How can Latin America sustainably expand its oil palm sector?

Oil palm production is becoming an important economic activity in Africa, Central- and South-America. Many individuals and international organizations have voiced their concerns that the increasing interest in oil palm cultivation may pose a threat to biodiversity and ecosystems. The large-scale deforestation that has occurred in South East Asia to accommodate this crop serves as a sad example that such concerns are not unfounded. In a previous entry in this blog [1] I argued that oil palm expansion in the African context could take advantage of the relatively large, but underproductive, areas already planted with this crop. Improving yields in these areas can increase overall production, and reduce pressures for forest conversion to accommodate plantations in the region. In this entry I would like to shift my focus to the South American case and explore a development pathway that could give the region competitive advantages when expanding its oil palm sector sustainably.

Reducing environmental impacts

In South America the historical drivers of large-scale deforestation have been the expansion of pastures and soy. For instance, in Colombia, up to 26.5 million hectares of natural forests have been cleared and transformed into pastures. These areas are used for extensive grazing for meat and milk production and are considered rather underproductive. Interestingly, in Colombia, the oil palm sector has been expanding in the past mostly at the expense of this pasture land. Research conducted in our group has suggested that a continuous expansion of oil palm on these lands can indeed meet the long-term production targets while reducing environmental impacts, such as carbon emissions and deforestation [2].

However, to effectively implement this more-sustainable development pathway, possible indirect effects need to be considered. When land owners increasingly convert their pastures to oil palm cultivation, ranching activities might just be displaced to new areas, resulting in further deforestation. Scientists call this process an indirect land-use change. Thus, a sustainable oil palm expansion in Colombia must be implemented in parallel with improved and more efficient ranching practices that reduce the area required for meat and milk production. This could be achieved for example through the adoption of better cattle breeds, the use of complementary nutrition sources such as natural fodder or better management during drought periods. A big question that arises from these findings, however, is what are the financial costs of such improvements in the ranching sector? And how can these costs be met?

With the demand for sustainably produced palm oil on the rise in European and North American markets, South American producers could have a competitive advantage to access these markets. Environmentally suitable land for conversion, such as pasture land, may not be available or readily identifiable in other regions such as Africa or South-East Asia. Furthermore, one could think that a sustainable expansion of oil palm in South America could indirectly push producers elsewhere towards a more sustainable oil palm production, who may change their practices to stay competitive and keep access to the more environmental minded markets.

This article is published in collaboration with ETH Zurich. Publication does not imply endorsement of views by the World Economic Forum.

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Author: John Garcia-Ulloa writes for ETH Zurich.

Image: Palm oil fruits are seen placed on a wheelbarrow at a palm oil farm. REUTERS/Samsul Said