103668 Indonesia Sustainable Landscapes Knowledge Note: 1 The Cost of Fire An Economic Analysis of Indonesia’s 2015 Fire Crisis FEBRUARY 2016 2 | February 2016 Copyright World Bank 2016 The World Bank Indonesia Stock Exchange Building Tower 2, 12th floor Jl. Jenderal Sudirman Kav. 52-53 Jakarta 12190, Indonesia This Indonesia Sustainable Landscapes Knowledge Note previously appeared in the Indonesia Economic Quarterly (IEQ), World Bank, Jakarta. December 2015. This was prepared by the staff of the World Bank, under the guidance of Ann Jeannette Glauber and Iwan Gunawan with contributions from: Magda Adriani, Sarah Moyer, Mubariq Ahmad, Anita Kendrick, George Henry Stirrett Wood, Elitza Mileva, Pandu Harimurti and Muhammad Farman Izhar. Dissemination is organized by Indra Irnawan, Jerry Kurniawan, GB Surya Ningnagara and Nugroho Sunjoyo, under the guidance of Dini Sari Djalal. Funding was provided by the Government of Norway and the Embassy of Denmark through the World Bank’s REDD+ Support Facility (RSF). The findings, interpretations and conclusions expressed in this work do not necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations and other information shown on map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Photo credits: Tempo Indonesia Sustainable Landscapes Knowledge Note: 1 | 1 The Cost of Fire AN ECONOMIC ANALYSIS OF INDONESIA’S 2015 FIRE CRISIS 1. Chronic Man-Made Fires Lead to an significantly to Indonesia’s substantial greenhouse gas (GHG) Economic and Environmental Disaster emissions (Box 2). According to the government, 2.6 million hectares of Fire has long been a tool for agriculture in Indonesia. Indonesian land burned between June and October 2015,1 Informally, it also plays an important role in land acquisition. an area four and half times the size of Bali. Man-made fires This means that, while many suffer extensive fire and haze- – more than 100,000 of them2– were used to prepare land for related losses, there are a few who make significant gains. agriculture and to gain access to land cheaply. Absent controlled This article looks at this winner-loser dynamic, estimating the burning measures or sufficient law enforcement, the fires grew economic losses and damages associated with fire and haze in out of control, fed by drought and exacerbated by the effects of 2015 from eight provinces and relating these to profits gained El Niño. This vast economic and environmental crisis is repeated from one area of agriculture – oil palm.3 year after year, as a few hundred businesses and a few thousand farmers profit from land and plantation speculation practices, Hectares burned by province, June – October 2015 while tens of millions of Indonesians suffer health costs and economic disruptions. In 2015, fires cost Indonesia an estimated Province Thousand hectares Percent USD 16.1 billion (IDR 221 trillion). Adding in regional and global S. Sumatra 608 23 C. Kalimantan 429 16 costs mean the actual figure is much higher. The government E. Kalimantan 388 15 has prioritized a response and the president has called for action. S. Kalimantan 292 11 Now is the time for Indonesia to address the underlying drivers Papua 268 10 of man-made fires, enforce laws and revise policies in order to W. Kalimantan 178 7 Riau 139 5 reduce the risk of these economic disasters from recurring. Jambi 123 5 Other 186 7 By October 2015, eight provinces had burned more Total 2,611 100 than 100,000 hectares each. In line with historical patterns, Source: Agency for the Assessment and Application of Technology (Badan the islands of Sumatra and Kalimantan – where most of the Pengkajian dan Penerapan Teknologi, BPPT); Ministry of Environment and country’s fragile peatlands (lahan gambut) are located – were Forestry; World Bank staff calculations the hardest hit. The provinces of South Sumatra and Central Kalimantan represented 23 percent and 16 percent of the total burned area, respectively. Unlike past years, however, fires in Hectares burned by land type Papua were particularly widespread, resulting in 10 percent of Mining the total area burned nationally. This is a particularly troubling 24,183 development because Papua’s peatlands are some of the last intact in Indonesia. Food crops Estate crops 346,039 72,763 Draining and conversion of peatland, driven largely by palm oil production, contributes to the intensity of haze from fire. others About 33 percent of the total area burned was peatland, leading 807,369 to noxious haze that blanketed parts of Indonesia and the region, Palm oil disrupting transport, trade, and tourism, forcing school closures concession and negatively affecting health. The 2015 fires also contributed 505,887 1 Communicated by Indonesia’s Ministry of Environment and Forestry at the Natural Forest 259,376 Meeting of Communication Forum for Disaster Data and Information in Jakarta November 10, 2015. Forestry 2 Global Fire Emissions Database: http://www.globalfiredata.org/index.html. concession Swamp Forest 3 A version of this article was published as part of the World Bank’s Indonesia 233,414 176,179 Economic Quarterly, December 2015. 2 | February 2016 Box 1. Certification Standards Could Encourage Environmentally-Friendly Production Practices In 2015, the estimated economic cost of fire to Indonesia (USD 16 billion) was larger than the estimated value added from Indonesia’s 2014 gross palm oil exports (USD 8 billion)* and the value added from the country’s entire 2014 palm oil production (USD 12 billion). While not all fires are set to clear land for oil palm, oil palm – an important and growing sector of the economy – is a large driver of land conversion. Given government support for its continued expansion,** coupled with the negative externalities of fire use in some oil palm production, a consideration of the relative costs of both is warranted. Efforts to ensure sustainable oil palm exist, but face challenges. Indonesia has a mandatory certification scheme – the Indonesian Sustainable Palm Oil Initiative (ISPO) – governing oil palm production on plantations greater than 25 hectares that prohibits the use of fire. Most large companies also subscribe to the Roundtable on Sustainable Palm Oil (RSPO) – a voluntary certification scheme globally accepted as the mark of sustainability. In addition, the Indonesian Palm Oil Pledge (IPOP) is a platform where participating companies pledge to produce and trade only deforestation-free oil palm within their supply chains. This means not sourcing palm oil produced on peat or old shrub lands or from areas that were once primary or secondary forest. Traceability is a key element of the IPOP commitment as it mandates that the palm fruit produced or traded is consistent with deforestation-free and sustainable agriculture practices. Given that IPOP members represent 60-65% of Indonesia’s (2013) 33 million tons of annual crude palm oil production, commitment to such standards implies a significant part of Indonesian production should be deforestation-free. However, there are technical challenges to ensuring the IPOP pledge is met. Specifically, government has expressed concern that some producers, namely smallholders, may not be able to comply and have pushed for these producers to be exempted. Monitoring Expansion of oil is impeded, in part, by the absence of a transparent, agreed-upon map of palm production is sensitive areas that are off-limits to development. a significant driver Several steps could make certification schemes more robust, leading to more sustainable production practices. On the policy side, a government of land conversion, regulation for peatland protection, restoration, and management, including including in sensitive a roadmap for transitioning people and production off of sensitive peatland areas, should be formalized and enforced. Technical follow-up is also needed. peatlands, and fire Specifically, given that some certification standards, including RSPO, call for is often part of this the protection of lands with high conservation value and/or high carbon stock, a government-led and publically-consulted inventory – including on process peatlands – would provide a single set of data to inform a baseline upon which policy and investment decisions could be made. Additionally, monitoring and implementation of responsible production standards would be strengthened considerably with the finalization of the OneMap Policy, which aims to integrate relevant land-use and boundary data into a single, publically available database for Indonesia. Such a map could help guide investment decisions by demarcating forest from non-forest lands. Data could also be integrated to include additional information on sensitive ecosystems (e.g., peatlands and primary forest), and identify lands that may need further protection. * Based on a gross export value of USD 17.5 billion in 2014 and total palm oil production value of USD 25.5 billion (IDR 302.5 trillion) multiplied by the palm oil industry value added share 0.556 of total palm oil output taken from the Indonesian 2008 Input-Output table. Data sources: Food and Agriculture Organization, Indonesian Palm Oil Producers Association, and Indonesian Ministry of Agriculture. ** The government aims to increase crude palm oil production to 40 million tons by 2020, from about 31 million tons in 2014 (Krisnamurti, B., 2008, “Government strategic policies in sustainable oil palm development,” presentation at the Indonesian Palm Oil Conference and Price Outlook 2009, Bali). Indonesia Sustainable Landscapes Knowledge Note: 1 | 3 2. Palm Oil Production is Worth Billions: Who Benefits? Indonesia’s fire story is not just one of loss and damage; fires contribute to significant economic upside for a diverse, if concentrated, group of actors. Fire is an integral part of the process of large-scale conversion of the nation’s rich forest assets, particularly peatland, into agricultural lands for private benefit. The growth in the prevalence of fire correlates with the expansion of lucrative agricultural commodities such as palm oil and acacia for wood fiber. Land conversion by fire is prohibited by Law No. 32/2009 and penalties include fines and prison terms. Yet, the alternative of mechanical clearing with heavy equipment can be many times more expensive.4 There are three common uses for fire in Indonesia: (i) land clearing and preparation; (ii) land acquisition; and (iii) as a mechanism to force inhabitants off the land. As a tool for acquisition, land-holders burn beyond their concession boundaries or those with no formal claim to the land burn land and then claim it. Without effective enforcement there is no control; and, given the profitability of crops such as oil palm, there is a strong incentive to continue the practice. Analysis by the Center for International Forestry Research (CIFOR) provides an example of the role If every hectare burned in of fire in the lucrative palm oil industry. Looking at 11 sites outside of concessioned plantations across 2015 were converted to 4 districts in Riau Province, CIFOR concluded that oil palm, the value would using fire for land acquisition and clearing generates a cashflow of at least USD 3,077 per hectare of oil palm in be about USD 8 billion just three years.5 While the production process involves illegal means for land clearing, the resulting palm oil is processed at the same facilities as legally-produced palm fruit before both types are sold for consumption. If every hectare burned in 2015 were converted to oil palm, the value would be about USD 8 billion, highlighting the scope for high profit in a short period of time. Poor land management and governance allow this ecologically-destructive activity to continue. Peatlands are a target as they generally are uninhabited and relatively free of overlapping claims. The CIFOR work finds that 85 percent of the cashflow generated goes to local elites – i.e., those in power or able to take financial risk – and to plantation developers. Smaller profits accrue to the land claimant (1 percent), land broker (2 percent), tree cutters (3 percent), slashers (3 percent) and burners (1 percent), and the oil palm farmer (5 percent). Without alternative commensurate economic opportunities, it is no surprise oil palm plantation expansion (especially on peat) continues. However, rapid expansion incurs negative impacts that carry domestic, as well as regional and global losses, affecting far more people than the relatively few who benefit. 4 Simorangkir, D., 2007, “Fire use: Is it really the cheaper land preparation method for large-scale plantations?”, Mitig Adapt Strat Glob Change, 12: 147—164. 5 Purnomo, H., Shantiko, B., Gunawan, H. 2015, Political economy study of fire and haze, presented at the International Seminar “Toward a sustainable and resilient community: Co-existence of oil palm plantation, biodiversity and peat fire prevention”, August 5, 2015, University of Riau, Pekanbaru, Bogor, Indonesia: Center for International Forestry Research. 4 | February 2016 3. The 2015 Fires Cost Indonesia an Estimated USD 16.1 Billion: Who Pays? Box 2. Fire, Peat and Climate Change The World Bank estimates that the 2015 fires cost Indonesia Calculating the GHG emissions from Indonesia’s at least USD 16.1 billion (IDR 221 trillion), equivalent fires is difficult and hinges primarily on quantifying to 1.9 percent of 2015 GDP. This is more than twice the the amount and depth of peatland burned. While reconstruction cost following the Aceh tsunami.6 The analysis all fires produce GHG emissions, the CO2 emissions estimates impacts on agriculture, forestry, trade, tourism and from fire are usually balanced by regrowth after transportation. The short-term effect of haze exposure on health the fire. However, this is not the case for peat fires and school closures are also included. Other costs captured because they burn carbon that has been deposited include those of emergency response and fire suppression as over thousands of years and cannot be replaced. well as costs to the environment. However, the estimate does Peatlands have long been a target for land conversion not capture long-term impacts on health of sustained exposure – draining seemingly unproductive swamp land and to haze, nor the loss of all ecosystem services. Furthermore, it then clearing it with fire for agriculture. Dry peatland is does not incorporate regional or global losses. quick to burn and difficult to extinguish. The estimates presented here cover the period from June Most peat is found on Sumatra, Kalimantan 1 to October 31, 2015 and 2.4 million of the estimated 2.6 and Papua but there is no agreed map nor a million hectares – or 94 percent – of the burned area in complete baseline of peatland areas. Allowing South Sumatra, Central Kalimantan, South Kalimantan, drainage and burning of peatland has significant, West and East Kalimantan, Riau, Jambi, and Papua. The even global, consequences for climate change, as analysis uses a disaster assessment methodology developed well as on health and the economy in Indonesia and by the UN Economic Commission 1 for Latin America and the the region. In addition to contributing significantly to Caribbean (ECLAC).7 Costs are based on an analysis of the types GHG emissions, peat fires also produce haze, due to of land burned as reported by the Government of Indonesia.8 their high content of aerosols. Where available, actual costs are used. Calculated damages are an estimate of the amount of financing needed for reconstruction The Global Fire Emissions Database version and rehabilitation, while calculated losses represent the reduction 4 (GFED4) provides a best, if uncertain, in economic activities and income resulting from the disaster. estimate of the GHG emissions impact of the 2015 fires by extending estimates of earlier years According to the estimates, fire and haze resulted in based on satellite-derived burned area and fuel damage and loss values ranging between USD 857 million consumption with satellite detections of active (IDR 11.8 trillion) in Jambi to USD 3.9 billion (IDR 53.7 fires.* GFED estimates that in 2015 Indonesian trillion) in South Sumatra. As a share of provincial GDP, Central fires contributed roughly 1,750 million metric tons Kalimantan is estimated to have suffered the largest decrease of carbon dioxide equivalent (mtCO2e) to global – 34 percent – half of which came from losses to agriculture, emissions in 2015. By comparison, based on its mainly oil palm plantations. Real GDP growth in the affected 2nd National Communication to the United Nations provinces may be lower by between 0.7 and 4.7 percentage Framework Convention on Climate points in 2015, all else equal. Change, Indonesia estimates that its annual economy-wide emissions are Agriculture and forestry have sustained 1,800 MtCO2e. Indonesia has pledged Fires like those in estimated losses and damages of USD to reduce emissions by 29 percent 2015 are likely to 8.8 billion (IDR 120 trillion) in 2015. (or 41 percent with international Damages to agriculture include those to financial support) compared with a make achievement infrastructure and equipment, while losses business as usual scenario by 2030 of Indonesia’s capture the cost of reclaiming burned lands as part of its contribution to keep for planting and the foregone production global temperatures from exceeding emissions reduction revenue during this reclaiming period. As a 2 degrees Celsius. Fires like those in targets unattainable result, the 2015 fires are estimated to cause 2015 will make reaching this target additional losses of about USD 800 million impossible. 6 As reported by the World Bank: http://www.worldbank.org/en/news/ * This approach is described in Van der Werf et al. (2010), “Global feature/2012/12/26/indonesia-reconstruction-chapter-ends-eight-years- fire emissions and the contribution of deforestation, savanna, after-the-tsunami. forest, agricultural, and peat fires (1997–2009)” Journal of 7 ECLAC (2014), Handbook for Disaster Assessment: http://caribbean.eclac. Atmospheric Chemistry and Physics, and further detailed on the org/content/handbook-disaster-assesment. GFED website. 8 For 33 percent of the land these details are unknown. In these cases the lowest land value is applied. Indonesia Sustainable Landscapes Knowledge Note: 1 | 5 per year for the next three in the case of estate Haze has also contributed to crops (e.g., palm oil, rubber, and coconut) the death of 19 people and and five years for forests. Damages to estate In 2015, fire and haze more than 500,000 cases of crops affected companies and small-holder cost Indonesia USD 16.1 acute respiratory infections.10 farmers. Costs to food crops (USD 1.7 billion) Immediate health costs11 totaled translate into lower incomes for farmers and billion - twice the cost of USD 151 million.12 The long-term possible impacts on food security. Forestry reconstruction following costs cannot yet be quantified. losses, at USD 3.9 billion, account for the lost Existing research suggests long- value of timber and the cost of reforestation. the 2004 tsunami term exposure to air pollutants correlates with increased Costs to the environment were cardiovascular and chronic substantial—26 percent of the total—and include losses respiratory illness. A study on the effects of the 1998 Indonesian to biodiversity (applying the government’s biodiversity haze crisis on fetal, infant and under-three child mortality showed value per hectare) as well as losses to ecosystem services. that air pollution led to 15,600 fewer surviving children.13 Because the impact on ecosystem services is especially difficult to quantify, the assessment focuses on a single foregone service Haze also forced school closures for up to 34 days, resulting – carbon storage9 Lost capacity for carbon storage represents the in USD 34 million in costs.14 In some instances, schools single biggest cost of the fires, underscoring their global impact. closed for weeks at a time, obliging teachers to accommodate take-home assignments. Conditions were worst in October, High levels of haze through most of September and October impacting 24,773 schools and 4,692,537 students. Child-care cost the transportation sector USD 372 million. Most of the costs and foregone wages increase when parents must care for losses were borne by seaports as cargo shipping was interrupted children normally in school; these costs are not included in the by poor visibility. Transport costs contributed to slower growth in World Bank assessment. Long-term, sustained school closures trade services, which suffered USD 1.3 billion in losses. Tourism could contribute to weaker graduation rates if reclaiming lost lost USD 399 million in revenues due to the fires and haze. The school days becomes burdensome. costs to manufacturing and mining totaled USD 610 million. Many provinces suffered damage and losses ...which reduced 2015 GDP growth due to fire and haze... (percent) (percent, LHS; IDR trillions, RHS) 10 BI May 2015 growth forecast 40 60 Disaster adjusted growth forecast 35 50 8 30 40 6 25 20 30 4 15 20 2 10 10 5 0 0 0 -2 S. Sumatera C. Kalimantan Papua W. Kalimantan Jambi S. Sumatera S. Kalimantan E. Kalimantan E. Kalimantan S. Kalimantan Riau Jambi Riau W. Kalimantan C. Kalimantan Papua Total damage and losses (RHS) Percent of GDP (LHS) Note: The provincial growth forecasts are from Bank Indonesia (BI) Source: BPS; World Bank staff calculations Archipelago Report (Laporan Nusantara), August 2015. Source: BI; BPS; World Bank staff calculations 9 This number is not meant to be an exact accounting of GHG emissions; on Community Health Centre (Puskesmas) user fees, and case base group rather, it serves to give a sense of the potential magnitude of lost ecosystem payment for inpatient cases (INA CBG). services. A value of USD5 per ton is applied to an approximation of the average 12 In addition, lost wages as a result of missed work due to illness totaled IDR carbon content of the lands impacted by fire. 54 trillion. 10 “Indonesia Forest Fires: Widodo to Visit Stricken Regions as Death Toll 13 Jayachandran, S., 2008, “Air Quality and Early-life Mortality: Evidence from Mount,” The Guardian, October 28, 2015. Indonesia’s Wildfires,” NBER Working Paper No. 14011. 11 Direct health costs include increased incidence of inpatient and outpatient 14 The World Bank estimates an average daily loss of productivity in the seven care, medical equipment and health worker overtime pay due to haze-induced provinces covered in this section (excluding East Kalimantan) multiplied by the illness. Data on utilization and facility visits are from The Center for Health Crisis number of school closures as a result of haze. Management at the Ministry of Health. Unit costs are based on local regulation 6 | February 2016 Estimated losses and damages from forest fires and haze, June-October 2015 (USD millions) 15 Jambi Riau S. Sumatera W. Kalimantan S. Kalimantan C. Kalimantan E. Kalimatan Papua Total Agriculture 210 181 1,033 349 523 1,242 1,128 173 4,839 Estate crops 134 134 260 238 169 1,075 1,006 95 3,112 Food crops 77 47 773 111 355 166 122 77 1,727 Environment 226 229 1,205 376 387 776 530 523 4,253 Biodiversity loss 17 24 72 23 27 33 33 58 287 Carbon emission 209 204 1,133 353 360 743 498 465 3,966 Forestry 136 304 972 168 698 92 815 746 3,931 Manufacturing & mining 29 183 133 61 122 14 69 0 610 Trade 184 292 290 120 139 131 108 68 1,333 Transportation 20 31 81 17 66 111 32 13 372 Tourism 10 116 118 54 38 42 16 4 399 Health 36 22 28 12 24 17 12 1 151 Education 4 4 9 4 6 5 4 3 39 Firefighting costs 10 11 49 14 24 35 31 22 197 Total in USD million 866 1,373 3,919 1,176 2,028 2,464 2,746 1,552 16,124 15 The World Bank estimates an average daily loss of productivity in the seven provinces covered in this section (excluding East Kalimantan) multiplied by the number of school closures as a result of haze. Indonesia Sustainable Landscapes Knowledge Note: 1 | 7 Box 3. Other Costs — The Unknown Cumulative Impact of Fire and Haze on Flora and Fauna The full impact of Indonesia’s systemic fire and haze on flora and fauna is unknown. Fire destroys natural genetic variability, which helps species adapt resistance to parasites and infectious diseases. Burning biomass produces the precursors of ground-level (tropospheric) ozone (O3), which impacts plant growth and photosynthesis and leads to long-term effects on ecosystem structure and function. O3 has been shown to reduce yields of major food crops and to affect the nutritional quality of wheat, rice and soybean. It can also reduce the capacity of land to act as a carbon sink. The particulate matter in haze has also been shown to reduce local rainfall, which could, in turn, impact recently planted crops. Sustained exposure to haze could also lead to the “volcano effect”, i.e., a decrease in plant productivity in the short term due to limited sun exposure and a deleterious effect on plant physiology and photosynthesis. In the longer term, it could lead to an overall weakening in the ability of plant species to recover from shocks as a result of cumulative exposure to stress. In extreme cases, haze exposure could affect a species’ ability to survive. Fire and haze also negatively affect pollinators, in turn affecting agricultural production. Chronic exposure to haze creates a sustained environment of stress, the Peatlands account for impacts of which on productivity and evolution are unknown. about one-third of the The recurring nature of Indonesia’s fire crisis is of particular area burned but are concern. While species can adapt, adaptations may not always be beneficial or possible. Fire wipes out living soil organisms, requiring responsible for the vast years before pioneer species can recolonize. More concerning, majority of the haze and however, is that long-term environmental stress will eventually lead to a tipping point, after which ecosystems will be altered irreversibly. CO2 emissions from How or when ecosystems will change is not known but the impact the fires of this process could extend beyond Indonesia. 8 | February 2016 4. The Case for a Peatland The following back-of-the-envelope Development Moratorium calculations for the two provinces that and Restoration will be most impacted — Riau and Central Kalimantan (which together have 151,471 On October 23, 2015, President Joko hectares of peatland) – could help better Widodo called for a moratorium on new understand the cost of a moratorium. A peatland concessions and a cancellation moratorium includes two primary costs: (ii) of existing concessions that have not lost tax and fee revenue to local and national been developed, thereby halting the legal government, and (ii) a reduction in land value conversion of peatland and peat swamp for concession holders. The estimated loss in forests into agricultural land. He also called annual revenue to local governments (but not for peatland restoration, including re-wetting the central government) in Riau and Central priority areas. This should be accompanied Kalimantan would amount to about USD 154 by efforts to conserve remaining peat swamp million (IDR 2.1 trillion) and USD 92 million forests and to stop drainage in areas of deep (IDR 1.2 trillion), respectively. To accommodate peat or high biodiversity. Fewer fires on peat the lost land value, the moratorium could be will reduce haze, which in turn will reduce the accompanied by a concession buy-back, land economic and environmental costs. substitution offer, or a combination of both. At USD 10,000 (IDR 135 million) per hectare – a reasonable estimate for well-managed certified oil palm plantations – a one-time land buy-back The Government has shown would cost USD 9.75 billion (IDR 131.6 trillion) commitment to address the in Riau and USD 5.39 billion (IDR 72.8 trillion) in Central Kalimantan. underlying drivers of fires and haze, including through measures The Government has called for two million hectares of degraded peatlands to be to restore and sustainably manage restored by 2020. In January 2016 President peatlands Widowo established the Peatland Restoration Estimated lost public revenue as a result of one year of a peatland moratorium One-time Land tax Personnel Total Royalties Hectares licensing revenue tax revenue annual Province (annual) impacted fees (annual) (annual) revenue (USD millions) Riau 975,000 28 95 21 40 184 Central Kalimantan 539,071 16 46 9 29 100 Indonesia Sustainable Landscapes Knowledge Note: 1 | 9 Agency (BRG) to oversee this effort. BRG will solve Indonesia’s fire crisis as both only target focus on restoration in Sumatra, Kalimantan peatlands, which represented only one-third and Papua, where peatlands are greatest. To be of the fires in 2015. A long-term commitment effective, restoration must be planned carefully to sustainable landscapes management is and include a long-term management plan. needed. This means taking action to improve Poorly implemented, restoration could have governance and management of land and unintended effects and costs, especially in natural resources, including: transparently areas where local populations depend on these defining land boundaries and allowable uses lands for their livelihood. A quick estimate of that recognize and balance trade-offs among initial restoration costs for basic canal blocking land uses and users; improving tenure and in two million hectares is USD 1.9 billion (IDR use rights with a focus on local communities 27 trillion). This does not include recurrent and customary practice (adat); completing costs of long-term management. It also and enforcing spatial planning, taking into excludes costs to businesses that must adapt to consideration ecosystem services and low-drainage practices or transition to activities strengthening land licensing procedures that are compatible with wet peatlands. accordingly; and aligning institutions, policies Effective restoration will prioritize areas where and incentives across sectors and levels of investment offers the greatest return, such government to promote sustainable landscape as those where only a small portion of the management. Completion and dissemination peat dome has been impacted. Moreover, of the Government’s OneMap Policy is an international experience demonstrates that important step. conservation of intact wetland habitats is less expensive than restoration. Peatland restoration can be The moratorium and restoration plan are welcome first responses and are an important part of solving much cheaper than the costs that accrue Indonesia’s fire and haze problem, from repeated incidence of fire and haze disasters. However, these steps alone will not but should be complemented with strong conservation measures Estimated construction cost of peatland restoration Peatland to be restored 460,000 hectares identified as priority (Musi Banyu Asin + Ogan Komering Ilir + Pulang Pisau) Cost per hectare Land reconstruction and/or water management USD 983 per hectare Cost to restore 460,000 USD 452 million hectares Cost to restore 2 million USD 1.9 million hectares Note: Restoration cost per hectare is assumed to be $1,000, which includes the cost for heavy equipment for canal blocking, etc. Source: World Bank staff calculations This work was supported with funding from the Government of Norway and the Embassy of Denmark through the World Bank’s REDD+ Support Facility.