Southeast Asia's Haze Crisis and Solutions

In 2023 and 2024, Southeast Asia once again faced the haze. Illegal slash-and-burn

fires in Indonesia push Singapore’s PSI above 300, shutting schools, cancelling flights,

and filling hospitals. This is market failure — private firms create huge external costs for millions

not involved in production. The haze mainly comes from palm oil and pulp companies

using burning because it costs under USD $5 per hectare, compared to $200–300 legally.

Firms consider only marginal private costs, but the true marginal social cost is far

higher: health damage, lost productivity, and environmental destruction. That gap between

MPC and MSC creates the negative externality. In the diagram, supply represents MPC.