Targeted Scenario Analysis (TSA) of cocoa and palm oil production in Peru


The Amazon landscapes, at a crossroads

The Government of Peru, assisted by the United Nations Development Programme (UNDP- Green Commodities Programme), strives to boost an integrated approach to manage Amazonian productive landscapes, backing the inclusion of sustainability criteria into natural resources management and agricultural commodities’ production. Under this goal, the project Sustainable Productive Landscapes in the Peruvian Amazon aims to promote the sustainable production of commodities such as cocoa or palm, and the generation of multiple environmental benefits of global importance, such as the mitigation of climate change or conservation of biodiversity.

To support the project, UNDP commissioned Wolfs Company the realisation of a Targeted Scenario Analysis, TSA for both cocoa and palm production. The TSA compared the financial, economic, and environmental effects of continuing with current practices in cocoa and palm production (BAU scenario); versus the adoption of alternative practices to increase crop yields and satisfy the projected demand in 2030 while reducing the pressure on forest ecosystems in a Sustainable Ecosystem Management (SEM) scenario.

Key findings of the TSA

  • The cocoa SEM model allows to meet the deforestation objectives and the increase in yield established in the Regional Development strategies, improving net benefits, and decreasing crop expansion and pressure on forests almost by half by 2030 compared to BAU. Cocoa SEM proposes the combined production of conventional and fine cocoa, which delivers the highest financial profit per hectare. The shift from BAU to SEM requires the redistribution of current expenditures to address the specific farming costs to promote fine cocoa.
  • Transitioning to a SEM scenario and achieving maximum palm yield by 2030, delivers approximately 10% of additional benefits and a reduced crop surface of -19% compared to BAU, thereby reducing pressures on deforestation. The strategic investments to enable the shift from BAU to SEM represent an average increase of 34% in the average investment per hectare, which are profitable over ten years.

Strategic recommendations for policy makers

While the transition to the scenarios analysed is economically feasible, achieving it in practice requires the creation of incentives. Key stakeholders from cocoa and palm sector discussed and validated strategic recommendations to enforce a shift towards increased sustainable production, summarized as follows:

  • Strengthen land use planning and governance in cocoa and palm producing areas, by bolstering forest management committees, developing incentives for forest conservation in the farms, and formalizing land use access rights when sustainable production is already taking place.
  • Strengthen the governance of the cocoa-chocolate production chain and the palm-oil production chain, by reinforcing or establishing crosscutting Working Groups to discuss the governance models of each commodities’ value chains, as well as to develop national plans.
  • Create a mixed source of financing for sustainable cocoa and palm production (including positive incentives conditional to land-rights and to the implementation of avoided deforestation practices), and suited to producer conditions (low interest rates, access to credit paired crop cycles).
  • Establish a non-financial services platform to address the implementation of agricultural practices to increase the yield, the provision of quality supplies, and capacity building in agricultural practices and business management.