The palm oil sector has created in the past few decades millions of jobs. Over the next decade, the Indonesian government plans to double the annual production of palm oil, creating new jobs for an estimated 1.3 million households. Although the cultivation of oil palm on peatlands creates new income opportunities for many farmers in the short term, longer term economic implications remain uncertain.
Transformation of tropical peat forest into plantations will lead to the loss of ecosystem services and biodiversity and will affect the social and cultural basis of forest dependant communities. Human health is affected negatively by haze resulting from forest and peat fires related to land preparation and drainage of the peat. There may be other negative ecological consequences linked to soil subsidence, which can lead to flooding and salt water intrusion when water tables reach levels and the land becomes undrainable.
When peat is developed for agriculture, carbon is lost as CO2 because: 1) oxidation of the peat; 2) fire; and 3) loss from biomass due to land use change. The simplest way to limit CO2 and other GHG emissions is to avoid the development of oil palm plantations on peat. Development of plantations on mineral, low carbon, soils has fewer impacts in terms of GHG emissions. For existing plantations on peat, effective water management (keeping water tables as high as practical) reduces GHG emissions, soil subsidence and fire risk. Nonetheless, even these measures will not turn the system into a carbon or GHG sink.