In 2019, Malaysia exported USD 8.91 Billion in palm oil making it the second-largest exporter of palm oil in the world after Indonesia at USD 15.3 Billion. Palm oil was also the 5th most exported product and the 9th largest importer of palm oil in Malaysia. Nevertheless, about 18-30% of Indonesia’s oil palm area is controlled by Malaysian capital owners.  Climate projections have found that if temperature rises by 1 °C, 2 °C, 3 °C, and 4 °C, production of oil palm in Malaysia can decrease from a range of 10 to 41% while sea level rise (SLR) of 0.5, 1, and 2 m can decrease oil palm production by 2%, 4%, and 7.92% respectively. 
As climate change will affect the production of palm oil, the palm oil sector itself has also contributed to climate change. Globally, the palm oil issue has been popularised by the animal orangutan and the European Union’s ban on the use of palm oil for biodiesel in December 2018.
The region has witnessed severe air pollution and haze events that have become an annual and regional problem due to the land conversion for oil plantations using fire set by plantation companies or by slash-and-burn practices that remain a common practice in Malaysia and Indonesia. Malaysia is also currently the biggest foreign investor in the Indonesian palm oil plantation sector. However, with Malaysia’s economic interest in the oil palm sector, haze mitigation tends to concentrate on burning activities of the community and smallholdings rather than large-scale commercial plantations. 
Besides that, the Palm oil mill effluent (POME) is a by-product of the palm oil production process which also releases large amounts of greenhouse gases and can contaminate rivers if not managed properly. The average greenhouse gas emissions produced from processing 1 ton of crude palm oil (CPO) was 1100 kg CO2eq. Although the amount could be reduced to 200 kg CO2eq by capturing biogases and installing wet scrubber vessels.  Other than land cover change, methane emission from POME treatment and nitrous oxide emissions following fertiliser application are also some of the largest greenhouse gas emissions from oil palm plantations and mills.
Is Sustainable Palm Oil the Way Forward?
The Roundtable on Sustainable Palm Oil (RSPO) was set up in 2004 to produce Certified Sustainable Palm Oil (CSPO) in compliance with environmental and social criteria. The RSPO is composed of oil palm producers, processors or traders, consumer goods manufacturers, retailers, banks/investors, and environmental and social non-governmental organisations (NGOs). However, the RSPO has been heavily criticised as a greenwashing tool where from 2001-2016 about 40% of the area in RSPO concessions suffered from forest loss, and certified concessions did not differ much from non-certified ones in terms of percentage of tree removal. Hence, certified “sustainable” palm oil has still led to high deforestation rates in Malaysia, Indonesia and Papua New Guinea. 
55-59% of palm oil expansion in Malaysia was reported due to the loss of primary, secondary or planted forests in Malaysia from 1990 to 2005 where 85% of primary forest species was also lost. The Malaysia Palm Oil board reported a total of 666,038 ha of peatlands had also been converted into oil palm plantations in 2009 alone, which was a 113% increase of recorded area of peatlands converted into oil palm plantations in 2003. Sarawak had the highest proportion (37.45%) of oil palms planted in peatland area, followed by the Peninsular Malaysia (8.29%) and Sabah with (1.60%). Nationally, Malaysia’s palm oil cultivation was on 27.4% of peatland.  With estimates of 60 tonnes of carbon dioxide released annually per hectare of peatland converted, the best-case scenario stands at 12.4 t CO2 eq/ha/year with the worst-case scenario at 76.6 t CO2 eq/ha/year.  This is because tropical peatlands act as carbon stores and when cleared, greenhouse gas emissions are released into the atmosphere.
Percentage of tree loss in the time-series from 2001 to 2016 in the whole territory, all palm oil concessions, and only RSPO concessions of Indonesia, Malaysia and Papua New Guinea.
Greenhouse gas emission for oil palm planted on peat (t CO2 eq/ha/year)
As the palm oil industry is rapidly expanding and remains one of the largest sources of revenue for the country, the effectiveness and verification of the Malaysia Sustainable Palm Oil (MSPO) Certification Scheme which is a new mandated sustainability standard by the end of 2019 has yet to be seen. Dr. Helena Varkkey, Associate Professor at the Department of International and Strategic Studies of University of Malaya, believes that “With current worldwide attention now on sustainable palm oil, Malaysia has the opportunity to further differentiate itself from other producer states by focusing on areas of environmental and social sustainability, like reducing chemicals and fertiliser use and improving labour conditions.” Besides having better environmental management and employment policies, she adds that “transferability of sustainable practices from larger plantations to smallholders should be further encouraged, to ensure sustainability and traceability across the supply chain.”
Some argue that MSPO’s model for sustainable palm oil certification has managed to slow down the rate of Malaysia’s deforestation while others call for greater cooperation between the EU and palm oil producing countries in incentivising schemes like MSPO. There are also still gaps in policy and implementation of sustainable palm oil as federally-mandated certification does not mean the Malaysian government has direct control over land-use policies as they fall under the purview of state governments. Nevertheless, there is a greater push for sustainability certification and utilising biomass from palm oil within the country. Ensuring the preservation of biodiversity, shifting from monoculture to polyculture planting, fertilizer management, closer monitoring of land-use changes and enforcement of environmental laws are some major steps that should be undertaken to ensure the sustainability of palm oil production and also the race against climate change. 
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