New analysis data has revealed that the palm oil sector and agrifood industry as a whole could stand to lose millions of dollars in profits as a result of climate change.
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The palm oil sector and agrifood industry could stand to lose millions of dollars in profits as a result of climate change, unless immediate changes are made.
This was the scenario offered up by expert environmental scenario modeller and Indonesia’s SMART Research Institute Sustainability Research Department Head Bram Hadiwijaya during the recent International Conference of Oil Palm and Environment (ICOPE) 2025.
“Based on a simple non-linear model, the prediction is that climate change will cause a net profit loss of US$8 to US$11 per hectare of oil palm plantation for very 1°C increase in temperature,” he told the floor.
“Considering there are millions of hectares of these plantations in markets like Malaysia, Indonesia and more, the profit loss is set to be in the millions of dollars as well – and we need to bear in mind that this prediction is only based on variations in temperature and rainfall, yet there are many other parameters that can come into play, so the real losses could be even greater.”
Oil palm trees can grow and efficiently produce good quality palm oil, such as that used for food production and cooking, at temperatures of up to 32°C – but temperatures in producing countries have been beyond this on a regular basis, with Malaysia averaging 35°C or more during the day and Indonesia recording its ‘hottest year in history’ in 2024.
“Recent studies have shown that temperature increases of 1°C to 4°C can decrease production significantly – and in 2022, the palm oil industry has actually already clearly seen the negative impacts of rising temperatures on yields,” Hadiwijaya added.
“It has also been shown that at temperatures beyond 38°C, photosynthesis decreases significantly and this is a direct impact on the trees.
“But one area that is just as important when it comes to yields is in terms of the labourers and workers that industry needs to harvest the palm fruits to be converted into oil – heat waves in recent years have affected more workers than ever before, and this has also caused a reduction in production and profits.”
Malaysia had already experienced the impacts of a lack of manpower previously during the COVID-19 pandemic period, suffering major losses of its palm oil yields after losing a large proportion of its foreigner-heavy population of palm oil plantation workers.
The only way is down
Hadiwijaya’s modelling gave three potential scenarios based on Shared Socioeconomic Pathways (SSPs) leading to different degrees of climate warming by 2081 to 2100. SSP1 assumes lowered GHG emissions and net zero carbon emissions by 2075 leading to just 1.8°C increase; SSP2 assumes intermedia emissions and a 2.7°C increase; and SSP5 assumes high emissions and a 4.4°C increase.
“Basically, the most pessimistic scenario of SSP5 where GHG and carbon emissions are not cut sufficiently will see an increase in 0.5°C per decade until the year 2100, and more and more areas will see more days per year with temperatures above 38°C and/or heat waves,” he said.
“This model also predicts increased rainfall during rainy seasons and even less rainfall during dry seasons – so wet seasons become wetter and dry seasons become dryer.
“The fact is that things are not yet on the positive track – from 1990 to as recent as 2020 temperatures at our study sites rose at a rate of 0.3°C per decade – and it is only by getting to the SS1 scenario soon and reducing GHG emissions to net zero, that this temperature rise can be halted or reversed.”
