Land-clearing forest fires in Indonesia cause enormous private and social losses from greenhouse gas emissions, deforestation, habitat destruction, worsened human health, and strained international relations. These fires are almost always deliberately set, often by smallholders as they seek to expand farm size. The Government of Indonesia has taken primarily a regulatory approach to preventing these fires, by imposing bans and making them illegal. This paper studies an alternative approach taken in a large policy experiment focused instead on incentives.
It draws on a 275-village sample from four fire-prone districts in West Kalimantan. Analytically, it uses a randomized controlled trial, complemented by three rounds of village surveys, to understand the efficacy of conditional cash payments (~US$10,800) to villages that had no fires in 2018, as monitored by satellite technology. Despite the potential for receiving a relatively large conditional payment to villages, private gains from burning by a few households often overrode this important public good for the village. We relate the experimental findings to the underlying causes of the fire outcomes across all villages, finding that climate variation, government policy, population density, and accidents appear to explain fire use more than the conditional payments.