Economic Analysis of Environmental and Cultural Impacts of the Development of Palm Oil Plantation

Abstract

This research focuses on the economic assessment of the development of palm oil plantation (Perkebunan Kelapa Sawit/ PKS) at the area of Taman Nasional Bukit Dua Belas (TNBD/ Bukit Dua Belas National Park) in Jambi Province. TNDB area is a forest dedicated to conserve the culture of Suku Anak Dalam (SAD or also known as Kubu People, a group of indigenous people of Jambi). The hollistic economic assessment of the present research is to estimate the benefits and cost to build a palm oil plantation in TNBD. The benefits consist of the benefits having palm trees and the woods whereas the cost consists of the cost to build a palm oil plantation, the cost to produce wood, the environmental cost, and the cost of the decline of indigenous culture. In this regard, the environmental cost refers to the erotion cost and the carbon release cost. On the other hand, the cost of indigenous culture's decline consists of the lost of SAD's culture from the perspective of community's users, the lost of SAD's culture from the perspective of indigenous people, and the lost of SAD's culture from the perspective of non users' community (NBG). The assessment techniques apply the formula and benefit's shift to obtain the value palm oil plantation. The SAD's culture from the perspective of community's users is assessed from the cultural tourism of SAD and estimated with TCM. The SAD's culture from the perspective of indigenous people is estimated with CVM. SAD's culture from the perspective of non users' community (NBG) is also estimated with CVM. The results of present research show that the building of PKS is sensitive to the choices of carbon price and discount level. The result of Net Present Value (NPV) of PKS is negative if the carbon price is around USD 5 per ton with approximate discount level is 8%. There is an equity issue which influences many groups of people.Keywords: Economic Analysis, Environmental and Cultural Impacts, Building PKS, NPV.JEL Classifications: O13, Q5