Beyond Firefighting: Rethinking the Economics of Forest Fires (Karhutla) in Indonesia

Indonesia’s forest and land fires (id: Kebakaran Hutan dan Lahan; Karhutla) are often treated as emergencies to be contained after they erupt. Yet their recurrence raises a more consequential question: why does the country continue to incur such substantial losses, and what would it take to avert them before the next fire season?

There is no single explanation for these disasters. Human activities and land-use changes can trigger fires, while prolonged drought and degraded peatlands create conditions in which they spread and become difficult to extinguish. Concentrating solely on who ignites a fire, therefore, risks obscuring the underlying vulnerabilities that allow localised incidents to escalate into widespread devastation.

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The repercussions extend well beyond the affected landscapes. Smoke-related illnesses place additional demands on healthcare services, hazardous air quality disrupts daily life, and school closures and business interruptions undermine livelihoods. The burden frequently falls on communities that derive little or no benefit from the activities associated with the fires.

The scale of the damage is considerable. Indonesia’s Ministry of Forestry recorded 202,004 hectares affected by fires between January and July 2026, a 69 per cent increase on the corresponding period in 2025. The Center of Economic and Law Studies (CELIOS) estimated Rp29.54 trillion in losses from damaged assets and disrupted economic activity between January and August 2026. Its healthcare estimates ranged from Rp9.75 trillion for diagnosed cases to Rp93.56 trillion under a broader assessment encompassing people experiencing related symptoms. Taken together, these estimates underscore the extensive economic and social repercussions of forest and land fires.

Nor is this a new predicament. A 2021 study published in Nature Communications estimated that Indonesia’s 2015 fires caused approximately US$28 billion in economic losses. It further estimated that restoring 2.49 million hectares of degraded peatland would cost between US$3.2 billion and US$7 billion, potentially avoiding US$8.4 billion in fire-related losses over the 2004–2015 period. Although these figures derive from modelled scenarios, they illustrate the magnitude of the damage at stake. They also raise a pressing policy question: how can Indonesia reduce the likelihood of such costly disasters recurring?

Answering that question requires addressing the different factors that shape fire risk. Where unlawful burning is established through evidence, enforcement and accountability are indispensable. Yet punitive measures alone cannot resolve the problem. Smallholder farmers need affordable alternatives to burning, supported by appropriate equipment and practical assistance with land clearance. Meanwhile, land-use planning and the management of concessions and degraded areas must reflect the heightened risks associated with drought and vulnerable landscapes. Deliberate violations, negligence and fires exacerbated by extreme weather warrant distinct responses rather than a one-size-fits-all approach.

Peatland restoration offers a further lesson: the effectiveness of public spending depends on where and how interventions are implemented. A 2026 study published in iScience assessed 3,840 canal blocks in West and Central Kalimantan using evidence from 2017 to 2022. It found that canal blocks were more effective when their rewetted areas overlapped. Modelling suggested that better-targeted interventions could have reduced burned areas by up to 6.4 per cent in the study region, avoided 0.4 million tonnes of carbon dioxide-equivalent emissions, and generated economic returns exceeding 100 per cent over 10 years in the best-performing locations.

This principle should guide the broader allocation of prevention funds. Success cannot be measured by budget absorption or the number of structures completed alone. It must be assessed through tangible outcomes: reduced burned areas, fewer fire incidents, lower expected losses and restoration infrastructure that performs as intended. Evaluations should also account for variations in weather and local conditions to avoid attributing every change in fire activity to a particular intervention.

No single measure can eliminate the risk. Effective policy requires coordinated enforcement, viable alternatives to burning, more rigorous land-use governance and strategically targeted peatland restoration.

Indonesia may not be able to prevent every ignition, particularly during severe droughts. It can, however, reduce the likelihood that fires escalate into large-scale disasters. The ultimate test of policy is not how rapidly authorities respond once flames appear, but whether their decisions make the next fire season less destructive, and less costly, than the last.