How Can the Environmental Efficiency of Indonesian Cocoa Farms Be Increased?

Increasing global cocoa demand in the new millennium has triggered farmers in developing countries to expand cocoa cultivation. A challenge is how to sustainably increase cocoa production without causing deforestation. We examine this trade-off around the Lore Lindu National Park in Indonesia and investigate the determinants of environmental efficiency by applying a distance output function that includes cocoa production and rainforest plant abundance. We analyze 208 cocoa producers' variables from 2015 using both measured and self-reported data. We find that cocoa intensification results in higher ecosystem degradation, and that producers in our sample display a 50% mean efficiency. This low value points to the increased infestation of cocoa pod borer and the failure of the Gernas government program. Increasing efficiency could lead to a win-win-win situation: higher cocoa production from fewer hectares, and with more native rainforest plants co-existing with cocoa on those hectares. On average, efficiency scores suggest that there is scope to expand production by 367 kg of cocoa per farm and year on the existing planted area, to increase rainforest plants per 5 ∗ 5 m area by 109 while maintaining existing areas and production levels, or to reduce acreage by 0.52 ha per farm without reducing production.