Indonesia and Trans-Boundary Haze

Introduction

Transboundary haze pollution (THP) in Southeast Asia—which mainly caused by Indonesia—is a regional recurring environmental problem (Qadri 2001, p. 54; Orangutanfoundation 2010). The THP can be resolved if there is support and cooperation of international stakeholders. Members of Association of Southeast Asian Nations (ASEAN) countries signed the 2002 Agreement on Transboundary Haze Pollution treaty ('The Treaty'). One of the principles in the treaty is to get support and cooperation among key stakeholders in domestic and international level (ASEAN Secretariat 2002, a. 3)

Key Issue

The key issue to end this recurring problem is how to create incentive for international stakeholders to cooperate and support Indonesia. The common cause of transnational problem is self-interested pursuits (Sandler 1997, p. 2). Nevertheless, 'cooperative solution' is still possible to be reached even if the stakeholders assumed to have individually rational behaviour (Finus 2001, p. 11). The key determinant to make the transnational public good achieved is the proper incentive for the individual contributors (Sandler 2004, p. 98). Indeed, the main reason of why Indonesia would not ratify the treaty is the lack of economic incentive which associated with the inadequacy of resources at the local level to address the challenges of haze pollutions (Tacconi et al. 2008, pp. 6-9). The adequate resources are very important for Indonesia to create alternative solutions for local stakeholders; for example: alternative technology for oil palm and logging companies in doing land clearing, or to provide alternative livelihood for local people.

The proper incentive for international stakeholders is to have good quality air and environment (collective good) and/or to meet their international commitment. This will never be achieved unless all parties cooperate. The cooperation is important because Indonesia needs economic resources from international stakeholders, while international stakeholders need Indonesian commitment. This meets characteristic of 'assurance game'; that is the benefit will only flow if both parties contribute to the cooperation (Sandler 1997, p. 35; Finus 2001, p. 32).

Solution options

Option 1: Isolate the cooperation within ASEAN

Indonesia should isolate the cooperation within ASEAN. This is because the affected countries of THP are ASEAN countries (Quah 2002, p. 429). The most effective way to resolve transboundary environmental problem such as THP is by involving the affecting and affected countries (Uitto & Duda 2002, p. 365). Indonesian leadership is important because Indonesia plays a dominant role both in ASEAN as well as in the THP (Tay 2002, p. 61). Leadership is a key to get an optimal outcome in an 'assurance game' (Sandler 2004, p. 27).

Indonesia must provide commitment to ratify and implement the treaty. This will send a strong signal of incentive for other ASEAN countries which will attract them to cooperate. In return, Indonesia should demand ASEAN members to contribute to the Transboundary Haze Control Fund (Haze-Fund) that has been initiated since 2007 (ASEAN Secretariat 2007).

Although the Haze-Fund is potential as resources for alternative solutions for Indonesian domestic stakeholders, it is difficult to get sufficient amount of it. As per October 2008, the ASEAN members were still struggling to achieve their initial target of $500,000 (ASEAN Secretariat 2008). That target is far from sufficient for alternative solutions of THP problem which involve large economic activities.

Option 2: Enlarge the cooperation to global level

Indonesia must relate the haze issue to the climate change. This will enlarge the scope of the cooperation into the global level. Effective collective action is more likely to be achieved by addressing global exigencies simultaneously (Sandler 1997, p. 19; Finus 2001, p. 2). Besides being a major contributor to the THP, the 1997 Indonesian peat-land fire released carbon to the atmosphere which estimated equivalent to 13-40 per cent of the mean annual global carbon emissions from fossil fuels (Page et al. 2002, p. 61). Addressing haze production from the peat-land fire will create global benefit in mitigating climate change (Tacconi et al. 2008, p. 2). This is a window to get more resources from global partnership through Reducing Emissions from Deforestation and Degradation (REDD) scheme.

The incentive for international stakeholders is the possibility to use the partnership as a source of offsets to meet their emission reduction target as promised in the Kyoto Protocol (Fogarty & Creagh 2010). In fact, there are two global partnerships that have been running so far; they are: cooperation with Australia on Kalimantan Forests Climate Partnership with a value of $30 million (Australian Government 2009), and cooperation with Norway on Norway-Indonesia REDD-Plus Parnership with a value of $1 billion (Norway Embassy-Jakarta 2010). The ability to provide alternative solutions allows Indonesian government to gain support from domestic stakeholders to implement the treaty.

While this option can create strong incentive for international stakeholders and support of domestic stakeholders to implement the treaty, it depends a lot on the global economic stability. The stability of global economy enables industrialized countries to contribute to the global emission reduction efforts.

Proposal

By applying the following criteria: (a) the cost to Indonesia, and (b) the perception of responsibility, option-2 is the most plausible one.

The cost to Indonesia is an important criterion because Indonesia needs fund for its development and economic activities to create jobs. The best THP solution is the one that create little economic cost to Indonesia. Option-1 is likely will end up with low amount of Haze-Fund. If Indonesia committed to apply the treaty, Indonesia must pay most of the costs. And if government decides to close oil palm and logging companies who unable to find solutions to their land clearing but burning (because of a lack of alternative solution such as appropriate technology), Indonesian economy will suffer. This is a disincentive for domestic stakeholders to support the treaty. Option-2 is more promising because it could attract more resources from international stakeholders which enable Indonesian government to find more alternatives for solutions to manage the interests of domestic stakeholders.

The perception of responsibility drives the incentive to cooperate which is central to achieve optimal outcome in an assurance game. In the THP issue frame (option-1), ASEAN countries (other than Indonesia) do not have strong responsibility of the issue because THP is a unilateral externality where Indonesia is the the main cause. By contrast, in climate change issue frame (option-2), almost all countries contribute to the greenhouse gas emissions (multilateral externality) where the industrialized countries are among the main cause. This explains why ASEAN countries have weak incentive to cooperate (option-1), while industrialized countries at global level have a stronger incentive (option-2) although both of them have similar interest to the collective good. Therefore, option-2 is more potential to make the international cooperation happen.

References

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