Palm oil economy, EU Deforestation-free Regulation, and FOLU Net Sink 2030

GCRF TRADE Hub: Roundtable Discussion

Palm oil is a significant trade commodity that contributes to Indonesia’s economic development. About 60% of palm oil production went to export markets in 2019 (MoA, 2020). In 2020, the export value of palm oil reached 17.4 billion USD, with a total volume of 28 million tons (UN Comtrade, 2022). As the world’s largest producer and exporter, oil palm contributed 12% of Indonesia’s agricultural gross domestic product in 2020 (UN Comtrade, 2022; World Bank, 2022). Despite the economic recession, agriculture was one of the economic sectors that consistently grew amid the pandemic, with a 1.75% growth rate in 2020 (BPS, 2021).

Center for International Forestry Research (CIFOR) has been conducting various research on sustainable palm oil trade in Indonesia under the Trade, Development and the Environment Hub (TRADE Hub) – a global research consortium led by the UN Environment Programme World Conservation Monitoring Centre (UNEP WCMC) and supported by UK Research and Innovation Global Challenges Research Fund (UKRI GCRF). Part of TRADE Hub research by CIFOR is to develop a value chain dynamic approach to simulate impact of EU RED II policy at national level and EUDR at sub-national level that shows possible reconciliation of international trade policy and various national policy in Indonesia to support sustainable palm oil trade and other environmental outcomes, such as reducing deforestation, conserving biodiversity and climate change mitigation. This model can be a tool to assess impact and discuss potential strategy for addressing challenge in sustainable palm oil trade for Indonesia, as well as contribute to addressing global crisis such as climate change. As we know, Indonesia has published its Long-Term Strategy for Low Carbon and Climate Resilience in 2050 (Indonesia LTS-LCCR 2050) in 2021 as national strategy that also puts Net FOLU Sink 2030 as one of key target for climate change mitigation efforts from forestry and other land uses sector (FOLU). Sustainable trade of palm oil, for example through no-deforestation supply chain, can potentially contribute to the achievement of Net FOLU Sink 2030. GCRF TRADE Hub Roundtable Discussion hopefully can provide platform for key stakeholders especially in palm oil and environmental sector to discuss how global sustainable palm oil policies such as EUDR can be inline and strengthen existing national initiatives in Indonesia towards climate crisis or other way around.

This roundtable discussion is a follow up of GCRF TRADE Hub High Level Policy Dialogue in August 2022.