*An environmental tax should not be seen as a punishment for economic activity. Properly designed, it is a commitment to protect communities, restore ecosystems, and ensure that those creating environmental risks also bear the cost of preventing them.*
## **When Smoke Becomes a Humanitarian Crisis**
For many communities in Kalimantan, forest and land fires—widely known as *karhutla*—are more than statistics on burned hectares. They mean children studying under hazy skies, workers losing productive days, flights being disrupted, and families worrying about the air entering their lungs. Behind every hotspot is a human cost that conventional economic calculations can easily overlook.
The crisis intensified in 2026. Indonesia recorded approximately 202,000 hectares of burned land between January and August, with West Kalimantan accounting for around 38,310 hectares—the largest provincial total reported during that period. Recorded fire incidents from January to June 2026 also increased by 366 percent compared with the same period in 2025. [1](https://wartaekonomi.co.id/read633857/saat-asap-mencekik-paru-paru-dan-fiskal-daerah-menakar-ongkos-mahal-krisis-karhutla-2026)[2](https://indonews.id/artikel/354121/CELIOS-Total-Kerugian-Ekonomi-dan-Biaya-Kesehatan-Karhutla-2026-Berpotensi-Tembus-Rp1231-Triliun/)[3](https://opini.kemenkeu.go.id/pages/read/menghitung-ulang-ongkos-fiskal-karhutla)
These figures demand more than emergency responses. Water bombing, weather modification, firefighting teams, and health assistance remain necessary, but they primarily address fires after risks have escalated. Indonesia needs a fiscal system that makes prevention economically rational and environmental negligence financially costly.
## **The Public Pays While Polluters Externalize the Cost**
Forest fires expose a fundamental injustice: environmental damage may be generated by a limited number of actors, but its costs are distributed across society. The government finances firefighting operations, public health services, disaster assistance, and ecosystem restoration. Households pay through medical expenses and interrupted education, while businesses experience damaged supply chains and declining productivity.
According to estimates reported by CELIOS, the combined economic and health-related losses from Indonesia’s forest and land fires between January and August 2026 could reach between Rp39.29 trillion and Rp123.1 trillion. The estimated loss of physical assets and economic activity alone was approximately Rp29.54 trillion, equivalent to around 0.23 percent of national GDP. [1](https://wartaekonomi.co.id/read633857/saat-asap-mencekik-paru-paru-dan-fiskal-daerah-menakar-ongkos-mahal-krisis-karhutla-2026)[4](https://muc.co.id/id/article/karhutla-2026-berpotensi-kurangi-penerimaan-pajak-daerah-rp26986-miliar)[2](https://indonews.id/artikel/354121/CELIOS-Total-Kerugian-Ekonomi-dan-Biaya-Kesehatan-Karhutla-2026-Berpotensi-Tembus-Rp1231-Triliun/)
The fires may also weaken government revenue. Regional governments were estimated to face around Rp269.86 billion in potential net tax-revenue losses, including approximately Rp28.9 billion in West Kalimantan. The disruption can travel beyond burned areas through industries such as timber processing, pulp and paper, and furniture manufacturing. [4](https://muc.co.id/id/article/karhutla-2026-berpotensi-kurangi-penerimaan-pajak-daerah-rp26986-miliar)[1](https://wartaekonomi.co.id/read633857/saat-asap-mencekik-paru-paru-dan-fiskal-daerah-menakar-ongkos-mahal-krisis-karhutla-2026)
This situation creates a troubling contradiction. Taxpayers finance the consequences of ecological destruction, while parties responsible for high-risk land management may not bear an equivalent share of the preventive cost. Fiscal policy must correct this imbalance.
## **Environmental Taxation as Preventive Infrastructure**
An environmental tax is a fiscal instrument imposed on activities that generate pollution, ecological degradation, or measurable environmental risk. In the context of *karhutla*, it should not merely become another general levy. It must be designed as preventive infrastructure: changing corporate behaviour before smoke appears.
The central principle is simple: **the greater the environmental risk created or poorly managed, the greater the fiscal responsibility.**
A risk-based environmental tax could apply to companies operating plantations, forestry concessions, peatlands, or other fire-prone areas. The rate should not be determined solely by land size or corporate revenue. It should account for peat depth, historical fire incidents, water-table management, verified hotspots, restoration performance, supply-chain transparency, and investment in community-based prevention.
Companies protecting peatlands, maintaining fire-free concessions, publishing auditable environmental data, and supporting local fire-prevention groups should receive lower rates or fiscal rebates. Conversely, operators repeatedly associated with fires, weak monitoring, or neglected restoration obligations should face progressively higher charges.
Such a framework would turn environmental performance into an economic variable. Prevention would no longer depend only on corporate goodwill; it would become a financially intelligent business decision.
## **Reward Protection, Not Only Punish Destruction**
Fiscal firmness does not mean treating every land-based business as an offender. A credible policy must distinguish between responsible operators, negligent parties, smallholders, and Indigenous or local communities whose livelihoods depend on the land.
Small farmers should not carry the same burden as large corporations with extensive concessions and sophisticated risk-management capabilities. Instead of indiscriminate taxation, the government could establish thresholds, exemptions, technical assistance, and transition periods. Smallholders adopting fire-free land preparation should gain access to equipment, affordable financing, agricultural training, and fiscal incentives.
Revenue from the environmental tax should also be ring-fenced transparently. It could finance peatland restoration, monitoring technology, village fire brigades, community health protection, and alternative livelihood programmes. Indonesia already has ecological fiscal-transfer initiatives—including provincial, district, and municipal models—designed to reward local environmental performance. Their underlying principle is that prevention costs less socially, environmentally, and fiscally than disaster response. [5](https://eftindonesia.org/)[3](https://opini.kemenkeu.go.id/pages/read/menghitung-ulang-ongkos-fiskal-karhutla)
Part of the revenue could strengthen such transfers, enabling villages and districts that successfully reduce hotspots, protect forests, and restore peatlands to receive larger allocations. This would create a balanced fiscal ecosystem: taxes discourage harmful behaviour, while transfers reward measurable stewardship.
## **Governance Determines Whether the Policy Works**
An environmental tax will fail if it becomes merely a revenue-collection instrument. Its legitimacy depends on accurate data, transparent allocation, independent verification, and consistent enforcement.
The government should integrate satellite monitoring, concession maps, peatland data, permit information, field inspections, and fire histories into one auditable assessment system. The public should be able to see who pays, why a particular rate applies, and how the collected money is spent. Communities must also have accessible channels for reporting fires, land conflicts, and corporate non-compliance.
Taxation cannot replace criminal, civil, or administrative enforcement. It must complement them. Paying an environmental tax must never grant a licence to burn or immunity from liability. Companies violating environmental laws should still face restoration obligations, administrative sanctions, civil claims, or criminal proceedings where legally applicable. Indonesian authorities have already used administrative sanctions against certain forest-business permit holders after fires were found in managed areas, illustrating the importance of combining fiscal policy with enforcement. [3](https://opini.kemenkeu.go.id/pages/read/menghitung-ulang-ongkos-fiskal-karhutla)[6](https://www.ditjenppi.org/indonesia/dokumen)
## **The Courage to Prevent**
Kalimantan does not need another cycle in which smoke arrives, emergency budgets expand, public attention peaks, and preventive commitments fade when the rain returns. It needs the political courage to move from reactive spending to preventive taxation.
A fair environmental tax sends a clear message: profit cannot be separated from ecological responsibility. Those who benefit economically from natural resources must invest proportionately in protecting them. Those who demonstrate genuine stewardship should be recognised and rewarded.
Ultimately, fiscal resolve is not about choosing between economic growth and environmental protection. Forest fires already damage both. The real choice is whether society continues paying for preventable destruction—or builds a fiscal system that protects forests, public health, responsible businesses, and future generations.
**The smoke is not inevitable. With fair taxation, transparent governance, and firm enforcement, prevention can become Indonesia’s most valuable public investment.**