Palm oil cultivation has been criticized for impacts on the natural environment,[76][77] including deforestation, loss of natural habitats, which has threatened critically endangered species such as the orangutan[78][79] and Sumatran tiger,[80] and increased greenhouse gas emissions.[77][81] Many palm oil plantations are built on top of existing peat bogs, and clearing the land for palm oil cultivation may contribute to greenhouse gas emissions.[81][82]

Environmental groups such as Greenpeace and Friends of the Earth oppose the use of palm oil biofuels, claiming that the deforestation caused by oil palm plantations is more damaging for the climate than the benefits gained by switching to biofuel.[82][83][84] However, research conducted by the Tropical Peat Research Laboratory shows that oil palms plantations act as carbon sinks, converting carbon dioxide into oxygen[85] and, according the Malaysia's Second National Communication to the United Nations Framework Convention on Climate Change, the plantations contribute to Malaysia's status as a net carbon sink.[86]

Efforts to promote sustainable cultivation of palm oil have been promoted by organizations including the Roundtable on Sustainable Palm Oil[87] and through support for conservation and rehabilitation of tropical forest, including by the Malaysian government, which has committed to preserve 50 percent its total land area as forest.[17]