BANGKOK, October 9, 2026: Indonesia and other developing economies in Southeast Asia need to rethink economic models built around extraction and short-term growth, and move towards a regenerative approach that restores forests, peatlands and local livelihoods while making polluters bear more of the environmental cost, according to Bhima Yudhistira Adhinegara, Executive Director of the Center of Economic and Law Studies (CELIOS).
Speaking to CarbonWire for the Climate Dialogues series on the sidelines of Bangkok Climate Action Week 2026, Bhima said the region is reaching a point where the economic costs of environmental degradation, wildfire, haze, flooding and health impacts are becoming too large to treat nature simply as an externality.
His central question is whether countries such as Indonesia are still operating with the right economic model.
“We need to find new economic models that can balance between development… but also preserve nature, regenerate nature, and localise many of the initiatives to restore the forests and also the peatlands,” he said.
Bhima described that alternative as a restorative or regenerative economy, one in which economic development is measured not only by conventional growth indicators, but also by whether ecosystems and local communities are becoming more resilient.
Polluters should bear more of the cost
One of Bhima’s clearest policy recommendations is stronger application of the polluter pays principle.
He argued that companies responsible for emissions, air pollution and environmental degradation should face higher taxes, particularly because the costs of that damage are often transferred to local communities through declining health, lost livelihoods and environmental deterioration.
“The local community itself” often bears the greatest burden, he said. At the same time, Bhima said governments should actively support locally led restorative economic models, rather than relying only on penalties.
He pointed to examples in Papua, Flores and Java where communities are developing agroforestry models around crops such as coffee and cloves without destroying forests. He also referred to efforts to rehabilitate former mining areas through partnerships involving local communities, philanthropy and international organisations.
The principle is straightforward: economic activity should create value without destroying the ecological base on which that activity ultimately depends.
Transition finance needs different success metrics
Bhima said financing will be critical if Southeast Asia is serious about moving away from fossil-fuel dependence, mining-heavy economies and other extractive models.
He argued that transition finance should be judged on more than credit growth or repayment performance.
Banks and regulators should also assess whether finance reduces carbon footprints, contributes to ecological restoration and improves environmental outcomes.
Indonesia’s central bank and financial services authority are already working on sustainable taxonomy frameworks, he noted, but Bhima said the bigger shift is in how financial success itself is measured.
Public finance, state-owned enterprises and private capital can all play a role.
For Bhima, the objective should be to move capital towards industries and projects that help communities transition away from extractive activity rather than simply relabelling conventional lending as sustainable finance.
Local livelihoods are central to the transition
One of the main obstacles to environmental transition is the fear that communities dependent on mining, plantations or other extractive activity will lose income.
Bhima argued that this need not be the case. He cited an example from South Papua where locally led initiatives were able to provide alternatives to large plantation-based employment and, according to his account, improve wages by more than 20%.
“When there is a project that is transparent, accountable, [and] there is a good business model, I think many of the people can voluntarily shift from the extractive to this kind of project,” he said.
This is a crucial point because climate transition is often discussed at the level of national targets, policy frameworks and corporate commitments.
For local communities, however, the issue is far more immediate: what replaces the current source of income?
Bhima said regenerative models have the best chance of succeeding when they are locally led, economically viable and built around communities rather than imposed from outside.
In South Papua, he said, some large food and energy estate projects have relied heavily on major capital while involving local communities relatively little. By contrast, indigenous and local initiatives that keep forests intact while developing sustainable commodities can create a more durable economic alternative.
Carbon tax should come before relying too heavily on carbon trading
Bhima also took a clear position on carbon pricing. He said Indonesia has leaned first towards carbon trading and has moved more slowly on carbon taxation, but he believes that sequence should be reconsidered.
“We need to have a strong carbon tax mechanism,” he said. His argument is that taxation creates a direct financial signal for companies to change behaviour.
If high-emitting or environmentally damaging business models become more expensive, companies have a stronger incentive to shift capital towards cleaner and more sustainable alternatives.
Only after that, he argued, should carbon trading and broader nature-based mechanisms play a larger complementary role.
The logic is also fiscal. If environmental damage continues to be paid for primarily through public budgets, then taxpayers end up financing the consequences of private-sector pollution.
Bhima said this is becoming increasingly difficult to justify as the economic costs of climate-related disasters mount.
Indonesia’s wildfire losses are becoming economically unsustainable
The strongest evidence for Bhima’s argument comes from the cost of wildfire and haze. CELIOS estimates that from January to August 2026, Indonesia suffered around US$6.5 billion in economic and health losses linked to wildfires.
Bhima said those costs include rising health expenditures associated with smoke and haze, as well as wider economic disruption.
He also linked the current wildfire situation to the expansion of large-scale economic projects and land-use pressures, including peatland degradation.
The concern is not limited to the dry season. Bhima warned that climate variability could create a cycle in which landscapes damaged by fire later become more vulnerable to flooding.
“El Niño make it worse,” he said, adding that future La Niña conditions could shift the region from wildfire risk towards severe flooding.
For him, these recurring disasters demonstrate that climate and economic policy can no longer be separated. If the current model repeatedly produces wildfire, haze, health costs, flood damage and stranded assets, then the economic model itself needs to be questioned.
Regenerative economics is also a risk-management strategy
Bhima’s case for regenerative economics is therefore not primarily an environmental argument.
It is increasingly a risk-management and economic resilience argument. Businesses that remain tied to environmentally damaging models may face higher taxes, tighter regulation, stranded assets and growing exposure to physical climate risks.
Governments, meanwhile, may find themselves spending ever larger amounts responding to disasters created or amplified by land degradation.
Communities face the most immediate consequences through lost income, poor health and declining natural resources.
A regenerative model attempts to shift the incentives before those costs become unavoidable. That means using taxation to penalise pollution, finance to reward ecological restoration, and local economic development to create viable alternatives for communities.
Southeast Asia needs a shared economic rethink
Bhima said regional forums such as Bangkok Climate Action Week are important because many Southeast Asian countries are facing similar problems, even if the local manifestations differ.
Wildfires, haze, flooding, extractive industries, fragile rural livelihoods and the challenge of financing transition recur across the region.
Events that bring together policymakers, businesses, experts and local communities can therefore help countries learn from each other and accelerate policy change.
Despite the scale of the challenge, Bhima remains optimistic.
“I’m the most optimistic person maybe you ever met,” he said, arguing that collective action around a new economic model can reduce climate risk while protecting livelihoods.
His broader message is that Southeast Asia no longer has the luxury of treating environmental restoration as a cost that can be postponed. The costs are already being paid through wildfire, haze, lost productivity, damaged health and growing fiscal pressure.
The real choice is whether those costs continue to be absorbed after the damage occurs, or whether governments and businesses begin redirecting capital towards economic models that restore rather than deplete natural systems.