Effects of demand-side restrictions on high-deforestation palm oil in Europe on deforestation and emissions in Indonesia

Jonah Busch, Oyut Amarjargal, Farzad Taheripour, Kemen G Austin, Rizki Nauli Siregar, Kellee Koenig, Thomas W Hertel

Environmental Research Letters (ERL), 17

January 05, 2022

Demand-side restrictions on high-deforestation commodities are expanding as a climate policy, but their impact on reducing tropical deforestation and emissions has yet to be quantified. Here we model the effects of demand-side restrictions on high-deforestation palm oil in Europe on deforestation and emissions in Indonesia. We do so by integrating a model of global trade with a spatially explicit model of land-use change in Indonesia. We estimate a European ban on high-deforestation palm oil from 2000 to 2015 would have led to a 8.9% global price premium on low-deforestation palm oil, resulting in 21 374 ha yr⁻¹ (1.60%) less deforestation and 21.1 million tCO₂ yr⁻¹ (1.91%) less emissions from deforestation in Indonesia relative to what occurred. A hypothetical Indonesia-wide carbon price would have achieved equivalent emission reductions at $0.81/tCO₂. Impacts of a ban are small because: 52% of Europe’s imports of high-deforestation palm oil would have shifted to non-participating countries; the price elasticity of supply of high-deforestation oil palm cropland is small (0.13); and conversion to oil palm was responsible for only 32% of deforestation in Indonesia. If demand-side restrictions succeed in substantially reducing deforestation, it is likely to be through non-price pathways.

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CITATION

Busch, Amarjargal, O., Taheripour, F., Austin, K. G., Siregar, R. N., Koenig, K., & Hertel, T. W. (2022). Effects of demand-side restrictions on high-deforestation palm oil in Europe on deforestation and emissions in Indonesia. Environmental Research Letters, 17(1), 014035. https://doi.org/10.1088/1748-9326/ac435e