Palm oil is a vital ingredient in many foods, beauty products, cleaning products and biofuels. But it has also been a massive cause of deforestation in South East Asia in recent years.
Companies are increasingly exploring substitutes to cut the risk they face from deforestation in their supply chains. One novel palm oil substitute is yeast-derived oil, a form of microbial oil. While it cannot be produced at the rate that would satisfy palm oil demand, it can overcome challenges other palm substitutes have stumbled at.
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An over-reliance on palm oil for foods and other consumer goods has driven deforestation across South East Asia at a rate that is not sustainable for the climate, wildlife, or the people who rely on the forests. The expansion of palm tree plantations requires massive amounts of deforestation, mostly in Indonesia and Malaysia, because plantations are only fully effective for around two decades. After this point, old palm trees are felled and more nutrient-rich land is sought out and deforested.
As well as driving climate change, companies are exposed to a range of risks when they rely on unchecked deforestation in their supply chains, including regulatory risk, physical risk, reputational risk and financing risk.
To counter deforestation risk, many companies are seeking to substitute palm oil for another similar product. However, an oil that fulfils all of palm oil’s qualities is hard to come by and none have yet fully risen to the challenge.
One emerging branch of research into palm oil substitutes focuses on oil derived from yeast. For example, a yeast called Metschnikowia pulcherrima that is found on grapes releases a significant amount of oil that can be processed in the same way as other vegetable oils. Other microbial oils have also been investigated as potential substitutes for palm oil, such as the microalgae Prototheca moriformis.
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By GlobalDataPalm oil’s functionality unchallenged until now
A major issue with previous attempts to substitute palm oil is that no potential substitutes are as versatile. Other vegetable oils, like soybean oil, sunflower oil, or rapeseed oil, can be substituted for palm in generic food applications like cooking oil.
However, due to palm oil’s specific composition, it can be ‘fractionated’: separated into a solid fat and a liquid oil. Fractionating multiple times produces fats and oils with specific properties for specialised applications, such as making them suitable for chocolate spreads, biofuels, margarine, or cooking oil. Other oils do not have this level of versatility.
A 2025 study into the microalgae Prototheca moriformis found iterative rounds of mutagenesis (the process of inducing a change in an organism’s genetic information, or DNA) and screening could ensure the microbial oil featured properties, including versatility, close to that of palm oil.
Yeast-derived oil has also been found to exhibit similar properties to palm oil when it is cultivated in a certain way, meaning it could also overcome the barriers faced by soybean, sunflower, and rapeseed oil.
Microbial oil not abundant enough – but production is rising
The other main problem with substituting for palm oil is that other sources of oil simply are not as abundant as oil palm. According to GlobalData, over 20% more palm oil than soybean oil was produced in 2024 worldwide. The discrepancy between rapeseed and sunflower oil and palm oil is even starker.
Even if soybean oil were to replace palm oil, it would not alleviate many concerns around deforestation. Soybean production is more land-intensive than oil palm production, so this would require massive land change, particularly in Brazil. Companies that switch to soybean oil would arguably just be shifting their land-use change and deforestation from South East Asia to South America.
Microbial oil, derived from yeast or microalgae, is being produced at a scale nowhere near that of any vegetable oil, so it will not displace palm oil in the foreseeable future.
Production is, however, scaling up. Dutch start-up NoPalm will begin production at its demo factory in 2026, producing 1,200 tonnes per year. Once this is established, it plans to set up a commercial plant producing between 6,000 and 10,000 tonnes per year.
While still a fraction of the volume of palm oil consumed per year, if the concept catches on and other businesses invest in yeast-derived microbial oil, deforestation driven by palm oil could fall dramatically.
