Banning high-deforestation palm oil imports would barely reduce forest loss

Source: Ulet Ifansasti/Greenpeace

Consumer countries are increasingly attempting to combat tropical deforestation by restricting imports of palm oil, soy, beef and other commodities. However, banning imports of commodities grown with high levels of deforestation may have a much smaller effect than anticipated, according to a new study by my co-authors and I published in December 2021 in the journal Environmental Research Letters.

If Europe had banned imports of high-deforestation palm oil from 2000-2015, then deforestation in Indonesia over that time period would only have been 1.6% less than it actually was, while the carbon dioxide emissions from deforestation would have been 1.9% less. 

We chose to study palm oil because, due to land clearance for plantations, this commodity is one of the biggest contributors to tropical deforestation and has seen some of the sharpest pressure from campaigners. We studied exports from Indonesia because it grows more than half of the world’s palm oil, and because its deforestation routinely puts it in the top five countries for climate-changing emissions. And we studied imports to Europe, the consumer of 10% of the world’s palm oil, because European countries have been at the forefront of imposing import restrictions.

Trade restrictions as climate policy

Tropical deforestation is the second largest cause of climate change behind burning fossil fuels. And the leading cause of tropical deforestation is conversion of forests to land used to grow commodities such as palm oil, soy and beef. 

It’s understandable that consumer countries seeking to reduce global forest loss should scrutinise their connection to tropical deforestation through the food they import. The European Union recently proposed restricting imports of commodities linked to high or illegal deforestation. Similar policies have already been enacted in the United Kingdom and Norway, while the US is to debate a bill prohibiting imports of commodities produced on land “undergoing illegal deforestation”. 

Such import restrictions shift the costs of ensuring that globally traded agricultural commodities are deforestation-free from relatively wealthy consumers in Europe and North America to farmers in the tropics. Unsurprisingly, they are viewed unfavorably by commodity-exporting tropical nations. Indonesia and Malaysia perceived earlier European restrictions on palm oil as protectionism, and brought legal challenges to the World Trade Organization.

Modelling the effects of import restrictions 

Despite the central – and controversial – role of import restrictions, their effectiveness at reducing deforestation has not been examined until now. Previous economic studies did not distinguish whether palm oil was produced with high or low deforestation. The current wave of public policies makes this distinction, and our model does as well.

We modelled the effects of import restrictions in Europe on deforestation and emissions in Indonesia by combining a global trade model with a model of land-use change in Indonesia. We distinguished palm oil grown with high and low levels of deforestation using satellite-derived maps of forest and oil palm plantations over time.

As mentioned, we estimated that if Europe had banned imports of high-deforestation palm oil from 2000-2015, the impacts of a ban would have been small: 1.6% less deforestation and 1.9% fewer carbon emissions. That’s because about half (52%) of the high-deforestation palm oil that would have been exported to Europe would shift to regions without a ban. Furthermore, even big changes in the price of palm oil barely budge deforestation – every 1% decrease in price was associated with just a 0.13% decrease in conversion of forest into oil palm cropland. Finally, only one-third (32%) of deforestation in Indonesia was due to oil palm, with the rest due to pulp and paper plantations, small-scale agriculture, conversion to grasslands and other uses.

The impact of an import ban would be increased by expanding the set of countries which restrict imports, but not by much. If China and the US had joined Europe in banning high-deforestation palm oil, Indonesia’s deforestation from 2000-2015 would have been 2.7% lower, and its emissions 3.2% lower. Even if the whole world outside of Indonesia and Malaysia restricted imports of high-deforestation palm oil, Indonesia’s deforestation still would have only been 3.8% lower, and its emissions from deforestation 4.5% lower.

What should wealthy consumer countries do?

Tropical countries’ policy options to address their own deforestation domestically are often described as positive “carrots” or punitive “sticks.” But consumer countries have neither option – they can only hope to persuade other sovereign nations to reduce deforestation using “vinegar or honey”. 

Trade restrictions are sour, confrontational vinegar: “If you deforest, we’ll curtail our trade with you.” An alternative approach offers sweet, cooperative honey, in the form of international carbon payments: “If you keep your forests standing, we’ll pay for the climate benefits.” Our paper finds that hypothetical carbon payments to Indonesia for reducing emissions caused by deforestation could have exceeded the effects of trade restrictions at just $0.81 per tonne of CO2 equivalent – an order of magnitude or two cheaper than current prices in most carbon markets.

These are disheartening times for proponents of international carbon payments. Since 2005, an international climate program called REDD+ (Reducing Emissions from Deforestation and forest Degradation) has sought to make tropical forests worth more alive than dead through results-based payments for the carbon they store. Since its inception, REDD+ has been hamstrung by levels of finance far too low and far too slow to compete with profits from deforestation. And in recent years, high-profile international results-based payment agreements between Norway and two large tropical forest countries, Brazil and Indonesia, have collapsed. 

Frustration with results-based payments has surely driven some of the momentum toward more confrontational approaches. And yet, in the absence of positive and cooperative approaches, international relations around tropical deforestation and climate change risk descending into rancour.

Perhaps the best we can hope for is that the vinegar of trade restrictions will be complemented with the cooperative honey of positive support for forest conservation. 

Without such support, our paper shows, trade restrictions should not be expected to have much impact on keeping forests standing.

By Jonah Busch

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