The economics of slash and burn: a case study of the 1997-1998 Indonesian forest fires

The slash and burn technique is used in many developing countries as a cheap means of clearing forest land for agriculture and involves cutting vegetation and setting it alight. This paper takes up a case study of the slash and burn forest fires of 1997-1998 in Indonesia and evaluates the social efficiency of this technique by means of a comparison of its economic costs with its economic benefits. The economic costs include the welfare loss caused by the fires through damage to plantations and crop cultivations, as well as the loss of direct, indirect and non use value of environmental goods, such as tropical rainforests damaged in the fires. The corresponding economic benefits consist of cost saving to shifting cultivators and plantation companies because of the elimination of the need to employ the more expensive mechanical (or non fire-using) methods of land clearing and because of the decreased requirement of fertilisers at the sites cleared for agriculture. A comparison of these costs and benefits reveals an estimated loss of US$ 20.1 billion as a result of use of slash and burn in Indonesia in 1997-1998, indicating that use of this technique is highly inefficient from a social perspective. Policy recommendations based on these findings include, among others, a proposal for imposition of a 'land clearing' tax on plantation companies in Indonesia in order to fund a state agency entrusted with the task of mechanically clearing forest land as per requirement, and multilateral aid transfers directed towards providing alternative employment to shifting cultivators. (C) 2003 Elsevier B.V. All rights reserved.