ACDE Trade & Development Seminars
Date & time
Annual forest fires raise substantial health, environmental and economic costs for Indonesia and its neighbours. In spite of substantial media and policy interest in the fires, there is little systematic quantitative analysis of the economic and political forces behind them. We utilize remote sensing and administrative data on fires, rainfall, forests, and agricultural conditions and prices over 2000-2016 to provide causal evidence on two prospective channels: weak governance, and global demand for palm oil. Our results suggest that weak governance is an important factor, particularly in terms of low capacity to enforce laws and regulations against the fires. As expected, upward palm oil price movements and suitability of land for palm oil conversion broadly drive fire activity. In addition, we find that fires account for slightly under half of all deforestation in Indonesia. These results provide insights toward efforts to predict and prevent the fires.