Production of Palm Oil Polluting Southeast Asia

Palm oil is a type of edible vegetable oil derived from the palm fruit produced in Southeast Asia, more specifically in Indonesia, the world’s biggest producer, where it acts as a significant basis of the country’s economic security. It is exported around the world to be used in a wide variety items: from being an important ingredient in foods such as chocolate and chewing gum to washing powders, and even bio diesel. It is a high demand item, consumed by people in everyday products, such as chocolate, however, many consumers do not realize its negative externalities. Despite it being a core ingredient to many products, it causes severe environmental implications that often cause controversy.

This industry is linked to major issues such as deforestation and forest fires, causing heavy air pollution as a result of using slash and burn agricultural techniques used to clear and regrow palm oil plantations. This technique causes terrible air pollution in surrounding areas, particularly in Singapore, Indonesia’s neighboring country. On September 24, 2015, Singapore’s air quality index reached unhealthy levels, hitting a record of 321 (anything above 100 is considered “unhealthy”), closing schools and producing acid haze, darkening daylight. During this time, people were highly advised to stay inside and wear masks outdoors in order to protect their lungs from the toxins carried in the air. These hazy conditions lingered for weeks and were directly attributed to the timing of the palm oil plantation season where slash and burn agriculture is used to clear clear the land. Although it did not directly around impact the price of palm oil at this time, the diagram represents how the negative externality shifts the supply curve left because of its indirect cost on Singaporean society. The quantity of the good consumed is less than the optimal quantity that internalizes all costs and benefits.

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