balance between planned development for economic growth, local sustainability and global responsibility.
To maximize efficiency, the Government should establish a regulation that sets a minimum carbon-efficiency standard for existing and future oil palm plantations. This would reduce pressure on land availability, promote intensification rather than expansion, and contribute to low-emissions development. Our research suggests that, at current valuations, USD 20 per ton of CO2eq would be a reasonable cut-off point between high- and low-carbon-efficiency plantations.
*NPV measures the value of current income against cash outgoings. It is used to estimate profitability.
Edited by Robert Finlayson
Read the technical brief
Dewi S, Ekadinata A, Rahmanulloh A, Khasanah N, Rahayu S, van Noordwijk M, Budidarsono S. 2012. The carbon efficiency of oil palm plantations: an opportunity cost analysis. Technical Brief 28: palm oil series. Bogor, Indonesia: World Agroforestry Centre Southeast Asia Program.
This work is related to CGIAR Research Program on forests, trees and agroforestry