Transboundary haze pollution (THP) is a recurrent phenomenon and has become a long-standing environmental issue afflicting not only Indonesia as the main producer of the haze, but also the rest of the Southeast Asian countries. Although some causes have been identified and corresponding policies have been put into force, the haze problem persists.

Many argue that the El Nino phenomenon, logging, agriculture, palm oil plantation, weak institutional capacity, government policies, decentralization and corruption are the common causes of the THP. However, very few people realize that the root causes of recurring haze problem are actually the land clearing and draining of peatlands. In the 1997-1998 forest fires episode, for instance, around 60 percent to 80 percent of the haze was produced by fires on 1.5 million hectares of peatlands, while in the 2005 forest fires episode about 81% of the haze came from peatlands. Similarly, in the most recent forest fires, the 2015 episode, around 60 percent of fire alert was identified on peatlands.

In the past, undisturbed peatlands had not caused any serious haze pollution problem because they are originally very resistant to fire, experiencing infrequent fires only during catastrophic and extraordinary dry episodes. The nature of peatlands are water-logged resulted from the accumulation of dead vegetation over a long period of time, enabling them to absorb monsoon rains and to keep moisture in times of light rainfall. Since the last two decades, however, these peat swamp forests has been drained for logging or agricultural purposes. Consequently, the peatlands become dense with carbon and flammable even without igniting fire in the first place.

In response to the THP, some domestic policy responses have been taken. The 1997-1998 forest fires, for example, led to the issuance of a presidential decree no. 23/1997 banning any kind of burning. In 2013, a two-year moratorium for disallowing the issuance of new licenses was enacted and extended for another two-year moratorium in 2015. The latest regulations are government regulation No. 71/2014 on the protection and management of peatlands’ ecosystem, and government regulation No. 1/2016 on the creation of peatland restoration agency.

All these policy responses have been put into force for years, but none of them seem successfully solving the recurring THP. One of the key challenges hindering the success of such policies is policy inconsistency in Indonesia. The changing laws or policies are often overlapping and not synchronized. For instance, law No. 41/1999 and government regulation No. 4/2001 prohibit the use of fire in opening land, but in law no. 32/2009 open fire less than two hectares is allowed under particular weather condition, and with the permission of local government. In addition to this, decentralization is considered as a key challenge to enforce national policy since local authorities have more power and tend to abuse the power to protect their interests, which are often not in line with national agenda. This is worsened by the fact that different levels of government and agencies use different maps and data, leading to different interpretations and disputes, and weakening law enforcement.

Should the rest of countries in the region ignore and let Indonesia alone to solve the problem? Of course NOT for two reasons. Firstly, THP involves international externalities, costs or benefits imposed by one nation on another. Domestic haze produced by Indonesia affects not only Indonesia itself but also neighboring countries. In fact, the THP will affect their economic activities and population’s health. Secondly, it often gives rise to the possibility of strategic behavior, which is commonly analyzed in the Prisoner’s dilemma scenario, a game theory that shows how two individuals pursue their own best interests that may not result in the optimal outcome. When a cooperation is absent, it is highly likely that Indonesia will continue burning for land clearing and draining the peatlands for agricultural development purposes as it is the fastest and cheapest way to clear land. This in turn will increase income for poor people and create more job opportunities, leading to economic growth. Thus cooperation is the only way that countries in the Southeast Asia should approach to achieve the most optimal outcome and to solve the transboundary haze problem in the region.

This proposition does not mean that such an approach has not been introduced in Indonesia and the Southeast Asia. In fact, a number of regional cooperation, such as the 1997 Regional Haze Action Plan (RHAP), the 2002 Agreement on Transboundary Haze Pollution (ATHP), and the Roadmap on ASEAN Cooperation towards Transboundary Haze Pollution Control, have been taken. However, the recurring THP exists, and even worsens. As noted by the World Bank, the 2015 THP is considered as the worst transboundary haze episode since the initiation of the ATHP. Therefore, identifying weaknesses and strengthening the existing cooperation may result in better outcomes.

Ensuring and institutionalizing mutual benefits between the polluters and the victims will be useful to offset the weaknesses of existing cooperation. Mutual benefit is important because it could reduce conflicts among nations, which are likely to comply with the cooperation if the benefit they obtain from cooperating is more than what they would gain from not cooperating. Given the economic benefits Indonesia receives from developing peatland and land clearing by fire, compensation contributed by the rest of the countries in the region is needed. The compensation should be high or attractive enough to influence the economic incentives Indonesia gains from polluting. In addition, the compensation should be paid not only by the worst affected countries, but also by the less affected ones to avoid free riders.

Although there might be no direct benefits the victim countries get from compensating the polluter, they still may get benefits in the form of reduced air pollution and infrequent haze event. For example, the compensation contributed by victim countries to the polluter in the Beijing-Tianjin-Hebei region resulted in declining the total annual SO2 reduction cost in the region from approximately 4.6% to around 11.3% for the 2003-2009. To minimize the risk of cheating, the inclusion of enforcement instruments in the cooperation is vital. These instruments should involve not only financial compensation for the affected countries, but also penalties for offenders. Decreasing incentives to cheat can potentially increase compliance rates. To improve the effectivity of financial compensation contributed by the harmed countries, conditions and clear objectives and targets that have to be met by the recipients should be agreed and included in the cooperation.

In addition to the Victim Pay Principle (VPP) applied in the cooperation, the Polluter Pay Principle (PPP) could also be applied to domestic companies that are causing the haze pollution. To achieve environmental policy goals domestically, monetary incentives could be combined with law enforcement mechanisms. The provision of job opportunities and cash transfer are some examples of compensation that might incentivize local people, while subsidizing companies with high land clearing costs (as a result of not using fire).

Although the reduction of pollution (e.g. emissions) is technically difficult to measure, collaboration among experts in the region with Cost Benefit Analysis (CBA) will be very useful in decision making processes particularly in calculating the amount of social costs or benefits that have to be charged to the companies for polluting. In addition, adaptive management and direct involvement of stakeholders should be incorporated into the cooperation as it makes the decision making processes credible, constructive, and inclusive.

To sum up, THP is a wicked environmental problem, which is complex, difficult to define, and it involves many stakeholders with competing interests. Relying on domestic responses and policy settings is insufficient and could not guarantee improvements. Although the Victim Pay Principle (VPP) seems unrealistic, using a “stick” or the Polluter Pay Principle (PPP) may not be an effective way to force and persuade Indonesia to make a serious commitment to deal with its haze pollution. Regional cooperation then is considered a good instrument to mitigate such a transboundary environmental problem. Indeed, regional cooperation is not a panacea for all the environmental problems. At the moment, however, cooperation is the only way to achieve the optimal outcome, and it can be achieved by incorporating mutual benefits, compliance and law enforcement mechanisms, stakeholder’ participation in decision making processes, and expert transfer. Yet these all rely heavily on political will. There is no easy solution.

This article was written by Emba and originally published on the Diplomat (