Indonesia Palm Oil Simulation – A policy simulation study for sustainable oil palm and dissemination activities

Courtesy of Sonya Dyah Kusumadewi, August 2020

This article is also available in Bahasa Indonesia here.

Country coordinator of Trade Hub Indonesia, Professor Herry Purnomo published his recent study on oil palm policy simulation using a value chain and dynamic modeling system approach in Volume 111 of the Forest Policy and Economics journal in February 2020. The article entitled ‘Reconciling oil palm economic development and environmental conservation in Indonesia: A value chain dynamic approach’ is a result of studies and co-authoring by other researchers: Beni Okarda, Ahmad Dermawan and Dr. Pablo Pacheco from CIFOR; Qori Pebrial Ilham and Professor Endang Suhendang from IPB University; and Dr. Fitri Nurfatriani from the Ministry of Environment and Forestry of the Republic of Indonesia.

In the study, the researchers establish a model called the Indonesian Palm Oil Simulation (IPOS). Four policy scenarios were simulated: 1) a moratorium on oil palm expansion in forest and peatland areas; 2) peatland protection and forest and land fire prevention; 3) agrarian reform; and 4) a palm oil export ban by the European Union. The figure below shows the architecture of IPOS and a causal loop diagram of the model.

Architecture of the Indonesian Palm Oil Simulation (IPOS) model

Causal loop diagram of the Indonesian Palm Oil Simulation (IPOS) model

The paper highlights simulated policy impacts on a business as usual (BAU) scenario and offers reconciliation solutions. Its main findings are provided in the table below. The study concludes that it is possible to reconcile economic development and environmental conservation for sustainable palm oil in Indonesia with existing policies and potential reconciliation solutions towards sustainability.

The research team presented this paper on several occasions to ensure policymakers and stakeholders received the key messages from this study. It was also presented to relevant national and sub-national level policymakers and stakeholders at the two Trade Hub Indonesia kick-off workshops in Jakarta and Manokwari, and disseminated to journalists and the general public through a presentation by Professor Herry Purnomo at a discussion event organized by Infosawit magazine. The paper was also featured in a series of articles in the April and May 2020 editions of Infosawit magazine. Through its dissemination of the paper, the Trade Hub research team aimed to raise the awareness of relevant policymakers and stakeholders as well as the general public on the importance and positive facets of implementing sustainable palm oil in Indonesia. During each presentation, Professor Herry Purnomo stressed that oil palm sector sustainability should be seen as a means for securing greater economic and environmental benefits, and its implementation should refer to the mandate of Indonesia’s Constitution on sustainable development, and not only be driven by markets or international commitments.

The full paper can be accessed here.

For any inquiries regarding Trade Hub Indonesia, please contact Sonya Dyah Kusumadewi (

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Main findings from the IPOS journal article

ScenariosMoratoriumPeatland protection and fire preventionAgrarian reformExport ban by the European Union
Impacts on BAUEconomic developmentPlantation area and income decreasePalm oil production and income from the oil palm sector decreasePalm oil production and income from FFB sales increaseTotal export value decreases by 1%
Environmental conservationDeforestation and greenhouse gas emissions decreaseGreenhouse gas emissions decreaseGreenhouse gas emissions increaseEffort to prevent tropical forest loss
A potential solution for reconciliationAgricultural intensification to increase productivityLand swap scenario Law enforcement and incentives for not using fireParticipatory mapping to identify beneficiariesEnhancing the sustainability of Indonesia’s palm oil industry with strengthened environmental and social indicators
NotesSimulation report shows that intensifying productivity by 20% would compensate for loss in production due to the moratorium in 10 yearsConsider the environmental aspects of forest estate and economic aspects of oil palm plantations for determining land swap scenariosAgrarian reform also includes land inside designated forest estatePotential to trigger similar actions from other importer countries and could possibly extend to bans on other commodities

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