Climate Change Could Cost Palm Oil and Agri-Food Sectors Millions Without Urgent Action
- PYD
- Mar 23
- 2 min read
The palm oil and broader agri-food sectors face potential multimillion-dollar losses due to the escalating impacts of climate change unless immediate mitigation strategies are adopted. This warning was delivered by Bram Hadiwijaya, Head of Sustainability Research at Indonesia’s SMART Research Institute, during the 2025 International Conference of Oil Palm and Environment (ICOPE).
Key Findings and Predictions:
Profit Loss of US$8–11 per Hectare per 1°C Rise:
Based on a non-linear climate model, each 1°C increase in temperature could lead to a net profit loss of US$8 to US$11 per hectare of oil palm plantation. With millions of hectares under cultivation in countries like Malaysia and Indonesia, total losses could reach hundreds of millions of dollars.
Rising Temperatures Already Exceed Optimal Thresholds:
Oil palm trees thrive up to 32°C, but Malaysia regularly exceeds 35°C and Indonesia recorded its hottest year ever in 2024. Studies show that a 1–4°C increase can significantly reduce yields, and temperatures above 38°C severely inhibit photosynthesis.
Labour Force Impacted by Heatwaves:
Beyond crop physiology, heatwaves are affecting plantation workers, leading to reduced harvesting capacity and further declines in productivity. Malaysia experienced this firsthand during COVID-19, when labour shortages led to massive production drops.
Climate Scenario Modelling (2081–2100):
Hadiwijaya used Shared Socioeconomic Pathways (SSPs) to project outcomes based on different emissions trajectories:
SSP1 – Low Emissions: Net-zero by 2075, 1.8°C rise
SSP2 – Medium Emissions: 2.7°C rise
SSP5 – High Emissions: Business-as-usual, 4.4°C rise
In the worst-case SSP5, temperatures could rise 0.5°C per decade, with more days exceeding 38°C and increased frequency of extreme heat events. Additionally, wet seasons will become wetter, and dry seasons drier, severely disrupting palm oil cultivation cycles.
From 1990 to 2020, study sites saw temperature increases of 0.3°C per decade. Without drastic intervention to reach the SSP1 pathway and achieve net-zero GHG emissions, the palm oil sector will face increasing volatility, reduced yields, and shrinking profits.
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