One solution to the haze problem? Pay Indonesia for fresh air

Today Online 1 Oct 15;

Fresh air and sunshine — things that are essential to life and that almost all can have access to for free hitherto — should not be taken for granted. In today’s world, where market values have come to exert such great influence in almost every sphere of our daily lives, perhaps it is time to subject sunshine and fresh air to market forces.

I want to be clear that I am not of the view that the market mechanism can and should govern all aspects of our lives. Allowing all things to be bought and sold erodes the value of what it means to be a human. It reduces everything to just transactions and encourages the idea that it is each man or woman for him or herself.

We should not need to be incentivised by money to discharge our civic duties, to stand up for what is just and fair, or to show kindness and compassion to others. But, for sunshine and fresh air, perhaps a case can be made for imposing market discipline to ensure we can all continue to enjoy them.

Unless you live underground, you would have realised the preciousness of having blue skies and fresh air these past few weeks. Haze has robbed us of these basic requirements for survival.

This haze problem, which originates from the Indonesian forest fires, has been around for some two decades. But, we are nowhere close to coming up with a long-term solution to the problem. The direction we have been taking thus far is to impose laws, such as Singapore’s Transboundary Haze Pollution Act, and to a certain extent, to appeal to the good sense and goodwill of our neighbour by having bilateral talks and closer cooperation between our governments.

Realistically, I do not see these measures leading to any meaningful long-term results. The reason is, to paraphrase Mr Bill Clinton’s successful 1992 presidential campaign, “It’s the economy, stupid!”.

Primary forests do not generate income for the host country. Yes, they produce oxygen, provide natural habitat for animals and add to the biodiversity of our world. But, so what? To a developing country like Indonesia, it makes economic sense to clear the forest, sell the logs, and use the land for more “productive” uses such as palm oil plantations.

Developed countries that have cleared most of their primary forests want countries that still have green swathes of land to preserve them for the good of the world. This is seen as an unfair request on the developing countries. If forests and land are their primary resources, they want to be free to monetise them.

FRESH AIR IS NO LONGER FREE?

Currently, carbon emissions trading under the Kyoto Protocol provides some incentives for countries to keep their forests. Under carbon trading, a country having more emissions of carbon dioxide is able to purchase the right to emit more, and the country having less emission trades the right to emit carbon to other countries.

However, not all countries see the need to be parties to the treaty. For example, China, India and the United States have previously signalled that they would not ratify any treaty that would commit them legally to reduce CO2 emissions. However, there has been some backing down from that stance of late.

In the case of haze, we all see the need for fresh air right here and right now. So, neighbouring countries that are benefitting from the oxygen produced by primary forests in their neighbour’s territory should pay for it.

How, then, do we decide how much to pay? One way is to come up with a formula that takes into consideration the population of a country, its GDP per capita and its proximity to the primary forests.

Distance between countries will not change, but population and per capita GDP will change over time. Hence, countries that are closer, those that are richer and that have more people will end up paying more. Based on that formula, country A, say Singapore, will pay a sum every year to Country B, which has primary forests, say Indonesia. The sum will have to be meaningful enough for the receiving countries to keep to their part of the bargain and keep the forests intact. Paying countries can monitor the green land area through satellite images.

As for the receiving countries, the amount they receive will depend on the area of their primary forests. So, these primary forests will be a source of recurring income for them. However, should there be any pollution in the form of haze coming from the receiving countries, there will be penalty and the amount paid will be reduced accordingly.

Framing the issue as a move to procure a steady source of fresh air for its populations may be something that most governments are willing to accept. We pay for food and water — the other two key ingredients for survival. Why not pay for fresh air, too?

As for the receiving countries, it is in their interest to keep the forests intact and there will be sufficient incentives for them to clamp down on the slash-and-burn practice.

So, which countries should be in this arrangement? Well, any country that is participating in global trade.

No other mechanism for organising the production and distribution of commodities had proved as successful as the markets. Oxygen is a commodity we all cannot live without. It may be time to take the radical move and consider subjecting it to market forces.

It is, perhaps, the only way to ensure that we still have primary forests on the face of this earth 50 to 100 years from now.

ABOUT THE AUTHOR:

Teh Hooi Leng is a multi-award winning journalist turned fund manager. She is now a partner in Aggregate Asset Management, manager of a no-management fee Asia value fund.