Oil palm plantation has expanded rapidly in Indonesia, driven by the enormous increase in the global demand for oil palm products. While the production and exporting of oil palm products have stimulated economic growth and improved living standards of local people, the expansion has imposed significant costs on the environment. Indonesia faces tough challenges to balance oil palm production with the growing commitment to protect tropical forest and peatland. This research offered a comprehensive assessment of the local responses in land-use changes and the associated environmental impacts in Indonesia to the dynamics on the global market of oil palm products. We employed generalized geo-economic gravity models to project export demand for oil palm products from Indonesia by 2050 under three different international trade scenarios. With the help of parametric survival analysis, we allocated the projected demands to 1km × 1km grids across Indonesia and quantified the possible trade-offs between oil palm expansion and environmental conservation. Results show that about 313–679 million tons of oil palm products (oil palm fruit equivalent) from Indonesia would be needed by 2050, which means about 18.58–45.59 million hectares of new plantation. We estimated that 8%–22% of secondary forest and 21%–54% of peatland would lose to oil palm expansion by 2050 if the expansion follows the historical pathways. Shifting the expansion from natural forest and peatland to degraded land with low environmental values would reduce the CO2 emission by about 87–142 Mton/year, at the expense of increased transportation and infrastructure accessibility costs. This shift towards sustainable palm oil production can be facilitated by extending current policies and regulations to secondary forest, enforcing stricter restrictions on peatland, supporting infrastructure development, and providing economic incentives.
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