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The palm oil dilemma – Policy tensions among higher productivity, rising demand, and deforestation

Palm oil production has increased rapidly over the past two decades in response to rising demand for its use in food, energy, and industrial applications.1 In an era of increasing pressure on natural resources, however, expansion of oil palm plantations presents a dilemma: On the one hand, oil palm is the most productive oil crop in the world; on the other hand, in some areas, oil palm plantations can displace forests and peatlands, leading to biodiversity losses and increased greenhouse gas emissions. Using an integrated system of economic and biophysical models, we find that increased palm oil yields will reduce pressure on land resources in the long run. In the near term, however, yield-increasing innovations must be accompanied by policy measures to discourage oil palm expansion that results in forest and peatland conversion, and by effective enforcement and careful monitoring to prevent environmental damage.

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