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Resty Woro Yuniar

Forest and peatland fires raging across Indonesia are threatening to become more than an environmental emergency, with analysts warning that the thickening haze could weigh on economic activity, strain public health and test confidence in the nation’s fledgling carbon market.
Indonesia is no stranger to forest and peat fires, but this year’s super El Nino has helped make it the country’s most intense wildfire season in 11 years. Toxic haze and smoke have also drifted to neighbouring countries such as Singapore, Malaysia and the Philippines, forcing some employers to impose work-from-home policies while numerous schools have resorted to remote learning.
A health crisis is also in the offing. Data from the Indonesian health ministry last month showed that acute respiratory infection cases topped 15.6 million from January 1 to August 20 this year.
The ministry recorded 400,000 new respiratory infection cases per week at the height of the dry season between the end of July and the beginning of August.


According to a report released by Jakarta-based think tank the Centre of Economic and Law Studies (Celios) earlier this month, the total economic and health costs from January to August could reach up to 123.1 trillion rupiah (US$6.9 billion), though the estimate does not yet account for a scenario in which fires continue to expand through the end of 2026.
Celios estimated the total economic costs arising from the loss of physical assets and economic activity could reach nearly 30 trillion rupiah, or 0.23 per cent of Indonesia’s gross domestic product last year.
The fires could also result in 269.89 billion rupiah in lost potential tax revenues, the group warned.
Total healthcare costs for people diagnosed with fire-related health conditions could hit 93.56 trillion rupiah, or “equivalent to 67.6 per cent of Indonesia’s total national health-sector budget in the 2026 state budget”, Celios added.
Its economic director Nailul Huda said these figures reflected a contraction across several commercial sectors.
“Our estimation isn’t merely about the value of burned timber or other forest products, but rather a broader disruption in economic activities of the community and trade,” Nailul told This Week in Asia.
“Regarding healthcare costs, these will be borne by either the state or individuals. If the patients don’t have universal healthcare, they will inevitably have to cover them privately. These are the [spending] losses that must be taken into account too.”
During the catastrophic 2015 forest fires, the worst in recent history, the World Bank estimated total economic damage to Indonesia alone reached US$16.1 billion, equivalent to 1.9 per cent of its GDP.
In Singapore, the haze, which lasted for two months, cost the country an estimated S$1.83 billion in lost tourism, reduced productivity, healthcare expenses, and cost of mitigation actions by the city state’s government, research published in the Journal of Asian Economics in 2021 showed.
Celios did not estimate the cross-border fallout from the haze this time. The first major haze episode in 1997-1998 from fires in Indonesia caused US$9.3 billion in economic losses across Southeast Asia, according to the Asian Development Bank.

Carbon market integrity
The widespread wildfires could also threaten the appeal of Indonesia’s fledgling carbon market, which launched its national carbon registry system, known as SRUK, in July.
Carbon markets allow projects that reduce or remove emissions to generate tradeable credits, which companies or governments can buy to offset their own emissions or meet climate targets.
During the initial roll-out, Indonesia approved four carbon projects covering roughly 225,000 hectares of peatlands and rainforest, including three restoration projects and one social forestry project, Rohmat Marzuki, deputy minister of forestry, said in July.
According to Rohmat, the projects are expected to issue more than 31 million carbon credits, with an estimated value of 5 trillion rupiah, of which 500 billion rupiah would go to state coffers as non-tax revenue.
Burning peatlands increased Indonesia’s carbon emissions from September 1 to 7 to 19.7 million metric tons, making up more than a third of the global total, according to Fire Emissions Watch, a portal developed by the European Union’s Copernicus climate ‌monitoring service, last week.
“I would not expect a blanket discount on Indonesian carbon credits as a direct result of the ongoing wildfires. However, the scale of these fires is likely to increase buyer scrutiny and due diligence, particularly for forest and peatland projects,” said Bjorn Fonden, international policy manager and Asia-Pacific lead at the International Emissions Trading Association.
“Prospective buyers or investors will want to understand whether a project has been directly affected, its historical fire exposure, the assumptions underpinning its baseline, the risk of future reversals, and the measures in place to prevent and manage fire-related carbon losses.”

Going forward, the revenue from Indonesia’s carbon projects should strengthen measures against peat and forest fires, Fonden said. These would include rewetting drained peatlands through canal blocking and water-table management, maintaining firebreaks and access corridors, and establishing community-based fire prevention and response systems.
He warned, however, that carbon finance would not close the financing and institutional gap.
“Indonesia also needs coordinated action by national and provincial governments, local communities, civil society, donors and the private sector to map fire risks, address illegal logging and land conversion, improve hydrological monitoring, establish early-warning systems and rapid firefighting response mechanisms,” Fonden said.
For environmentalists such as Belgis Habiba, the ongoing land degradation strengthens their scepticism about Indonesia’s credibility in the international carbon market.
“Indonesia’s carbon achievements should have been considered a failure from the very start, because it couldn’t protect peatlands as one of the largest carbon sinks,” said Belgis, a forest campaigner with Greenpeace Indonesia.
“So if you ask about its carbon market integrity, it has already failed. It failed the moment the fires occurred.”


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How wildfires are threatening Indonesia’s economy and carbon market

Indonesia

A drone view shows a barge being towed along the Kapuas River, shrouded in haze from wildfires, in Pontianak, Indonesia’s West Kalimantan province, Indonesia, on Tuesday. Photo: Reuters

People travel on a riverboat as thick haze from forest and land fires blankets Benua Melayu Darat village in Pontianak, West Kalimantan, on Wednesday. Photo: AFP

Staff members of the Regional Disaster Agency spray water to extinguish a fire in a peatland area burned by wildfires, in Kubu Raya, Indonesia’s West Kalimantan province, on Tuesday. Photo: Reuters

Workers load a boat amid the haze from forest fires at a pier in Pontianak, West Kalimantan, Indonesia, on Monday. Photo: AP

People ride motorcycles amid haze from wildfires in Pontianak, Indonesia’s West Kalimantan province, Indonesia, on Wednesday. Photo: Reuters

A drone view shows St. Joseph’s Cathedral shrouded in haze from wildfires, in Pontianak, West Kalimantan province, Indonesia, on Tuesday. Photo: Reuters

When Indonesia burns, these women run towards the fire

A member of the Power of Mama on night fire patrol at a palm oil plantation in West Kalimantan province, Indonesia, last month. Photo: Garry Lotulung

Irma, a member of the Power of Mama team that heads out every day during the dry season to battle blazes in Indonesia’s West Kalimantan. Photo: Garry Lotulung

Smog from massive forest and land fires blankets a rural area in Tanjungpura village, Ketapang regency, Indonesia’s West Kalimantan province, on August 18. Photo: Garry Lotulung

A Power of Mama volunteer carries a hosepipe to extinguish flames in Ketapang regency, West Kalimantan province, Indonesia, on August 20. Photo: Garry Lotulung

 Suriati (left) and Ratinah, members of the Power of Mama team, rest after conducting a patrol in Sungai Putri village on August 17. Photo: Garry Lotulung

Ely Marlina carries a hosepipe to extinguish fires at night in Sungai Awan Kiri village, Indonesia, on August 17. Photo: Garry Lotulung

Wildfires threaten Indonesia’s new capital as carrier ordered in

A firefighter sprays water to extinguish a wildfire in East Kalimantan province, Indonesia, in September. Photo: Reuters

A firefighter sprays water on a wildfire in South Sumatra, Indonesia, on Saturday. Photo: EPA

A helicopter drops water on a wildfire burning through a peatland in Jambi province, Indonesia in August. Photo: AP

Philippine capital’s ‘acutely unhealthy’ air due to Indonesian haze spurs warnings

A thick haze shrouds Metro Manila due to smoke from ongoing fires in Kalimantan, Indonesia, on Tuesday. Photo: Reuters

Firefighters try to extinguish a wildfire in the Tumbang Nusa area of Pulang Pisau, central Kalimantan, on Sunday. Photo: AFP

Haze shrouding the area around the Sarawak Legislative Assembly building in Kuching, Malaysia, on Tuesday. Photo: AFP

An Indonesian prays for rain at a mosque in Pontianak, West Kalimantan province, Indonesia, as haze from wildfires blankets the area. Photo: Reuters

Malaysia’s air quality turns hazardous as Indonesian wildfires burn

The skyline of Malaysia’s Kuala Lumpur is seen shrouded in haze from regional wildfires on Wednesday. Photo: Reuters

Firefighters spray water in an attempt to extinguish a wildfire in Indonesia’s South Sumatra province on Friday. Photo: Reuters

Satellite data from Nasa’s Fire Information for Resource Management System showed dense concentrations of heat signatures in West Kalimantan on Sunday. Image: Handout

A farmer in Indonesia’s West Kalimantan province sprays water in an attempt to extinguish wildfires that are burning his palm oil plantation on Saturday. Photo: Reuters

Burnt trees lie on the ground at a peatland area affected by wildfires in Ketapang regency, West Kalimantan province, Indonesia, on Saturday. Photo: Reuters

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Total economic and health costs from January to August as a result of the haze could reach US$6.9 billion, analysts warn


Total economic and health costs from January to August as a result of the haze could reach US$6.9 billion, analysts warn.


Environment

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How wildfires are threatening Indonesia’s economy and carbon market

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Total economic and health costs from January to August as a result of the haze could reach US$6.9 billion, analysts warn

Total economic and health costs from January to August as a result of the haze could reach US$6.9 billion, analysts warn