How Do Forest Fires Threaten Indonesia’s Carbon Projects?

Forest Fire Risk Puts Indonesia’s Carbon Projects Under Pressure

Tempatdonasi.com – Indonesia’s expanding carbon market faces a recurring challenge from forest and land fires, which can undermine projects designed to keep carbon stored in natural ecosystems over the long term. The Madani Berkelanjutan Foundation has warned that fire is a tangible threat to the durability of carbon projects, including schemes that have already generated credits and sold them to buyers.

The concern is especially significant because fire risk is considered highly predictable. Yet fires continue to return each year, raising questions about whether project planning, prevention measures, and financial safeguards are sufficient for a market built on the promise of lasting emissions reductions.

Predictable Threats, Repeated Damage

Nadia Hadad, executive director of the Madani Berkelanjutan Foundation, said potential fire zones can be identified with a high degree of confidence through spatial analysis. The available information draws on data and monitoring from the Meteorology, Climatology, and Geophysics Agency (BMKG), the Ministry of Forestry, the Forest and Land Fire Monitoring System, known as SiPongi, and civil-society organizations.

“The prediction is really up to 90 percent, more than 90 percent,”

Nadia made the statement during the Katadata SAFE 2026 event in Jakarta on Wednesday, September 16, 2026.

Madani’s own mapping of locations vulnerable to fires has an accuracy rate of roughly 96 percent when compared with SiPongi information, she said. Its analysis is also released two weeks earlier. That timing matters: early warning can give companies, communities, project managers, and authorities more opportunity to prepare before dry conditions develop into large-scale fires.

Even with those warning signals, forest and land fires continue to affect areas connected to economic activity and conservation. Businesses that obtain non-timber forest products from these landscapes, including coffee, vanilla, and cocoa, may see their cost assumptions disrupted when fires damage land, restrict access, or alter local production conditions.

Why Fires Matter to Carbon Credits

For carbon projects, the consequences go beyond operational losses. Carbon credits generally depend on the idea that a project delivers a measurable climate benefit. A forest fire can release stored carbon, destroy vegetation expected to absorb emissions, and weaken confidence in claims attached to credits already issued.

Two core principles are particularly exposed. The first is permanence, meaning carbon storage must endure for the long term. If a protected or restored forest burns, the stored carbon may no longer remain in place as anticipated. The second is additionality, which concerns whether a project provides benefits beyond what would have occurred without it. A fire can complicate assessment of both the project’s avoided emissions and its continuing climate value.

These principles help determine whether a carbon credit remains valid. Their importance is underscored by the scale of Indonesia’s forest carbon market: since early July 2026, 31.7 million tons of forest carbon credits valued at around Rp5 trillion have been issued.

For buyers, the issue is not merely technical. A company purchasing credits may rely on them as part of a climate commitment or emissions-management plan. If fire later affects the underlying land, questions may arise over how the loss is measured, who bears responsibility, and whether replacement credits or other remedies are available.

Calls for Disaster Risk in Project Assessments

Nizar Marizi, Director for Environment at the Ministry of National Development Planning/Bappenas, said carbon-project assessments should look beyond projected emissions reductions. Future evaluations also need to account for resilience against disasters and the risks that could threaten a project’s results.

He pointed to the Presidential Regulation on National Development Risk Management as an existing reference for such work. Its application, however, has not been uniform across all development activities.

Nizar also referred to a draft government regulation on sustainable finance being discussed by the Ministry of Finance. The proposed regulation could help establish a clearer framework for recognizing and managing environmental and disaster-related risks within financing decisions.

Financial institutions have a role as well. Nizar urged the Financial Services Authority (OJK) and Bank Indonesia to incorporate natural-disaster risk into existing investor stress-test systems. Such tests are intended to examine how investments might perform when confronted with severe risks; incorporating fire and other natural hazards could make the vulnerability of carbon-related assets more visible before losses occur.

An Unresolved Question for Credit Buyers

The discussion highlighted the need for stronger prevention and risk analysis, but it did not resolve what protections should apply to carbon-credit buyers when a project area is burned after credits are sold. It also did not specify how carbon-credit reversals should be handled in those circumstances.

That gap is important because the credibility of a carbon market depends not only on issuing credits, but also on managing setbacks when environmental conditions change. Fire-prone landscapes require systems that can detect risks early, reduce the likelihood of damage, assess losses transparently, and address the consequences if stored carbon is released.

Indonesia’s fire risk is not an unknown variable. The central challenge is turning increasingly accurate predictions into consistent prevention, stronger project design, and clearer safeguards for every party relying on forest carbon projects.