Investing in palm oil production technology has positive effects on environment and income

Published on
May 13, 2013

Investing in an advanced technology in palm oil production will reduce greenhouse gas emissions by 80%, improve the economic return of the palm oil mill, and increase the net income of smallholder fresh fruit bunch (FFB) producers and middlemen.

LEI and Alterra, both part of Wageningen UR, have assessed the sustainability of an advanced technology by a palm oil mill in Indonesia. The technology is to capture methane emissions from palm oil effluent (POME) to be used in power generation, replacing fossil fuels. In addition, the effects of an investment to double the palm oil mill capacity has been investigated.

Capture of POME biogas and subsequent conversion of biogas into electricity leads to 80% greenhouse gas emissions reductions as compared to the traditional POME treatment in open ponds. Thus, the second most important contributor of greenhouse gas emissions in the palm oil supply chain is tackled, while improving the mill’s economic return. The environmental performance could further be improved by compressing and utilise excess biogas instead of flaring it. And by applying POME effluent to irrigate a larger acreage of palm trees (now 5 ha) after methane capture. This would lead to an additional reduction of GHG emission from fossil fuel due to a lower need for fertiliser N (nitrogen).

By doubling the processing capacity of the mill, the mill expects to be able to pay out a price premium to FFB suppliers which would lead to an income increase of 8.4% (214 euro per year) for smallholder FFB producers and a yearly financial injection of 342,000 euro into the region in which the mill operates. The increase in demand for FFB from the mill is not expected to lead to new plantations as sufficient feedstock will be available when the mill operates in full capacity. However, when other mills would follow suit, this could have a negative impact on nature and the environment when smallholder farmers would react by expanding oil palm production areas by establishing new plantations.

This ex-ante impact assessment of investments in a palm oil mill was commissioned by Zebra Special Products BV and conducted in the Palm Pro oil mill.