A method for estimating buyers’ shared responsibility for oil palm expansion

Abstract

Oil palm expansion is a leading contributor to forest loss in Southeast Asia. While concerns about biodiversity loss and land disposition have led to debates about the crop, the main concern has to do with the degree to which deforestation for oil palm expansion and sharing the responsibility for those emissions appropriately across supply chains could contribute to policy or initiatives to incentivize better behavior in the sector. This paper presents a method for assigning shared responsibility for oil palm emissions costs between producers and buyers, based on estimating the degree to which each benefit from transacting in a market where social costs for byproducts like greenhouse gas emissions are not internalized. The method is demonstrated by estimating domestic and international buyer's shared responsibility for the value of greenhouse gas emissions from the elimination of aboveground woody biomass for oil palm expansion in Central Kalimantan, Indonesia, and Sabah, Malaysia. These calculations demonstrate that even with a restrictive definition of targeted emissions and low carbon process, the values at stake are substantial. These examples are supplemented with an analysis using the recently available Trase Indonesia Supply Chain dataset, which results in an estimation that domestic and international buyers of oil palm from Indonesia from 2001 to 2022 is around US$5.8 trillion. Future developments of this approach should consider the intertemporal dimension of assigning shared responsibility, as well as considering how estimates like these might be used to incentivize more sustainable agricultural practices.