Forest Fires in Indonesia:

Causes, Costs and Policy Implications

Luca Tacconi
Center for International Forestry Research (CIFOR) Bogor, Indonesia
 TABLE OF CONTENTS

List of abbreviations ..........................................................................................

Acknowledgments ..............................................................................................
Executive summary ............................................................................................
1. Introduction ............................................................................................
2. Extent of forest fires during ENSO 1997/98 ..........................................
3. Policy issues related to forest fires .........................................................
3.1 Smoke haze pollution and carbon emissions ................................
3.2 Forest degradation and deforestation and loss of various
forest products and services ..........................................................
3.3 Losses in the rural sector ..............................................................
4. Re-calculate the economic costs due to the 1997/98 forest fires ...........
4.1 Estimated aggregate value ............................................................
4.2 Recalculate the cost components ..................................................
5. policy implications and recommendations .............................................
5.1 Costs and economic appraisal .......................................................
5.2 Fire, degradation and deforestation and land use allocation .........
5.3 Fire and smoke haze pollution ......................................................
5.4 Fires and laws ...............................................................................
5.5 Carbon Sink ..................................................................................
5.6 Fire, ENSO and human factors .....................................................
Final note ...........................................................................................................
Reference ...........................................................................................................
Attachment .........................................................................................................
List of abbreviations
ADB Asian Development Bank
ASEAN Association of Southeast Asian Nations
BAPPENAS National Development Planning Agency
C1FOR Center for International Forestry Research
ENSO El Nino Southern Oscillation
FAO United Nations Food and Agriculture Organization
GTZ Deutsche Gesellschaft fur Technische Zusammenarbeit
1FFM Integrated Forest Fire Management project (Integrated Management Project
Forest fires)
1SAS Institute of Southeast Asian Studies
Thank-You Note

This study was carried out for the 'The Underlying Causes and Impacts of Fires in
Indonesia' project with funding from the European Commission SCR Common Service for
External Relations 13-line Line (137-6201).
Thank you for the input provided by Jozsef Micski, Forest Liaison Bureau of the
European Commission, Jakarta; NG Ginting, Forestry Research and Development Agency,
Ministry of Forestry, 1ndonesia; Jeff Bennett, Australian National University; 1van
Anderson, formerly involved in the Forest Fire Prevention and Control Project (European
Commission); Anja Hoffmann, formerly involved in the Integrated Forest Fire Management
Project (GTZ); Peter Moore and Nina Hasse, FireFight Southeast Asia (WWF-1UCN)
project; Pete Vayda, Rutgers University and my colleagues at C1FOR Unna Chokkalingam,
Ken MacDicken, Mike Spilsbury and Takeshi Toma. Thank you to Soni Mulyadi and Yayat
Ruchiat who prepared the map for this report. Also, a thank you to Petrus Gunarso, who
contributed to the improvement of the Indonesian version of Occasional Paper. Gideon
Suharyanto and Paul Stepleton provided constructive input into the editing process and
publication layout
Executive Summary
Lately forest fires have become
an international concern as an
environmental and economic issue,
especially after the 1997/98 El Nino
(ENSO) disaster which devastated 25
million hectares of forestland
worldwide. Fire is considered a
potential threat to sustainable
development because of its direct
effect on ecosystems, the contribution
of carbon emissions and their impact
on biodiversity. Haze pollution is a
recurring problem even during the
years when ENSO events in Indonesia
and neighboring countries did not
occur. During the 1997/98 ENSO
event, 1ndonesia experienced the most
severe forest fires in the world. The
same problem was repeated in 2002.
Although various studies on
forest fires have been carried out, little
progress has been made to overcome
this problem in Indonesia. Reasons
include policy confusion, limited
understanding of their impact on
ecosystems, and blurring about the
various causes of forest fires as a
result of uncertain economic and
institutional responses to forest fires.
Policy problems related to fire can be
defined as follows:
 Smoke haze pollution;
 Forest degradation and
deforestation (with results) forests
and services which are also lost);
and
 Negative impacts on the rural
sector
Some of the main causes of
policy problems related to forest fires
are then investigated. As it turns out,
there are various main causes besides
policy problems, and besides that the
policy problems in each country are
also different. Information about the
extent and location of forest fires in
1997/98 was collected and the
estimated area of the area affected by
forest fires was revised from 9.7
million hectares to 11.7 million
hectares.
The impact of the 1997/98
forest fires on the ecosystem was also
revised. Fires resulting in forest
degradation and deforestation cost an
economy of around 1.62-2.7 billion
dollars'. Costs due to smoke haze
pollution are around 674-799 million
dollars; these costs are likely to be
higher because estimates of the
economic impact on business activities
in Indonesia are not available. The
valuation of costs related to carbon
emissions shows that it is likely to cost
as much as 2.8 billion dollars.
Revised estimates of economic
costs due to forest fires and haze
remain important and lead to
important issues that need to be
resolved to avoid similar impacts,
especially during ENSO. However, the
steps taken need to cover specific
policy issues, take into account the
relevant costs to calculate the benefits
derived from the proposed policies and
be able to resolve the specific causes
of the problem of forest fires. That is,
the policies taken must be reviewed in
accordance with their feasibility to
address the problem of forest
degradation and deforestation or the
occurrence of haze on a large scale.
Conclusions and recommendations
Fire, degradation and deforestation
as well as land use allocation
 In many places the problem of
forest allocation for the benefit of
other land uses, such as oil palm
plantations, and the factors that
form the basis for making decisions
on land allocation are generally the
root causes of deforestation, fires
are not the cause;
 Therefore, in many cases, it is not
the forest fires themselves which
are the cause of the policy
problems, so that the use of fire in
plantation management need not be
banned at all as is now stated in the
law;
 Introduction of better forest
management practices might result
in a reduction in the risk of forest
fires, given the existing socio-
economic and institutional
conditions;
 To support better resource
management, research is needed to
assess forest areas with low access
(using concertative parameters
related to human access), primary
forest areas and secondary forests
that potentially present
environmental conditions that lead
to a significant risk of forest fire.
Fire and smoke haze pollution
 Further analysis is needed to
explain the relative contribution of
various activities to smoke haze
pollution. However, from the
presentation of general information
it is clear that plantation activities
are not the only contributing factor,
at least during ENSO. During
periods that were not influenced by
ENSO, plantation activities were
indeed a major factor, but the
increasing role of the activities of
small-scale land users, especially in
West and Central Kalimantan, also
needs to be assessed;
 During the ENSO period, degraded
peatlands are likely to be the
highest risk factor for haze.
Management and finally
regeneration / restoration of
peatlands may need to be done to
avoid severe air pollution disasters;
 Reduction and / or management of
forest fires for the opening of peat
forests may be very influential in
eliminating the problem of haze as
long as ENSO is not in progress.
However, the costs, benefits and
aspects of spreading policy
initiatives aimed at reducing the
impact of forest fires need to be
assessed;
 There is still a significant lack of
knowledge, at the level of policy
making (district and provincial),
about the human activities that
contribute to this problem in most
parts of Indonesia, including the
matters mentioned above. This
knowledge gap needs to be filled to
develop appropriate policy
responses.
Fire and the laws
 Regulations must be revised. There
must be a prohibition on burning
that causes significant haze, such as
burning on peatlands, although the
use of fire in situations and
locations that might have
undesirable local effects of smoke,
 for example, on health or
transportation, must be regulated.
In the case of forest fires that cause
unwanted deforestation, the
authorities must be given the power
to regulate (including prohibiting)
the use of fire at certain times, such
as during the ENSO period;
 Feasibility analysis is needed on
laws governing peatland
development, including social,
economic and environmental
implications;
 Clear examples of punishment need
to be given to make changes to the
company's use of fire effective;
meaning companies that use fire in
a way illegitimate needs to be
prosecuted. If they are proven
guilty they will be fined a large
enough amount to make them
deterrent;
 If the community's livelihood
activities are related to the issue of
forest fires or haze, then only
community-based initiatives or
activities, supported by legislative
instruments, will succeed.
Carbon sinks
 Because peat forest fires have a
large part in carbon emissions, it is
important to consider whether
conservation of peatlands should be
included in the commitment of both
protocols
Kyoto
Fire, ENSO and human factors
 The Indonesian government,
industry and NGOs must go far
beyond looking for forest fires and
trying to establish serious
partnerships to overcome these
environmental, economic and social
problems nationally and
internationally.
Economic costs and valuation
 policy initiatives aimed at resolving
issues related to forest fires are
necessary take into account the
costs and benefits associated with
the use of fire, and also its spread;
 Economic assessments of policies
aimed at resolving specific policy
problems, such as deforestation and
forest degradation or haze
pollution, must also
consider the various causes of
forest fires and their different
effects;
 Incentives for forest concession
holders investing in forest fire
prevention and suppression efforts
need to be understood;
 Resolving the haze problem is
important, but the problem of
deforestation and forest degradation
due to forest fires also needs to be
resolved because it can cause huge
losses;
 Further research and policy studies
should be directed at increasing
understanding of the damage
caused by forest fires to forest
functions, to estimate all potential
losses from smoke haze pollution;
 Economic indicators, as well as
environmental indicators need to be
considered in developing policies
aimed at minimizing the impact of
forest fires and haze pollution
1. Preliminary
In recent times forest fires have
increasingly attracted international
attention as environmental and
economic issues, especially after the
1997/98 El Nino (ENSO) disaster
which devastated 25 million hectares
of forestland worldwide (FAO 2001;
Rowell and Moore 2001). Fire is
considered a potential threat to
sustainable development because of its
direct effect on ecosystems (United
Nations International Strategy for
Disaster Reduction 2002), its
contribution to increasing carbon
emissions and its impact on
biodiversity. In Southeast Asia,
concerns about the impact of forest
fires are quite significant, which is
indicated by the signing of the
Association of Southeast Asian
Nations (ASEAN) Cross Border
Pollution Treaty in June 2002 in Kuala
Lumpur. 'Forest fires' is one of the
priorities stated by the Indonesian
Ministry of Forestry and actions to
address this issue are included in the
commitment documents to donor
countries that are included in the
Consultative Group on 1 Indonesia
(CG1).
In 1997/98, Indonesia
experienced the most severe forest
fires in the entire world. The image of
a city filled with fog, burning forests
and suffering orangutans is displayed
on the front pages of newspapers and
television and attracts public attention.
Neighboring countries such as
Singapore and Malaysia, as well as
development aid agencies, are
involved in efforts to extinguish the
forest fires. This event was declared as
one of the worst environmental
disasters of the century (Glover 2001),
because of its impact on the forest and
also the amount of carbon emissions it
generates.
Although increasing attention
to the problem of forest fires and
various measures have been made to
avoid, reduce or reduce the effects of
unwanted forest fires, the smoke haze
pollution 'still occurs at different levels
in the same location each year in
Southeast Asia; the highest level
occurred in August-October 2002
since the 1997 forest fires.
Furthermore, although
numerous studies on forest fires have
been carried out, little progress has
been made to overcome this problem
in Indonesia.
Reasons include the confusion
of policies, limited understanding of
their impacts on ecosystems and the
economy, and the ambiguity of
various causes of forest fires as a
result of uncertain economic and
institutional responses to forest fires.
For example, the difference between
losses due to haze pollution and forest
fires, various sources or causes and the
importance of policies that have
specific targets are often not
considered. Until now the cause of
forest fires is still a topic of debate;
whether it is a natural disaster or
because of human activity (Colfer
2002). In addition, various proposed
policies are sometimes not based on
the analysis of the costs and benefits
of specific actions taken to resolve the
problem and its causes. This report
reviews and defines the limits of
various policy issues and identifies
general policies that may be needed to
deal with the negative effects of forest
fires.
This report begins by
integrating information about the
extent and location of forest fires. The
next focus is determining the policy
problem. Some of the main causes are
highlighted by explaining land use
activities that contribute to forest fires.
The root causes of forest fires that
occur in various land use activities,
such as institutional arrangements and
incentive structures faced by
stakeholders in using and / or
controlling forest fires, are not
analyzed. Analysis like this is outside
the scope of this report, but is needed
to develop appropriate policies;
therefore it will be the focus of further
research. This report further outlines
the results of studies and analyzes of
the impact of forest fires on
ecosystems. This report pays special
attention to the assessment of
economic costs due to the 1997/98
forest fires. Economic assessments of
various emerging disasters can be used
to: i) draw attention to the problem
and highlight its role, ii) assess the
extent of its impact on the economic
sector and the population and iii)
evaluate policy improvements. An
assessment of the economic costs of
forest fires in Indonesia in particular
has been used to draw attention to this
problem but attention has been paid to
expansion the impact is limited and is
not used properly in evaluating policy
improvements. Therefore, this report
seeks to present estimates and
comments for future use in future
studies with the aim of assessing
policies specifically.
This study is the first step
needed to identify further research
needed to clarify i) the details of the
direct causes and root causes of the
problem and ii) various appropriate
policy responses. Comments on these
two issues are also presented at the
end of this report.
Before starting the analysis it
should be noted that because the
severity of forest fires and their impact
is increasing in the world, policy and
economic analysis due to forest fires
needs greater attention. 1su related to
the methodology that appears in this
report is expected to be useful for
similar studies in other regions.
2. Extent of forest fires during
the 1997/98 ENSO event
The most complete national
assessment of the area of land burnt
during the 1997/98 ENSO event
estimated total burnt land of around
9.75 million ha (BAPPENAS-ADB
1999, subsequently, ADB study
[ADB, Asian Development Bank;
BAPPENAS, National Development
Planning Agency of 1nd Indonesia])
(Table 1). This estimate is updated
based on the following discussion and
summary results

Table 1. ADB calculations for fire-affected areas in 1997/98 (hectares)

Vegetation type Sumatera Java Kalimantan Sulawesi West Papua Total
Mountain forest 100.000 100.000
Hutan dataran rendah 383.000 25.000 2.375.000 200.000 300.000 3.283.000
Lowland forest 308.000 750.000 400.000 1.458.000
Shrubs and dried grass 263.000 25.000 375.000 100.000 763.000
HTI 72.000 116.000 188.000
Plantation 60.000 55.000 1000 3000 119.000
Agriculture 669.000 50.000 2.829.000 199.000 97.000 3.843.000
Total 1.755.000 100.000 6.500.000 400.000 1.000.000 9.755.000
Source: BAPPENAS-ADB (1999)
Source: The spread of smog was obtained from Barber and Schweithelm (2000)
are presented in Table 4. A description
of the geographic area discussed in
this report is presented in Map 1. The
ADB study was developed from an
initial national assessment conducted
in 1997 by Liew et al. (1998) were
then revised, including an additional
peat swamp area that burned in
Sumatra covering 316,000 ha (Liew et
al. 2001). As such ADB estimates are
adjusted based on this latest data;
The Integrated Forest Fire
Management (1FFM) project (funded
by the German Government,
hereinafter known as the GTZ study
[Deutsche Gesellschaft fur Technische
Zusammenarbeit]), carried out a
detailed assessment of forest fires in
East Kalimantan in 1997/98
(Hoffmann et al. 1999). " There are
some differences between the
estimates of the GTZ study and the
ADB estimates (Table 2): Estimates of
swamp forest and mangrove wetlands
that were burned 50% higher than the
results of the GTZ study, however, the
results of the ADB study do not
provide the same details for this
category as those given by GTZ, data
integration cannot be provided.1 This
is because burning peat swamp forests
will release far more carbon than
burning mangroves, so ADB estimates
can be considered conservative.
Lowland and sub-mountain
forests are similar categories in the
two studies conducted and can
therefore be integrated. 'Unproductive
dry land' and 'open land (savanna),
weeds and shrubs' are similar
categories. However, note that in
Table 1 only 375,000 ha were
classified as 'dry bush and grass',
which is smaller than land forest fires
classified in the 'unproductive dry
land' category in East Kalimantan
(Table 2). It can therefore be assumed
that forest fires in the unproductive
dry land area are included in the
'agriculture' category by ADB. The
agricultural land category is reduced,
but not for all other agriculture
categories because the estimates for
the 'agriculture' category in the ADB
study are too low.
There are fundamental
differences in the 'industrial plantation'
category. This difference is not
surprising because the ADB study
conducted relied on data provided by
the Forestry Service in East
Kalimantan, which was not based on a
comprehensive assessment of remote
sensing data. A similar argument
applies also to the 'estate' category.
Therefore the ADB estimate is higher.
The difference between the estimates
made based on these two studies
turned out to be quite large. However,
after the figures for industrial
plantations and plantations (which in
the ADB study were not based on
remote sensing analysis) have been
adjusted, and now the difference is
only about 10%.
A study to assess peat forest
fires in Central Kalimantan (Page et al.
2002) estimates that in a study area of
2.5 million ha, including the Rice
fields Million Hectares project, forest
fires cover an area of approximately
797,000 ha. Of total

Table 2. Comparison of calculated area of burnt area in East Kalimantan, 1997/98

Vegetation / land use ADB GT% Difference
Swamp forests, mangrove wetlands, including: 433.000 693.259 260.259
- Peat swamp forest 311.098
- Wetlands 290.432
- Mangrove 91.729
Lowland forest 1.862.000 2.177.880 315. 880
Sub-mountain forest 4.000 213.194 209.194
Dry land that does not produce 798.000
Open land, alang alang, bush 292.569 -505.431
HTI 116.000 883.988 767.988
Plantation 15.000 382.509 367.509
Agriculture 301.000 459.239 158.239
Settlement 7000 -7000
Shrimp Pond 316 316
Total 3.536.000 5.102.954 1.566.954
Source: BAPPENAS-ADB (1999); GTZ: (Hoffmann dkk. 1999).

burned forest areas, forest fires
occurred in 729,500 ha of peat forest,
almost the same as the ADB estimate,
which is 750,000 ha burned
throughout Kalimantan. Considering
the estimated area of peat forest burnt
in East Kalimantan by GTZ (311,000
ha), and other peat forest areas not
included in the study Page et al.
(2002), namely in Central Kalimantan
and also in West Kalimantan, it is
clear that the area of peat swamp
forest that burned in all of Kalimantan
in 1997/98 far exceeds 1,000,000 ha.
Therefore, by adding estimates of peat
swamp forest conducted by Page et al.
2002 into the GTZ estimate, the
combined estimate for Kalimantan is
1,100,000 ha.
An estimate of the area of
peatland that was burned across
Indonesia was also presented by Page
et al. 2002, but not adopted here for
the following reasons. This estimation
results in a higher range of around 7
million hectares by incorporating an
estimated proportion of the area burnt
in the study area in Central
Kalimantan (33.9%) into the area of
national peatlands (20.07 million ha).
However, there is no evidence that this
proportion may be true at the national
level. Therefore the proposed range is
lower, at 2.44 ha based on 'a
combination of verifiable and non-
verified sources' but no explanation
for these sources.
Detailed estimates of the area
of burnt areas throughout Sumatra do
not yet exist, other than those
calculated above (Liew et al. 1998;
Liew et al. 2001). An assessment of
the burned area in Lampung and South
Sumatra Provinces resulted in an
estimated total burned area of around
one million hectares (Legg and
Laumonier 1999), but details of the
type of vegetation burned were not
carried out. Further assessment of the
burned area is available for the South
Sumatra region (Forest Fire
Prevention and Control Project 1999).
This study yields an estimated area of
burning about 2.8 million hectares. If
you consider the estimated area of the
burned area is higher than the total
area reported by ADB for the whole of
Sumatra. This can be an indication
that ADB estimates are more
conservative. However, the data
presented in Table 3 are almost certain
to show an estimated figure that is
higher than the actual area of burned
area.5 Due to data uncertainty and the
fact that the estimation is not possible
to update the figures from the ADB
study, the estimation made ADB has
not been revised.
The conservative estimates
presented in Table 4 show an increase
in the area affected by forest fires by
around 1.94 million ha. This increase
occurred in lowland forests and peat
swamp forests, respectively around
315,000 ha and 666,000 ha.
3. Policy issues related to
forest fires
National and international
NGOs, aid agencies and the media
have used 1997/98 forest fire cost
estimates to emphasize the severity of
the 'problem of forest fires,' the need
for government action to prevent
further forest fires and
control it. The recommended policies
vary greatly and concern the forestry
and agricultural sectors, including oil
palm and HT1 plantations, as well as
smallholder plantations. These policies
include the prohibition or freezing of
forest conversion to the improvement
of land allocation policies and forest
fire control procedures that have been
available, with the adoption of
reducing the impact of logging
activities, strengthening regulations
and penalties for those who open land
on plantations by burning land and
rationalizing land use which involves
communities to develop land use
consensus and establish community
responsibilities and commitments
(BAPPENASADB 1999; Barber and
Schweithelm 2000; Applegate et al.
2001; Glover 2001; Qadri 2001;
Siegert et al. 2001).
 The notion that 'forest fires' is a appropriate land management
policy problem, or as a single policy tool;
problem so that general
recommendations are needed to solve
it is a false thought. The impact of
forest fires is a series of various
problems. Without acknowledging that
this problem actually has two
important implications:
a. There is a risk that all forest fires
are considered a problem rather
than thinking in what
circumstances fire can be an

Table 3. Calculation of the area burned during the 1997 dry season in South Sumatra

Burned area
Land status and land use Ha % from
the total
Non-forest area 2.097.050 75
Controlled fires 1.501.000 54
- Irrigated rice fields 390.000 14
- Moving cultivation 894.000 32
- Paddy fields in swampy areas 145.000 5
- Land clearing in old rubber plantations by small cultivatorskecil 14.000 1
- Land clearing in old coffee plantations 8000 0
- Land clearing by plantation companies 50.000 2
Uncontrolled fire 596.050 21
- Oil palm / rubber plantations and other large scale plantations 13.800 0
- secondary forest 100.000 4
- Shrub and shrub vegetation that was burnt due to previous 290.000 10
wildfiressebelumnya
- Shrub and shrub vegetation 30.000 1
- Meadow 30.000 1
- Plantation area of small farmers 30.000 1
- Transmigration area 250 0
- Others 102.000 4

Forest land 700.988 25

Controlled fires 70.000 3
- HPHTI Industrial Plantation Forest, land clearing 70.000 3
Uncontrolled
Uncontrolled firefire 630.988 23
- PH in primary and secondary forests 10.491 0
- HTI Reforestation 14.494 1
- Reforestation other than in HTI 5000 0
- Shrubs and shrubs 393.000 14
- Meadows, degraded forests 30.000 1
- Swamp and peat areas 173.000 6
 - Others 5000 0
Total controlled fires 1.571.000 56
Total wild fire 1.227.038 44
Total fires (controlled and uncontrolled) 2.798.038 100
Sumber: (Forest Fire Prevention and Control Project March 1999)

Table 4. Calculation of area revised fire-hit areas in 1997/98 (hectares)

Tipe vegetasi Sumatera Java Kalimantan Sulawesi West Papua Total
Mountain forest 213194 100000 313194
Hutan dataran rendah 383000 25000 2690880 200000 300000 3598880
Lowland forest 624000 1100000 400000 2124000
Shrubs and dried grass 263000 25000 375000 100000 763000
HTI 72000 883988 955988
Plantation 60000 382509 1000 3000 446509
Agriculture 669000 50000 2481808 199000 97000 3496808
Total 2071000 100000 8127379 400000 1000000 11698379
Source: Obtained from (BAPPENAS-ADB 1999). The numbers in italics are the latest calculation

b. We might miss the opportunity to by forests, including timber, non-

highlight the fact that forest fires
might have different impacts (for
example, according to the location
and area affected) so that needs to
be resolved with different
policies.
In connection with the first
point, there have been many serious
discussions in Indonesia regarding the
extent of forest fires, but it has not
been explained which forest fires are
considered a problem, meaning which
forest fires have undesirable impacts.
In the case of forest fires in Indonesia,
the three main policy issues identified
in relation to forest fires are as
follows:
 smoke haze pollution, carbon
emissions and other related
impacts;
 forest degradation and
deforestation, and loss of forest
products and various
environmental services provided
timber forest products, soil
erosion and loss of flood control
functions, biodiversity; and
• losses in the rural sector due to
wild forest fires and weather
anomalies triggered by forest
fires.
Carbon emissions can also be
considered a separate problem because
they are environmental issues that
occur globally. But the issue of carbon
emissions due to forest fires that are
not considered too important by the
government, will be discussed later.
Biodiversity loss may be more a
concern of international groups than
the government itself. These three
policy issues will be discussed one by
one later. The problem of losses in the
rural sector is briefly highlighted. This
issue is not prominent in the important
policy agenda at the international,
national and even provincial level and
has not been the focus of in-depth
research.
3.1 Smoke haze and carbon
emissions
Smoke haze pollution is a
major policy issue related to fires and
attracts the attention of neighboring
countries and through the pressure
they exert, draws the attention of the
Indonesian government. There is
several smoke haze pollution events
that have crossed national borders
over the past two decades, and most
importantly, the events related to the
biggest forest fires of 1997.
In Indonesia, peat forest fires
are the biggest contributor to smoke
haze pollution. In 1997/98, peat forest
fires probably produced 60-90% of
emissions which caused haze and
forest fires were also the main source
of carbon emissions (BAPPENAS-
ADB 1999). In 1997, the main
contributor to smoke haze pollution
that spread to Singapore, mainland
Malaysia and Sumatra was peat forest
fires in the provinces of Jambi, Riau °
and South Sumatra. These fires are
mainly due to land clearing to become
oil palm and HT1 plantations. In
South Sumatra, fires that occur in
wetlands are also caused by
community livelihood activities such
as rice fields, fishing and logging7, but
the extent of their respective causes is
still unknown (Anderson and Bowen
2000; Barber and Schweithelm 2000,
maps 2; Tapper et al. 2001). During
the years outside the ENSO period,
clearing peatlands for plantations
appears to be the main source of haze
(Sargeant 2001).
Although the role of large
companies has been well documented,
there is also an increase in the
influence of smallholder activity as a
contributing factor to the haze
problem. In 1997, peat forest fires in
the Million-hectare Rice Field Project
area created by the government in
Central Kalimantan were the main
source of haze in Kalimantan (Barber,
2000; Siegert, 2001) which also hit
Sarawak. Once again, in 2002, there
was a forest fire in the same area,
which produced a thick haze that
covered Central Kalimantan from
August to October. Fires which caused
thick haze also engulfed the same area
in August 2001 (Anderson 2001).
Extensive forest fires in West
Kalimantan in 1997, possibly clearing
oil palm and HT1 plantations (Potter
and Lee 1999) on peatlands and also
because of the livelihood activities of
the people in the Lake Sentarum
region (Dennis et al. 2000) caused
smoke haze pollution in West
Kalimantan and Sarawak. During
January-April 1998, forest fires in the
Central Mahakam Lake area, it seems
in relation to the livelihood activities
of the population, (Chokkalingam et
al. 2001), as well as large scale forest
fires in other areas of East
Kalimantan, have a big role in smoke
haze pollution in the province. These
forest fires do not result in significant
cross-border pollution.
Fires in southern Papua had a
large share in the haze in 1997.
However, this event was not given
much attention because the haze
spread westward to the sea (Legg and
Laumonier 1999; Tapper et al. 2001)
and hit West Papua's own densely
populated region low population and
no big city.
In conclusion, smoke haze
pollution and carbon emissions are
mainly caused by intentional forest
fires and fire spreads from peatland
areas. The relationship between
burning activities in forests and
plantations in addition to peatlands,
grasslands and other agricultural
lands, is more limited in relevance to
this policy issue.
3.2 Forest degradation and
deforestation and loss of various
forest products and services
The disappearance of the forest
and its various products and services
constitute a large part of the national
policy problem, the loss of which is
borne by Indonesia. Of course there
are foreign stakeholders who are also
concerned about the amount of loss
that must be borne, especially those
related to biodiversity. In 1997/98,
East Kalimantan's lowland forests
experienced the most extensive forest
fires, around 60% of the total forest
area. This region also experiences the
most severe dry season due to the
influence of ENSO (Fuchs and
Schneider 2002). The source of the
fire is still not well understood, but
zones of hotspots are scattered and not
affected by differences in land types
(Steenis and Fogarty 2001). This
indicates that forest fires to the same
extent afflict all arable land and that
wild forest fires are linked to a range
of commercial activities and key
livelihoods. Various activities that
have contributed to the subsequent
forest fires need to be explored.
Considering the area burnt in the HPH
area and protected forest is quite
significant, respectively 2,347,717 ha
and 440,381 ha (Hoffmann et al. 1999,
p 21). accidentally. Whether large-
scale deforestation also occurs, still
needs further study.
The 1997 forest fires were far
more extensive than the period outside
ENSO (Anderson et al. 1999),
indicating that there was a possibility
of accidental fires. But forest fires in
Sumatra, Sulawesi, West Papua and
West Kalimantan and South
Kalimantan appear to have occurred
on cleared lands. In South Sumatra
forest fires hit a large portion of
degraded forest and shrubs (Achard et
al. 1998; Potter and Lee 1999;
Anderson and Bowen 2000; FW1 /
GFW 2002). Noting the difference
between planned forest clearing and
wild forest fires that still occur in
areas allocated for land clearing and
unintentional, the rate of forest loss
due to accidental forest fires turns out
to be quite important in estimating
economic losses, which are detailed in
Section 4 , and for the improvement of
policies that will be developed later.
3.3 Losses in the rural sector
Losses in the rural sector may
be caused by wild forest fires by
agricultural activities or other
activities. Data on potential losses at
the national and local level are very
rarely available. It is likely that this
issue received less attention because
most of the organizations involved in
assessing the impact of forest fires
were mostly concerned with forests
and biodiversity. The possible impact
on the rural sector is less important,
limiting the attention of national and
local stakeholders on this topic and /
or is also a difficult and expensive
assessment to do. Available data
(Jhamtani and Badawi 1998;
Oosterman and Widayat 2001) show
that at least some rural areas are likely
to be affected by wild forest fires. In
addition there are reports of potential
negative impacts of haze on
agricultural production, for example
oil palm (Casson 2000), because it
affects the photosynthesis process, but
other reports state that the cause is the
dry season (United States Department
of Agriculture 1998). However, there
is some evidence to suggest that
smoke is caused by fire. the 1998
forests of Kalimantan have been
holding back rain (Rosenfeld 1999).
Further research into the impact of
haze and forest fires on the rural sector
is specifically needed in areas affected
by significant wild forest fires such as
in East Kalimantan.
4. Recalculate the economic costs
due to forest fires 1997/98
In the 1997/98 forest fires there
were three studies conducted at the
national level (Jhamtani and Badawi
1998; BAPPENAS-ADB 1999;
Glover and Jessup 1999, hereinafter
referred to as the 1SAS study [1
Institute of Southeast Asian Studies]).
The ADB study was developed from
Jhamtani and Badawi (1998).
Therefore, only ADB and 1SAS
studies are considered detailed and a
summary of key assumptions and
parameters is presented in the
Appendix. These two main studies are
examined based on the following
reasons:
- Many practitioners argue that the
two studies support each other's
findings, therefore the results are
widely welcomed. This belief is
based on the fact that the ADB
study, which covered forest fire
incidents that occurred in 1997 and
1998, calculates the area of burnt
area and also the total loss in the
economic sector, whose value is
almost double the value in the
1SAS study, which only covered
the year 1997 only;
- weaknesses or weaknesses in one
study
can be highlighted by other study
findings;
- The estimation can be used to
complement each other.
Recounting economic losses is
carried out in a framework that
highlights the difference between
tangible tangible costs and intangible
costs (Bureau of Transport Economics
2002). These tangible costs are
calculated through market values such
as infrastructure damage (direct costs)
and production losses (indirect costs).
While intangible costs are costs that
have no market value such as negative
impacts on health (direct costs) and
disruption of social activities (indirect
costs). Intangible costs are more
difficult to calculate, so they must be
based on various estimates. The
importance of intangible costs should
not be underestimated simply because
these costs are difficult to calculate,
although, the reliability of estimates
may be doubtful and may be ignored
by certain stakeholders.
The following data is presented
to highlight the impacts of forest fires
in Indonesia and other countries, as
well as the direct costs of forest fires
and the resulting haze. The estimated
aggregate value will be discussed first.
Then followed by other cost details. If
necessary the estimates have been
revised and summaries are presented
in Tables 8 and 9.
4.1 Estimated aggregate value
The 1SAS study uses the 1997
average Rupiah exchange rate of 2500
rupiah per dollar, while the ADB
study uses the 1998 average Rupiah
exchange rate of 8000 rupiah per
dollar. The crisis in Asia in 1997/98
revealed the economic weaknesses in
Indonesia, including the overvalued
Rupiah. Reviewing this, the exchange
rate that is more appropriate is from
1998.
In the 1SAS study, costs
related to agriculture and health in
Indonesia, which are a category of
costs calculated in rupiah, are then
converted to dollars, respectively
down from 470 million dollars to 147
million dollars for agriculture and
from 924 million dollars to 289
million dollars for health (Table 5).
ADB studies calculate the total
costs of 'forest fires and drought' in
Indonesia. However, the results of this
study are often cited by the media, in
scientific publications (for example,
Barber and Schweithelm 2000), and
also in official documents (for
example, Qadri 2001) as losses due to
'forest fires' only. Therefore
agricultural costs related to drought ($
2431 billion) are not included (Table
6).
Here are significant similarities
and differences between the two
studies (Table 7). Both associate fire
costs as the largest portion of total
costs borne by Indonesia. In these two
studies, smoke haze has a smaller
proportion of costs compared to forest
fires. If regional costs due to smoke
haze pollution.

Table 5. Calculation of 1SAS, adjusted average exchange rate (million dollars)

1ndonesia
Other countries

Rated Not rated Rated Not rated

Cost issues with with Total
with with
money money money money

1. Damage related to fire

Wood 494 494

Agriculture 147 147
Direct benefits from the forest 705 705
Indirect benefits from the forest 1077 1077
Biodiversity that can be obtaineddiperoleh 30 30
Fire control costs 11 13 25
Carbon emissions 272 272
Sub-total 652 1812 13 272 2750

Total cost
740 2101 379 289 3509
Source: Obtained from (Glover and Jessup
1999)

2. Damage associated with smog

Health 289 17 306

Tourism 70 186 256
Transportation 18 7 25
Industrial production losses 157 157
Declining fish catch 16 16
Subtotal 88 289 366 17 760

Total cost 740 2101 379 289 3509

Sumber: Diperoleh dari (Glover dan
Jessup 1999)

Table 6. ADB calculations (million

dollars)

Cost issues 1ndonesia Other Countries Total

Rated Not rated Rated
with with with Total
money money money
1. Costs related to fire
Wood 1461
Dead tree 287
HTI 91
Plantation 319
HHNK 631
Indirect benefits from the forest
Flood prevention 413
Erosion and deposition 1354
Fire control costs 12
Carbon emissions 1446
Buildings and other property 1
Subtotal 2171 2398 1446 6015
2. Costs associated with smog
Health 148
Tourism 111
Transportation 33
Subtotal 144 148 292

Total cost 2315 2546 1446 6307

Source: Obtained from (BAPPENAS-ADB 1999
Table 7. Comparison of the main results of studies conducted by ADB and ISAS
Indonesia Other Countries Total

Cost issues Rated Not rated Rated Not rated

with with with with
money money money money
ISAS Fire costs 652 1812 13 272 2750
Fire contribution in total costs 18,6% 51,6% 0,4% 7,8% 78,3%
Fog fee 88 289 366 17 760
Mist contribution in total costs 2,5% 8,2% 10,4% 0,5% 21,7%
Total cost 740 2101 379 289 3509
Contribution in total costs 21,1% 59,9% 10,8% 8,2% 100%

ADB Fire costs 2171 2398 1446 6015

Fire contribution in total costs 34,4% 38,0% 22,9% 95,4%
Fog fee 144 148 292
Mist contribution in total costs 2,3% 2,3% 4,6%
Total cost 2315 2546 1446 6307
Kontribusi dalam biaya total 36,7% 40,4% 22,9% 100%
added in the ADB study, the total
contribution will increase but only around
5%. Forest fires are indeed the largest
proportion of costs in these two studies, and
in the 1SAS study the intangible costs due to
forest fires reached three times the tangible
costs. According to ADB the contribution of
tangible and intangible costs is equal to the
total cost. These differences indicate that the
two studies do not fully support each other's
findings. Costs for each category need to be
studied in more detail.
Although large plantation areas in
East Kalimantan have also been reportedly
affected by forest fires (Table 4), this area
has not yet been planted. ADB estimates are
used because they relate to the most accurate
costs available. It seems impossible that the
damage caused by forest fires exceeded the
estimates used because national production
statistics for plantation crops that burned (oil
palm, rubber, cocoa) during the 1996-2000
period showed a rising trend in tetape (Agro
Indonesia 2002).
4.2 Recalculate the cost components
4.2.1 Agriculture
The 1SAS study assumes that all
burning agricultural land incurs economic
costs. This study does not take into account
that fires may be deliberately carried out as a
way to cultivate land or when a forest fire
occurs, the land in the absence of plants. In
fact, during the dry season from July to
October 1997 when there was a forest fire,
the land was ready to be planted. Therefore,
only if the burned land is planted with annual
crops, forest fires will cause economic
losses. As for seasonal crops, it is likely that
many areas have not yet been planted or
plants have not yet grown due to drought.
The ADB study uses estimates of
estate crop losses due to forest fires
presented by Jhamtani and Badawi (1998).
4.2.2 Timber
The ISAS estimate is incorrect
because it uses the average remaining forest
stand derived from the average calculation
for Sumatra and Kalimantan but the total
forest area burned in Sumatra and
Kalimantan is different. A calculation of the
weighted average might be more appropriate.
Study 1SAS and ADB may overestimate the
amount of wood burned, because most of the
forest that has been burned has been logged
before. In East Kalimantan, it is known that:
“the burnt area in 1997/98 re-ignited again in
1982/83 ... but now most of the burned area
has been logged or recently converted. So a
large amount of commercial wood whose
diameter exceeds the cutting boundary was
taken before the 1997 forest fires / 98 ... ...
this causes the condition of the wood supply
to be very bad in parts areas damaged by
forest fires 1997/98. "(Hoffmann et al. 1999,
p. 21)”.
The data used in the ADB report
was strengthened through rather limited field
research but the data related to the report in
East Kalimantan was supported by Siegert et
al. (2001). Therefore, ADB estimates are
used and are considered as higher estimation
levels.
The revised estimate for the
minimum value of losses in the form of
wood is based on the consideration that, as
discussed in Section 3, forest fires in
Sumatra, Sulawesi, Papua, West and Central
Kalimantan are likely to occur in land
clearing areas, where forests have been
logged commercially. In addition, forest
areas which have been burnt by accident in
South Sumatra occur in areas that have been
degraded (the Forest Fire Prevention and
Control Project 1999). Therefore, the
estimated minimum loss of wood only covers
the burned area in East Kalimantan.
The real cost of burning wood may
also be lower than assumed here because
immediately after the forest fires, the
Government of Indonesia issued a regulation
that allows 'rescue logging', ie burning trees
can be harvested (van Nieuwstadt et al.
2001). However, there is no data about the
extraction value of burned wood.
4.2.3 Losses in the form of tree death
In theory, tree death can indeed be
calculated as part of the cost of fire.
However, this only applies if forests are not
burned for the benefit of alternative land
uses. Many burned areas were converted to
plantations. Therefore the results of
calculations in the ADB study of the value of
dead trees are too high. As in the case of
wood, the revised estimate for the minimum
value of dead trees takes into account that
forest fires in Sumatra, Sulawesi, West
Papua, West and Central Kalimantan are
likely to occur in land clearing areas.
4.2.4 Industrial plantations
Although the HT1 area is very wide
reported burning in East Kalimantan (Table
4), most of this area is actually
unplanted (Steenis and Fogarty 2001). ADB
estimates related to reported forest fires from
industrial plantations have not been adjusted.
4.2.5 NTFPs and other direct forest
benefits
The 1SAS study adopted a global
estimate of non-timber forest products
(NTFPs) and the value of forest recreation
(Costanza et al. 1997) and then applied them
to Indonesia. However, the results of this
estimation are not validated by referring to
the actual value that is relevant to the forest
ecosystem in Indonesia, so this estimate is
invalid. The reasons for applying the global
estimation are inappropriate will be
explained in the following discussion.
The ADB study obtained data on
NTFP losses by applying the total value of
natural resources extracted per hectare, based
on a study conducted in the Danau Sentarum
wetlands in West Kalimantan (Aglionby and
Whiteman 1996), as part of the total area of
forest that was burned. Based on a sample of
households, the study at Lake Sentarum
extrapolates the total net direct benefits of
the ecosystem that all households living in
this protected area receive. The ADB study
divides the total direct benefit benefit by the
area of the protected area to obtain its value
per hectare. Calculations like this as an
estimate of the value of non-wood forest loss
per hectare of burned forest are not suitable
for the following reasons.
First, let's consider the issue of
applying value per hectare to different
ecosystems. About 60% of total direct net
benefits in the protected area of Lake
Sentarum are obtained from fishing.
However, this activity does not occur at the
same level in forest ecosystems whose
estimates are applied in calculations. In
addition, there is no clear evidence that
shows that the amount of fish caught in lakes
and rivers in East Kalimantan was affected
by forest fires (Sarwono 1989). It is even
possible, although in the short term, fish
catches are increasing due to forest fires,
because the community is actively starting to
increase fishing (Chokkalingam et al. 2001).
econd and related to the above point,
the value of non-wood forest per hectare
losses due to forest fires is actually much
lower than that adopted by ADB (23 dollars).
A study conducted in two villages in East
Kalimantan (Grossmann 1997) found that:
 NTFPs contribute around 9% (26
dollars) of total household cash income
each year (around USD 290) and almost
all of the income from NTFPs (around
77%) comes from illegal fishing;
 The annual replacement value of all
NTFPs consumed by households is
around 20% (58 dollars) of cash income
each year;
 Most NTFPs have a very low density
and most of the plants harvested are
from cultivated species;
 Specifically wild species are collected
from open space, along riverbanks and
on new fallow (unused) fallow land.
Third, the direct benefit gains (ie, the
total value) are an inappropriate measure for
assessing the economic benefits of NTFPs.
"The value of NTFPs from one hectare of
forest is equivalent to the rental price that
will be paid to harvest one hectare of forest."
(Chomitz and Kumari 1998, p. 26). The
economic rent value of NTFPs is close to
zero considering the cost of extraction, which
is the cost of labor, almost as large as the
value of NTFP sales (Chomitz and Kumari
1998).
Fourth, losses due to loss of
cultivated species, such as rattan, may be
quite large (and require further attention) but
these species are better included in losses
related to agricultural products because these
species are cultivated, rather than inflating
their economic value per hectare of forest .
Based on these reasons, the economic
loss of NTFPs per hectare can be assumed to
be zero. And this value can be entered as a
minimum estimate. The estimated maximum
value of losses in East Kalimantan is 1 dollar
/ ha, 9 for 10 years at a discount of 10%.
Forest fires in other provinces are assumed to
be forest fires for land clearing.
4.2.6 Indirect forest benefits
The ADB study calculates the value
of flood prevention and erosion and
sedimentation based on a report that
considers the total economic value of forests
in Indonesia (Whiteman and Fraser 1997).
Regarding flood prevention, forest
conversion and protection, ADB calculates
that land use categories are on a higher slope,
especially important for flood prevention.
Production forests, the land use category
which are mostly in the lowlands, are far less
important in fulfilling this function.70
Additional costs for flooding due to reduced
forest cover include costs for urban and rural
infrastructure, such as schools, markets,
government buildings, mosque and street.
The density of housing and roads in urban
areas is about 11 times greater than in rural
areas. Therefore, the costs must also be
divided proportionally.
In terms of damage to trade crops,
they assume that rice is the main crop that
has been damaged by flooding. The
implications for the assumption of additional
costs due to flooding caused by the 1997/98
forest fires are as follows. Production forests,
i.e. lowland forests, and not conservation and
protection forests, are the biggest land use
category affected by forest fires. Fire-
affected areas have a limited impact, if any,
on downstream urban infrastructure, as well
as village infrastructure downstream. The
burned forest area has no significant impact
on the paddy fields downstream. Regarding
the actual flood events that might have
occurred in areas that were really hit by the
1997/98 forest fires, only the floods that
occurred in East Kalimantan in 1998 were
events that may have been directly related to
forest fires (Glover and Jessup 1999). In fact,
flood events in East Kalimantan were
recorded long before the 1982/83 forest fires
(Massing 1981) and there is no clear
indication whether the flood pattern has
changed. Flooding is an integral part of the
central Mahakam Lake ecosystem on the
Mahakam River (Wetlands 1 International
2002), the largest river in East Kalimantan
that flows through areas hit by forest fires.
Regarding soil erosion and
sedimentation, there are three aspects to
calculating costs. First, it is the costs
associated with soil erosion. Secondly, this
erosion will cause precipitation. Third,
economic costs will arise from these
processes.
The economic value of forests related
to land functions and depositional protection
is obtained by calculating economic costs for
52 large dams and eight ports (Whiteman and
Fraser 1997). Dam names and locations are
not available in this referenced report. We
know that there have been 68 large dams
registered since 1995, "and there are no large
dams in the area affected by forest fires. The
eight national ports mentioned are also not in
the area affected by the fires and so are the
erosion and shallow potentials that they
count.
For the calculation of the value of soil
erosion after forest fires in East Kalimantan,
limited quantitative evidence shows that "the
rate of soil erosion on logged forest (with
heavy, light and no logging density) which
subsequently experiences severe forest fires ,
can still be accepted / tolerated, based on
research conducted 1.5 years after logging
and 6-10 months after forest fires
"(Sudarmadji 2001, p. 43). This research was
conducted in a forest fire area that is not very
extensive and in no way represents the entire
area. For the 1982/83 forest fires, extensive
soil erosion did occur but no quantitative
data was collected (Leighton and Wirawan
1986). In the same province, East
Kalimantan, the level of erosion in logged
forests is known to be almost as high as
logged and burnt forests. That is, forest fires
do not make the level of erosion increases. In
addition, some agricultural activities carried
out in East Kalimantan, such as traditional
pepper plantations (Kartawinata and Vayda
1984) resulted in higher erosion rates than
logged and burned forests.
For losses in the form of silting up,
there is no information confirming that
siltinging occurred. Studies have not been
conducted to assess the impact of soil erosion
and siltation on economic activities. For
example, there is no clear link between
fishing decline and silting in East
Kalimantan after the 1982/83 forest fires
(Schindele et al. 1989). Depreciation that
occurs in certain species seems to be more
related to a combination of drought effects,
forest fires causing deterioration of certain
habitats and due to overfishing.
Based on the reasons above, the
results of the revised estimated costs are as
follows. Forests that are affected by forest
fires have no economic value in terms of
flood prevention (minimum value), which
seems to be supported by the fact that there
were no relevant flood events in the 2 years
after the forest fires associated with the
calculation occurred. If it is assumed that the
burned forest really works for flood
prevention (maximum value), and bearing in
mind that the burned area is a rural area and
not an urban area, the economic value of this
function should not be more than the 9%
assumed in the ADB report (based on 1:11
comparison for rural and urban infrastructure
discussed earlier). Costs due to soil erosion
and silting may be limited (maximum: 9% of
ADB studies), or completely absent
(minimum).
hese estimates are given to show a
picture based on known facts. However it is
also possible that the higher costs associated
with soil erosion and deposition should not
be ignored. There are a number of examples
that show that a significant decrease in forest
cover does not cause an increase in silting
(Alford 1992). However, in addition there is
also evidence that forest fires, especially at
severe levels, usually do cause soil erosion
and silting, although their effects at the
watershed level are not well known (DeBano
2000). Therefore, further assessment of these
biophysical impacts is needed so that the
implications of forest fires on the
environment and economy can be better
understood.
4.2.7 Biodiversity
To calculate losses in terms of
biodiversity, the 1SAS study uses a value of
300 dollars per km2, which is based on
international experience; with indications of
payments ranging from 30- 3000 dollars /
kmz for the protection of tropical forests.
This study shows that this is not an 'actual'
estimate of the value of biodiversity, but
'value that can be obtained', that is, value that
can be obtained from a limited international
market to participate in paying for it. This
estimation raises several questions.
First, the willingness to pay for
secondary forest (most of the lowland forest
that has been burned has been logged, even
in protected areas illegally logged) is
allegedly lower than the stated value.
Secondly, estimates of losses in terms
of biodiversity and also lost wood mean
double counting. If the value of wood is
indeed obtained in full, that is, all the wood
is harvested, the value of biodiversity will
indeed disappear to a significant degree,
unless logging techniques have a mild
impact. However, the value obtained from
timber harvesting will produce various kinds
of benefits and will be reflected in losses in
terms of wood whose value will be lower.
Third, by including the value of biodiversity
loss that is lost forever means that forest fires
cause permanent forest loss, even though the
reality is not the case. Forest fires usually
cause damage72 in some areas and the forest
will regenerate, if other factors, usually
related to human activities, do not prevent it.
Therefore, the relationship between human
disturbance and forest fires that makes the
forest vulnerable to recurrent fires and other
disturbances is the cause of deforestation.
Based on the reasons stated above,
the revised minimum estimate assumes that
the value of biodiversity lost is zero. The
maximum estimate uses the range of
minimum values available from the 1SAS
study (30 dollars ha) which considers that in
fact most of the burned area is secondary
forest and the willingness to pay for this
forest type is definitely lower than for
primary forest.
4.2.8 Carbon emissions
ADB studies report higher carbon
emissions than those reported by the 1SAS
study. As explained below, it is possible that
actual carbon emissions are higher than the
carbon emissions adopted by the ADB study.
Therefore, we focus our analysis on the ADB
study.
Based on ADB studies, from an
estimated 206.6 million tons of carbon
emission due to forest fires, 156.3 million
(around 75%) were produced from burning
peat, which also produced about 5 million
tons (60%) of dust particle material out of a
total of 8, 2 million. These estimates are
based on the assumption that around 750,000
ha (50%) of the area identified as peat
swamp forest in ADB estimates is actually
peatland. If in fact all the areas identified as
'peat swamp forest' were peat and we
adopted the area reported in Table 4, then
carbon emissions from peat could be 442
million tons, bringing the total carbon
emissions to 493 million tons. "This figure is
equivalent to around 30% of global average
annual emissions from land use changes that
took place during 1989-1995 (1PCC 2000),
and peat forest fires contributed 27% of
global emissions caused by land use changes,
using values adopted from ADB study (7
dollars / ton), the total loss will be around 2.8
billion dollars.
From an institutional perspective,
carbon emissions due to land clearing or
other types of forest fires are not in the form
of costs to a country or the global
community. Developing countries (in the
Kyoto protocol requirements, countries not
listed in Appendix 1) do not have to meet
targets to reduce carbon emissions and
carbon emissions from projects that avoid
deforestation are not permitted in the Clean
Development Mechanism as long as the
commitment first. Therefore, even though its
contribution to world emissions is
significant, carbon emissions from forest
fires in Indonesia today cannot be calculated
yet as costs to other countries and do not
represent the potential benefits that should be
derived from projects implemented through
the Clean Development Mechanism.
Therefore, costs related to carbon emissions
are not included in the revised estimated
losses. However, there are policy
implications that will be discussed in another
section of this paper.
4.2.9 Health
To calculate the economic costs of
the impacts of air pollution related to health
as a result of forest and land fires is
particularly difficult because of the limited
background knowledge that studies the
relationship between different levels of air
pollution and their various effects on health
(Osterman and Brauer 2001). The two
authors noted that during the 1997/98 haze
event, there was an increase in hospital visits
in Singapore by 30% for haze related
problems, but a significant increase for those
treated in hospitals and death data are not
recorded. However, after reviewing
epidemiological studies they stated that:
“Research on seasonal exposure to fire
smoke requires observing the time period
of exposure that can be compared with
fire events occurring in Southeast Asia.
Based on this study, it is reasonable to
suppose that the haze event in Southeast
Asia has a series of acute impacts,
including increased mortality, and also
subchronic (periodic) effects on lung
function, respiratory symptoms and
diseases.For this determination the long-
term effects of a single air pollution event
are still difficult, although exposure to
smoke biomass that occurs repeatedly
every year deserved serious attention. "
(Osterman and Brauer 2001, p. 211.)”
Given the uncertainty about the
effects of smog on health and the number of
people affected by forest fires, the results of
ADB and 1SAS studies are used as the
lowest and highest estimates of various
impacts, respectively. The 1SAS estimate for
1 Indonesia is adjusted (-6%) by assuming
that the level of pollution associated with the
1 Air pollution index is 51-100 causing an
increase in health problems, which is actually
not the case (Osterman and Brauer 2001).
5. Policy implications and
recommendations
Smoke haze pollution and forest
degradation and deforestation are the two
main fire-related policy issues which are
 discussed in detail in this report. Losses due
to both during ENSO 1997/98, and also in
recent years, to some degree the causes can
vary. These simple but important findings
need to be recognized to formulate more
appropriate policies. Policies must be
studied for accuracy because they are
important in addressing forest degradation
and deforestation or haze problems.
5.1 Cost and economic valuation
The total cost of fire and smoke haze
pollution in 1997/98 may be lower than
previously thought. The total loss rate is not
included in the table because it is a bit
misleading to add the cost of forest fires to
the costs of fires caused more by haze. For
those who want to know the whole number,
the estimated total cost is between $ 2.3
billion and $ 3.2 billion. It is possible that
losses due to smog were higher than
reported. An assessment of the impact of the
haze on business activities in Indonesia was
not carried out, as shown in Table 9. If it was
considered appropriate to include carbon
emissions in the costs, the total costs could
range between $ 5.1 billion and $ 6 billion.
The revised estimated cost is still quite high,
meaning that there are important issues that
need to be addressed so that similar impacts
can be avoided, especially during the ENSO
years.
However, it should be noted that the
net economic loss from fires, which is the
difference between costs and benefits, is
likely to be lower than the estimated costs. In
most cases fires are ignited because they
provide benefits. For example, it can reduce
the cost of opening up plantations - between
$ 68 and $ 117 per hectare for timber and oil
palm plantations (Guyon and Simorangkir
2002) - or reduce harvesting costs for
livelihoods such as fishing.
Policy initiatives aimed at dealing
with fire-related problems need to take into
account the costs and benefits associated
with the use of fire, as well as their
distribution. For example, assessments of
policies directed at reducing haze pollution
might need to consider the costs of
implementing the intended policy and also
the benefits, which can be assessed as costs
to avoid the effects arising from haze
pollution. To do this calculation requires a
cost-benefit analysis approach in policy
analysis. Alternatively, a cost-effectiveness
approach can also be used. This approach is
used to reduce the costs of implementing
policies aimed at achieving certain targets,
such as reducing health impacts. Of course,
the adoption of one of the two approaches is
a political decision. Therefore, the costs and
benefits of a policy.

Table 8. Economic costs due to fire (million dollars)

A matter of cost Indonesia Other Countries
Minimum
Rated Not Rated Not rated Total Rated
with rated with with Max with
money with money money money
money

Wood 1056 1614

Trees that have died 197 316
HTI 91 91
HHNK 0 8
Plantation 319 319
Indirect benefits from the forest
Flood prevention 0 37
Erosion and deposition 0 122
Biodiversity 0 181
Fire control 12 12 13
Transmigration, ownership 1 1
Total 1675 0 2352 348 2700 13
Part of 1457 1766 283 2049
East Kalimantan 87% 75% 82% 76%
Table 9. Economic costs due to smoke haze pollution (million dollars)
Cost issues Indonesia
Rated Not rated
with with
money money
Health 147-272
Tourism 111
Transportation 33
Industrial production na
Decreased catch na
Total 144 147-272
Total together
na: nothing.
Obtained from: Indonesia (BAPPENAS-ADB 1999); Singapore and Malaysia (Glover and Jessup
1999).
it also needs to be considered, rather than just
focusing on the cost of fires as happened in
the current debate about fires in Indonesia.
Economic assessments of policies
aimed at addressing deforestation and forest
degradation or haze pollution must take into
account different causes and impacts. For
example, prevention costs for smoke haze
reduction initiatives should not include costs
associated with forest degradation and
deforestation, unless it is clear that forest
fires are a cause of smoke haze pollution
which is also a direct cause deforestation.
Although this seems clear, various policy
proposals submitted to address the 'fire
problem' are based on reasons to reduce
costs, which are part of the total costs
incurred due to fire and haze, regardless of
which policy issues will be used and also
without taking into account different sources
of impact.
Various incentives faced by para
HPH holders to invest in fire prevention and
mitigation funds need to be understood.
These incentives include the ability to
control the timber resources that exist in the
HPH area and the amount. The ability of
HPH holders to protect timber resources
from illegal exploitation by others may be a
factor influencing their decision to invest in
fire prevention and mitigation funds. A better
assessment of the timber value within the
Singapore Malaysia Total
Total
9 8 164
58 127 297
7 0 40
0 157 157
0 16 16
291-416 74 309 674-799
43-52% 9-11% 39-46%
HPH area is also needed. Burning wood is
the largest share of losses due to 1997/98.
This estimated loss is based on parameters
that are doubtful at the national level. If the
value of wood stands left behind in the HPH
area is considered lower than assumed in the
various studies studied, the losses in terms of
wood value will be significantly lower.
Possible lower losses will not encourage
HPH holders to invest in fire prevention and
control.
Haze pollution was recorded to have
contributed more to the total fire losses in
1997/98 (20% -30%) than the previous
estimated figure. If data on losses
experienced by businesses in Indonesia are
available, then the costs to be borne due to
smoke haze pollution will be even greater.
The attention of the Government of
Indonesia and other neighboring countries
that is quite bear on the problem of haze
compared to forest fires that cause forest
degradation and deforestation can be
explained from two factors. First, the size of
the estimated cost. Second, the fact that
smoke haze pollution occurs almost every
year and directly affects Indonesia and
neighboring countries, with greater economic
costs and also negative impacts in terms of
public and diplomatic relations. The problem
of smog pollution needs to be overcome, but
the problem of fires that cause deforestation
and forest degradation also needs to be
addressed because it can also cause
significant losses.
In terms of the methodology used to
assess losses, it is clear that intangible costs
are difficult to start with and are based on
various estimation approaches. The revised
estimate shows that the stated loss value is
still too high. However, it must be
recognized that there are also limited
knowledge about some forest functions and
the potential losses associated with them. In
addition, other potential losses, such as the
impact on industrial production in Indonesia,
are not estimated. Future research and policy
assessments must aim to improve
understanding of the damage to forest
functions as a result of fires, so as to estimate
the range of potential losses arising from
haze pollution.
Finally, economic assessments related
to long-term environmental changes, such as
the potential impact of recurrent fires on land
and biodiversity, fail to capture the costs
associated with these events because they are
spread over a long period of time and their
value may not be important due to a decrease
over time . Economic and environmental
indicators need to be taken into account in
the development of policies aimed at
reducing the impact of fires and smoke haze
pollution.