Scaling Up Palm Oil Certification: Gaps and Options for More Sustainable Production

Abstract

Palm oil production is a rapidly growing commodity industry leading to rampant deforestation and land use change due to its lucrative financial returns. Palm oil plantation expansion has significant impacts on ecosystem services, biodiversity loss, and greenhouse gas balances through extensive logging activities and unsustainable land use change. Greater certification and sustainable production is necessary in order to not only lessen environmental impacts but also to ensure longer-term and more sustainable economic growth for producing regions.

This report focuses on some of the fundamental economic aspects driving production processes and analyzes ways to implement more sustainable means of production and improve certification transparency throughout the supply chain. Improving field management and productive yields alongside expansion onto degraded land are two components of the scaling up of sustainable oil palm production. Viable mechanisms and incentives must address the profitability and opportunity costs of sustainable management practices and the cost of certification that oil palm producers face.

The findings here illustrate the current gaps in incentivizing producers to undertake more sustainable processes. GreenPalm, Malua BioBank, tiered certification, payments for ecosystem services (PES) programs, Reducing Emissions from Deforestation and forest Degradation (REDD) activities, and higher price premiums for certified environmental goods are all potential ways to address the costs of certification and ensure more sustainable production. A combination of such innovative approaches with more robust governance and regulatory measures are critical catalysts that can help drive such change. Without sufficiently addressing opportunity costs, business-as-usual approaches will only continue, increasing environmental impacts and limiting the welfare of future generations in these regions.