Impact of climate change on oil palm production in Malaysia
Climate change has significantly impacted the economic development and trade of developing countries, particularly those that largely rely on agriculture. Oil palm was the main contributor to the Gross Domestic Product (GDP) of the agriculture sector in Malaysia. Climate change affects the growth...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
2022
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/113216/1/113216.pdf |
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| Summary: | Climate change has significantly impacted the economic development and trade of
developing countries, particularly those that largely rely on agriculture. Oil palm was
the main contributor to the Gross Domestic Product (GDP) of the agriculture sector in
Malaysia. Climate change affects the growth and production of oil palm in several
ways, including reduction of sex ratio, disruption of the pollination process, abortion of
newly formed inflorescences and spread of pests and diseases. Some quantitative
research findings, including the Production Function approach, have produced
inconsistent results, prompting this study to be conducted by introducing a supply
response approach that has not been widely used in the country, particularly in
estimating the impact of climate change on commodity crops. Hence, the goal of the
study is to quantify the impact of climate change on oil palm production. Specifically,
the study was designed to determine the best model for measuring the impact of
climate change on oil palm production by using Supply Response and Production
Function approaches, to estimate the short-run and long-run impact of the variables
associated with climate variables and to predict the future impact of climate change on
Malaysian oil palm production. Annual time series data (1980–2019) were collected
and analyzed using appropriate time series econometric models: Autoregressive
Distributed Lag (ARDL) and Error Correction Model (ECM). Estimated coefficients
were constructed in linear and non-linear equations, in logarithmic form and subjected
to and passed relevant diagnostic tests. Three simulation scenarios consisting of SN1
(minimum climate variability), SN2 (maximum climate variability) and SN3 (average
climate variability) were employed to project the FFB production. The estimated shortrun
coefficients of Model 3 show price factors respond significantly to increase oil
palm production in the second lag period, and the expansion of the oil palm area has a
positive relationship with oil palm production in the long-run consideration. The
estimated coefficient of rainfall and temperature produces an adverse negative impact
on oil palm production in the short run, while rainfall is an important variable for
increasing oil palm production in the long run. The estimated short-term coefficients of
Model 8 explain that own price and fertilizer use have a positive effect on oil palm
production in the second lag period, and the increase in oil palm area is beneficial for
oil palm production in the long run. The rainfall variable has a negative effect in the
second lag period, but positively increases oil palm production in the long run. The
results of forecasting analysis revealed that SN1, SN2, and SN3 would cause an
increase in FFB production by 5%, 1% and 2%, respectively. The production of FFB
under SN1 is expected to increase from 90.5 million Mt in 2021 to 122.2 million Mt in
2030, from 87.8 million Mt in 2021 to 9.10 million Mt in 2030 under SN2 and 89.2
million Mt to 105.6 million Mt over the same time period under SN3. The FFB yield
under SN1 is predicted to increase from 16.75 tonnes/hectare in 2021 to 16.90
tonnes/hectare in 2030, a decrease in the FFB yield from16.71 tonnes/hectare to
16.57tonnes/hectare under SN2 and anticipated to decrease in FFB yield from 16.71
tonnes/hectare to 16.57 tonnes/hectare under SN3 within the same period. Overall,
climate change is likely to reduce FFB yield in the future. These results would serve as
empirical guides in helping policymakers, smallholders and agencies involved in oil
palm production to make decisions in terms of practical and policy implications to
adapt to climate change-related risks and uncertainties. Among the practical
implications are investments in technologies, such as developing drought-tolerant and
early-maturity crop varieties, controlling emerging pests and diseases, increasing water
saving, and reducing evapotranspiration. Production and income insurance policies and
disaster assistance could be one way to recover losses, especially for smallholders. In
addition, law enforcement for all smallholders to comply with Malaysian Sustainable
Palm Oil (MSPO) certificate requirements in operating oil palm plantations is
necessary, apart from the introduction of policies such as the National Climate Policy
(2009). The findings of this study will prompt a number of studies that require further
investigation, such as the application of supply response on other crops and
agricultural-related activities, considering other climate indicators such as radiation,
light duration, CO₂ concentration, humidity and sea level, and divided regions such as
Peninsular Malaysia, Sabah, and Sarawak in order to produce more accurate results
regarding climate change scenarios. |
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