Palm oil production is important to the economy of Indonesia as the country is the world's biggest producer and consumer of the commodity, providing about half of the world's supply. In 2016, Indonesia produced over of palm oil, and exported of it. Oil palm plantations stretch across at least . There are several different types of plantations, including small, privately owned plantations, and larger, state-owned plantations. There are a variety of health, environmental, and societal impacts that result from the production of palm oil in Indonesia. A recent publication by the NGO Rainforest Action Network (RAN) indicates that the use of palm oil by some of the biggest chocolate and snacks' producers is increasing this problem.
In addition to servicing traditional markets, Indonesia is looking to put more effort into producing biodiesel. China and India are the major importers of palm oil, accounting for more than a third of global palm oil imports. Looking at Indonesia's GHG emissions breakdown, climate change mitigation will mainly come from controlling forest fires and peatland conservation. REDD+ (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) will be ‘an important component of the NDC target from [the] land-use sector’. This implies that there will need to be large economic incentives and inputs from outside resources to ensure that land-use change is prevented.
Deforestation.
As late as 1900, Indonesia was still a densely forested country: forests represented 84 percent of the total land area. Deforestation intensified in the 1970s and has accelerated further since then. The estimated forest cover of around 1900 decreased to less than by the end of the 20th century. Of the total logging in Indonesia, up to 80% is reported to be performed illegally.
Forests are often cleared for palm oil industries. Typically, the company that has usage rights for the land will contract individuals to burn the supposedly "degraded" forest, thereby avoiding direct responsibility for fires, which become more likely when peatland is deforested.
Forest fires often destroy high capacity carbon sinks, including old-growth rainforest and peatlands. In May 2011, Indonesia declared a moratorium on new logging contracts to help combat this. This appeared to be ineffective in the short-term, as the rate of deforestation continued to increase. By 2012 Indonesia had surpassed the rate of deforestation in Brazil, and become the fastest forest clearing nation in the world. However, it is unclear about the current comparative deforestation rates between Indonesia and Brazil because new political leadership in Brazil has recently increased deforestation dramatically.
Domestically, there has been some effort to crack down against illegal slash and burn practices. A Peatland Restoration Agency was also formed in 2015 under President Joko Widodo. In 2018, the government no longer granted licenses for deforestation for palm oil plantations. It is unclear as to how effective these laws are due to corruption, poor enforcement and loopholes in some of these policies.
Production.
Production of palm oil in Indonesia has, since 1964, recorded a phenomenal increase from to in 2018 and a total of will be needed in 2025 to sustain international and domestic demands. Palm oil accounts for 11% of Indonesia's export earnings of $5.7bn. Maintaining its status as the world's largest producer of palm oil, Indonesia has projected a figure of by 2020. In this context, the global production figure given by the Food and Agriculture Organization (FAO) was for 2012, equivalent to double of the 2002 production. This increase is also reflected in increases of Indonesia's production of palm oil for the same period, from in 2002 and in 2012. In April 2022, President Joko Widodo announced that the country will effectively ban palm oil exports starting 28 April, until further notice. The policy is said to guarantee availability of affordable cooking oil in the domestic market. In return, this has flustered global markets and sent the commodity's price to historic highs.
The entire oil production is derived from Indonesia's rainforest which ranks third in the world, the other two being in the Amazon and Congo basins. The three main business models for palm oil production in Indonesia are private large scale plantations, nucleus estate smallholders, and independent smallholders. The breakdown of palm oil area and production by type of palm oil plantation is shown in Table 1. Palm trees that were planted about 25 years ago have an annual average production rate of 
Indonesia is considering plans to increase production this by introducing newer varieties which could double production rate per hectare (acre).
Borneo and Sumatra are the two islands that account for 96% of Indonesia's palm oil production. As of 2011, there were of palm oil plantations, with of these being productive plantations under harvest, thus making Indonesia the global leader in crude palm oil (CPO) production. According to World Bank reports, nearly 50% of CPO produced in the country is exported in an unprocessed form, while the remaining is processed into cooking oil, about half of which is exported, while the rest is consumed locally.
The crude palm oil production system is vital to the economy of Indonesia and has many domestic and foreign uses. It provides a major export source through food and for industrial use. It is also used for domestic food, biodiesel, and biofuel. It is estimated that the population of Indonesia will grow to 285 million people in 2025 which will lead to an increased domestic demand for vegetable oil. In addition, other domestic industrial uses of palm oil are to support the pharmaceutical, cosmetic, and chemical industries.
Uses.
Palm oil is an essential ingredient for the food industry, used as a cooking oil or in the production of processed foods (such as many types of chocolates, biscuits, chewing gum...) and for the manufacture of cosmetic and hygiene products (soaps, lipstick, washing powder...). It is also valuable as a lubricant in industrial production or for the energy sector for the production of biodiesel.
Biofuel.
Over the past few years an interest in biofuel has increased as a potential clean energy source, it has become a primary use for domestic crude palm oil. As seen in table 3, domestic use of biodiesel is expected to see the most growth of 7.3% by 2025. The Indonesia government has been interested in growing biofuel plantations to decrease the countries reliance on fossil fuels. It is predicted that in 2025, biofuel will account for 25% of Indonesians national energy mix.
Biodiesel is created using a transesterification process that converts the triglycerides in the crude palm oil into esters to be used in biofuel production. This process has been shown to have a biodiesel yield of 93.6%.
Companies.
Major local and global companies are building mills and refineries, including PT Astra Agro Lestari Terbuka ( biodiesel refinery), PT Bakrie Group (a biodiesel factory and new plantations), Surya Dumai Group (biodiesel refinery).
Cargill (sometimes operating through CTP Holdings of Singapore) is building new refineries and mills in Malaysia and Indonesia, expanding its Rotterdam refinery to handle /year of palm oil, acquiring plantations in Sumatra, Kalimantan, and Papua New Guinea.
Robert Kuok's Wilmar International Limited has plantations and 25 refineries across Indonesia, to supply feedstock to the new biodiesel refineries of Singapore, Riau, Indonesia and Rotterdam.
Musim Mas Group has plantations and refineries in Malaysia and Indonesia – Kalimantan, Medan etc. although they are headquartered in Singapore.
Marihat Research Station (MRS), nowadays known as RISPA and located in Medan, is the first research centre for Palm Oil Plantation for Indonesia. One of its well-known experts in soil, who has now retired, was Ir. Petrus Purba.
In August 2011, the governor of Aceh issued a permit for Indonesian palm oil firm PT Kallista Alam to develop around in Tripa. Indonesian palm oil producer Triputra Agro Persada will reportedly increase its planted area by about two-thirds from 2013 by 2015.
Environmental impact.
Logging effects and deforestation.
Since agricultural land is limited, to plant monocultures of oil palms, land used for other cultivations or the tropical forest need to be cleared. Of the total logging in Indonesia, up to 80% is reported to be performed illegally. A major environmental threat is then the destruction of rainforests in Indonesia, which was estimated at of primary forest per year from 2000 to 2012. From 1990 to 2005, of Indonesian forest were taken down from logging, 77% of this forest had never even been touched.
Deforestation also makes Indonesia one of the biggest emitters of greenhouse gases. Carbon dioxide (CO2) is released in the atmosphere massively with the cutting of tropical peatlands, which are carbon sinks, according to Greenpeace. Deforestation is also caused by illegal forest fires to clear land for palm oil plantations. According to WWF for example, in 1997 around of carbon were released by the fires which represented "13–40% of the mean annual global carbon emissions from fossil fuels that year". As of 2013, Indonesia ranked number eight among countries worldwide for overall greenhouse gas emissions. According to the World Resources Institute, 65.5% of these greenhouse gas emissions can be attributed to land use change and forestry; the palm oil industry in Indonesia is a major contributing factor towards this trend.
Industrial palm tree plantations also impacts negatively the quality of soils, water and the air because they often rely on the use of agrochemicals products, such as pesticides or fertilizers.
Carbon sinks.
The drainage, burning, and plantation building on former peat lands releases large quantities of carbon dioxide, so negating their value as so-called 'carbon sinks' (stores of carbon). The carbon sinks "store more carbon per unit area than any other ecosystem in the world". One study found that destroying the carbon sink peat bogs in Southeast Asia could release as much carbon as nine years of fossil fuel that is used globally.
A recent study by Rahman et al. (2018) found that when forest is converted to oil plam plantation, Soil Organic Carbon (SOC) stocks declined by 42%, 24% and 18% after 29, 39 and 49 years of conversion respectively.
Air pollution.
Palm Oil production is a source of air pollution in Indonesia, mainly due to the use of slash-and-burn method to clear out forests for palm oil plantations. The areas that are typically being cleared out are rainforests, which have very carbon rich forest floors are known as peatlands. The carbon-rich soil of the peatlands make them very flammable. When peatlands are burned, they release a large amount of CO2 along with black carbon, an extremely dangerous type of particulate matter. Along with particulate matter, the smoke from the fires can release toxic gases that can spread over large areas and the fires are not easy to put out in remote areas, causing harm to both animal life and human populations. As a result of the large fires, a recurring phenomenon typically between July and October or during El Nino called the Southeast Asian haze occurs. This is an event where air quality becomes extremely dangerous and can cause adverse health outcomes, have negative environmental, and economic impacts.
Soil and water pollution.
 of effluent or liquid waste is made for every metric ton () of palm oil that is produced. This effluent affects freshwater furthermore affecting downstream wildlife and humans. Pesticides and fertilizers can further cause issues for downstream water pollution.
Land erosion.
A majority of Indonesia's palm oil plantations are on steep slopes, causing "increased flooding and silt deposits in rivers and ports". Repair of infrastructures such as roads and housing are effects of land erosion to local communities.
Animals.
Many animals native to Southeast Asia and  Indonesia are impacted by the effects of the palm oil industry and deforestation often facing threats of extinction. Deforestation entails a reduction in biodiversity and an alteration of ecosystems which causes the destruction of the habitats of endangered species such as Borneo pygmy elephants, Sumatran elephants, Sumatran tigers, Sumatran rhinoceroses, Malayan sun bear and the various species of orangutan that can be found only on the forests of Borneo and Sumatra. Some of these animals such as the orangutan are arboreal and try to stay in the trees, often being burned alive during slash and burn of forests. Other animals like the orangutans are introduced to new threats as palm oil fields increase in size. Palm oil plantations in Sumatra and Borneo are one of the main areas where reticulated and blood pythons are sourced for the exotic leather industry
Remedial measures.
A government moratorium on the clearing of new forest was effective from 2011 to 2015.
The Indonesian Palm Oil Board has planned to adopt new planting materials on the older