Market responses to oil palm intensification could exacerbate deforestation in Indonesia.

Oil palm is a major driver of tropical deforestation. A key intervention proposed to reduce the footprint of oil palm is intensifying production to free up spare land for nature, yet the indirect land-use implications of intensification through market forces are poorly understood. We characterise supply and demand of oil palm in Indonesia using a spatially explicit land-rent modelling framework under different crop yield improvement and demand elasticity scenarios, and explore how shifts in market equilibria alter projections of crop expansion. Oil palm supply was sensitive to both crop prices and yield improvements: intensification raises agricultural rents and lowers the effectiveness in reducing crop expansion. Increased yields are able to lower oil palm prices, but these price-drops are not sufficient to prevent further cropland expansion from increased agricultural rents under a range of price elasticities of demand. Crucially, we show that agricultural intensification might only result in land being spared when the demand relationship is highly inelastic, and crop prices are severely reduced. Under these scenarios, the extent of land spared is countered by the continued expansion of new plantations. Oil palm intensification in Indonesia has potential to exacerbate current pressures on its imperiled biodiversity and should be deployed with stronger spatial planning and enforcement to prevent further cropland expansion. This article is protected by copyright. All rights reserved.