Funding for wildfire management has increased significantly since 2017, with a marked shift towards prevention. The implementation of the NAP has driven average annual expenditures for wildfire management to EUR 534.7 million between 2021 and 2024. Spending peaked in 2024, with an estimated EUR 638 million allocated, which more than doubles the EUR 264 million spent in 2019, the NAP’s baseline year for financial planning. While this level of funding approaches the estimated annual budget required to meet the NAP’s objectives (EUR 647 million), it remains an exception rather than the norm in the past years. Since the NAP’s adoption, prevention has consistently accounted for approximately 60% of total wildfire management expenditure (AGIF, 2025[10]).
Towards an integrated rural fire management framework in Portugal
EUR million
Source: Author’s own, based on data from (AGIF, 2025[10]).
Similarly, planning and monitoring wildfire management investments has improved, notably through mapping of funding sources and the introduction of budget tagging mechanisms. The definition and approval of a provisional multi-annual budget to implement the IRFMS, along with the identification of key financing sources – such as European funds, the Environmental Fund, and the state budget – have laid the groundwork for a more structured investment framework. The NAP itself has also played a transformative role by not only identifying funding needs for each project but also proposing mechanisms to reduce barriers to accessing fragmented funding, incentivise private sector engagement and enhance coordination across funding streams. Additionally, the introduction of a tag in the state budget since 2021 has enabled central entities to track wildfire-related expenditures under a unified budget code, improving both strategic oversight and transparency in resource allocation.
Evidence on wildfire damages, losses, and exposure is essential to support a sound and cost-efficient financing strategy. In Portugal, accounting for fire losses and damages1 is a condition for obtaining government relief funds. In addition, estimating the potential economic impacts of wildfires ex ante is critical to inform cost-benefit analyses of risk prevention and reduction investments. This helps identify high-value investments and ensures the strategic allocation of financial resources. Such an ex-ante estimation requires not only data on observed losses and damages, but also information on wildfire management expenditures to infer potential future costs. It also requires information about the value of exposed assets. International examples, such as CAL FIRE’s damage database and Victoria’s Rapid Risk Assessment Teams, highlight the importance of standardised classification, consistent reporting, and transparency (Box 5).
California (United States): Since 2013, CAL FIRE’s Damage Inspection Program (DINS) has collected standardised data on structures damaged or destroyed by wildfires in California. Using a consistent inspection process and classification system, inspectors document the type, use, and damage level of structures whether within or just outside fire perimeters. This publicly accessible dataset supports emergency response, recovery planning, insurance claims, and research on wildfire impacts and resilience. Damage levels are codified based on estimated damage percentage: 1–10% is classified as Affected Damage; 10–25% as Minor Damage; 25–50% as Major Damage; 50–100% as Destroyed; and No Damage is used when the structure remains intact.
Victoria (Australia): In the State of Victoria, Australia, disaster damage and loss data are collected through a two-phase impact assessment process – initial and secondary impact assessments – coordinated under the Emergency Management Act 2013. These assessments inform response, relief, and long-term recovery planning, and feed into EM-Impact, a centralized platform for real-time data entry and visualisation. EM-Impact uses over 100 predefined metrics across recovery domains (social, economic, built, natural), with a Data Dictionary ensuring consistency, clarity, and data governance throughout the emergency management cycle.
Source: (CALFire, 2025[40]) and proceedings from the international peer-learning workshop “Strengthening Damage and Loss Data Collection” with wildfire management authorities from Victoria (Australia), held on 28th May 2025.
Portugal faces several challenges in documenting losses and damages and evaluating future wildfire risk. One major issue is the limited documentation and standardisation of data on wildfire-related damages and losses. The data collection process involves a wide range of stakeholders, including national authorities, regional directorates, infrastructure managers, municipalities, and private landowners. Yet, limited coordination and the lack of standardised practices hamper the comparability and centralisation of this information. In addition, there is a lack of a detailed inventory of exposed assets. To inform such an inventory in California, satellite technology is used to map assets, in addition to information collected by inspection teams before fires occur (Box 5). Finally, gaps remain in assessing wildfire-related losses and damages, particularly in relation to ecosystem services.
To address these challenges, a working group on wildfire damages and losses was created under Portugal’s National Commission for Integrated Rural Fire Management (Presidency of the Council of Ministers, 2021[27]). It involves the national civil protection, national forest office and regional authorities and aims to develop a standardised framework and digital platform for identifying, valuing, and reporting wildfire losses and damages across sectors. Its implementation should start in 2026, allowing to evaluate direct impacts. Further work is needed to evaluate the indirect impacts of fires.
In Portugal, wildfire related contingent liabilities are financed through the regular contingency budget supplemented by international cooperation, or ad-hoc budgets in the case of extreme events. Between 2015 and 2024, the average annual amount available in the contingency reserve was approximately EUR 510 million, which has been considered adequate so far to cover liabilities arising from wildfire events. Following the 2017 events, Portugal established a special one-time budget to cover implicit liabilities. This one-off budget, totalling almost EUR 190 million, was earmarked for various critical areas: compensation for deaths and serious injuries, restoration of affected areas, cost-sharing arrangements with municipalities to replace public equipment, support for the construction and rehabilitation of damaged housing, and the establishment of a credit line for municipalities to invest in management of secondary fuel break networks (Council of Ministers, 2023[41]) (Finance and Territorial Cohesion, 2024[42]) (Ministry of Agriculture and Food, 2023[43]).
In the absence of clear cost-sharing arrangements for fire recovery, implicit contingent liabilities by the central government weaken incentives for risk prevention investments among private and subnational government actors. Past arrangements with the national government lack explicit contractual commitments or clearly defined financial responsibilities for compensation of wildfire losses and restoration costs by subnational and private stakeholders. This can unintentionally discourage proactive fire risk reduction investment by creating expectations of default central government support for incurred losses and damages. Other countries have defined clear cost-sharing arrangements among levels of governments, such as Canada, where those differ depending on the type of support (e.g. response, recovery, and mitigation) but also consider regional risk levels Hence, provinces and territories receive higher national co-financing rates for risk reduction investments in high-risk areas compared to those in lower-risk zones (Public Safety Canada, 2025[44]). Similarly, Australia has defined transparent, well-communicated assistance frameworks with clear eligibility and limits for financial support to private actors (Box 6).
Growing fiscal constraints at the local level, coupled with limited strategic and financial support from the central government, has contributed to disincentivise fire-resilient land management. Declining populations in rural areas have eroded municipal tax bases limiting the resources available for the implementation, inspection and enforcement of fuel management regulations. At the same time widespread land abandonment has led to even greater fuel accumulation and increased demand for such management. Hence, while municipal taxes represent 40% of the total revenues across mainland municipalities, this share is only 26% when analysing the fifty-five municipalities affected by the 2017 wildfires, which are in rural, abandoned areas (DGAL, 2019[45]). Fiscal equalisation mechanisms neither compensate wildfire-prone municipalities for the public goods they provide, such as carbon storage, water quality, biodiversity, and wildfire mitigation, nor for the relatively higher fire risk they are exposed to. Current transfers are not performance-based and focus mainly on protected areas, excluding many high-risk forested zones. As a result, municipalities that face opportunity costs from adhering to wildfire hazard maps and safety regulations receive little financial reward in return. This creates a trade-off between generating tax revenue and investing in wildfire prevention and forest conservation. In turn, it can foster rent-seeking behaviours that undermine risk reduction, such as promoting high-risk economic activities or neglecting fire safety measures to attract development.
Canada’s cost-sharing arrangements between levels of governments: Canada also uses a cost-sharing model, where the federal government reimburses provinces and territories between 50 and 90% of disaster costs through the Disaster Financial Assistance Arrangements (DFAA). Funding is structured into five streams covering response, recovery, resilient infrastructure, mitigation, and support for individuals and small businesses. Federal support is triggered when disaster costs exceed a per capita threshold. The DFAA also includes a “build back better” provision (+15% for resilience) and a disaster risk reduction incentive, offering up to 40% of the financial threshold for pre-disaster risk reduction efforts.
Australia’s financial assistance for individuals affected by disasters: When Australians are impacted by major disasters, two key financial supports are available from the government. The Australian Government Disaster Recovery Payment is a one-off, not means-tested and non-taxable lump sum of AUD 1,000 for eligible adults and AUD 400 for each eligible child. It is designed to help people who have been seriously affected – such as those who were injured, lost their home or major assets, or lost an immediate family member as a direct result of the disaster. In addition, the disaster recovery allowance provides short-term, taxable income support for up to 13 weeks to employees, small business owners, and farmers who have experienced a loss of income due to a disaster.
The absence of market-based incentives such as payment for ecosystem services for private landowners who own 97% of Portugal’s forests further discourages private investments in wildfire resilience. This increases the financial burden on municipalities and amplifies fiscal risks. Efforts to establish a policy for the provision and compensation of ecosystem services in rural areas in Portugal are, in fact, underway (Santos et al., 2019[47]). Initially, the policy will be implemented in two protected areas – the Tejo International Natural Park and the Serra do Açor Protected Landscape – where landowners who engage in production and conservation activities that promote greater territorial resilience will be compensated for the net income loss that would have been obtained from the most profitable land use allowed by the Regional Forest Management Plans (Programa Regional de Ordenamento Florestal, PROF). Revisions of the PROF may be necessary to ensure the proper development of the policy (Independent Technical Observatory, 2021[14]). In Spain, these schemes have become increasingly adopted to support wildfire prevention (Box 7).
Catalonia: Fire Flocks (Ramats de Foc) is a wildfire prevention initiative in Catalonia that promotes targeted grazing in high-risk areas to reduce fuel loads. In coordination with the support group for forest actions of the regional firefighters, strategic zones are mapped where grazing supports fire control. Shepherds are compensated €140 per hectare per year in strategic areas and €70 per hectare per year in complementary zones, with funding from local authorities and private partners like BBVA, a Spanish multinational financial services company.
Andalusia: The RAPCA programme (Red de Áreas Pasto-Cortafuegos de Andalucía), launched in 2005 by the Government of Andalusia, integrates extensive grazing into wildfire prevention. It engages 220 shepherds to manage nearly 6,000 hectares of firebreaks on public land, reducing biomass and fire risk while promoting land stewardship. Operated through annual contracts or pasture rights, RAPCA is supported by technical staff from the regional environment agency. Participants receive a fixed payment of €300 and variable compensation between €42 and €90 per hectare, depending on terrain. The programme is one of Spain’s most established models for using grazing in fire risk management.
Source: (Ascoli et al., 2023[48]).
Finally, fragmented funding sources, weak coordination, and limited expenditure tracking hinder effective public finance management and evaluation. Sources for wildfire funding under the NAP are spread across multiple programmes and institutions without a centralised mechanism to coordinate, prioritise, or evaluate spending. This institutional fragmentation limits the ability to align funding with strategic objectives, creating inefficiencies and gaps in implementation. For instance, despite substantial EU Common Agriculture Policy (CAP) funding for forest development and improving economic competitiveness of the forestry sector, resources have been disproportionately directed toward the country’s most prosperous regions, neglecting more vulnerable areas with greater forest cover and higher wildfire risk (Viegas, Batista and Cordovil, 2023[49]) (Figure 5). In addition, subnational governments’ expenditures on wildfire management are difficult to monitor, as they are often financed through broader thematic programmes – such as EU regional agricultural funds – where wildfire prevention is not the primary objective. Although these expenditures may contribute to implementing the NAP, they are not recorded as wildfire-related due to the absence of dedicated budget tags. This lack of tagging hampers effective monitoring and evaluation and limits the ability to allocate resources where they are most needed. The fragmentation challenge is compounded by the decreased reliance on the central government budget to fund wildfire management initiatives – falling from 70% of total expenditures in the baseline year to just over 50% in recent years (AGIF, 2025[10]) – as the system shifts toward more diverse funding sources.
Most of the CAP resources have been allocated to the least vulnerable territories
Portugal’s rural areas face significant fiscal and structural disincentives that hinder land management and wildfire risk reduction. High land fragmentation – driven by undivided inheritance, unclear property titles, and costly legal procedures – makes many rural properties economically unviable and prone to abandonment, especially in the centre and north regions (AGIF, 2020[1]). This situation is exacerbated by the rural property tax system2, which indirectly penalises active land management by taxing productive land more heavily and often letting abandoned plots go untaxed. As a result, landowners who maintain their properties face higher costs and lack incentives to manage fuel loads or formally register their land.
Additionally, the Property Transfer Tax (IMT) acts as a disincentive for rural land transactions that could promote more effective land management. By generating revenue primarily from land sales linked to construction, the tax has unintentionally encouraged development in wildfire-prone areas. Although the 2025 state budget introduces provisions for tax exemptions related to rural land consolidation – including an expanded scope covering mixed or residential-use properties with a predominantly rural function – these exemptions remain temporary. The lack of long-term fiscal incentives for land aggregation contributes to the persistence of numerous small, unproductive plots, undermining the NAP’s objective to enhance the attractiveness and viability of rural areas (Florestas.pt, 2022[50]). In France, a Forest Investment Tax Incentive Scheme (DEFI) offers income tax credits for land consolidation, eligible forest management activities, or wildfire insurance premiums – none of which are currently available in Portugal, although landowners who voluntarily consolidate adjacent rural parcels may benefit from Property Transfer Tax exemptions.
While standard property insurance in Portugal typically includes fire coverage, uptake remains low in high-risk rural areas. In 2022, about 55% of households had property insurance covering fire risk, though take-up is often significantly lower in districts exposed to high or very high wildfire risk (ASF, 2024[51]) (ASF, 2024[52]). Limited coverage reflects both low demand and restricted availability, as insurers are hesitant to cover older buildings made with flammable materials or located near dense vegetation (Almeida et al., 2021[53]). In the United States, state-level programs help ensure insurance availability for properties with high wildfire risk and limited private coverage. The Fair Access to Insurance Requirements (FAIR) plans are public-private schemes providing basic coverage for high-risk properties, with minimal direct government funding. Premiums under FAIR plans are higher than standard market rates but generally lower than what private insurers would charge for similar risks (National Association of Insurance Commissioners, 2025[54]). These plans typically purchase reinsurance and can levy assessments on insurers if claims exceed capacity. Community-based insurance offers another model, organising coverage at the community level rather than individually. A municipal or district government may purchase insurance for the entire community, using funds collected from members to pay premiums, and distributes payouts in case of loss (Box 8). Variations include the community acting as a facilitator, helping members access coverage, or as an aggregator, collecting premiums on behalf of insurers while claims remain the insurer’s responsibility. Such approaches can expand access, reduce individual costs, and strengthen resilience in high-risk rural areas.
Community-based insurance provides a mechanism to organise insurance coverage at the community-level, rather than at the level of individual households or businesses. The community-based insurance coverage can be designed to make payments based on the occurrence of a wildfire in the covered community (i.e. a parametric trigger) which should reduce the cost of coverage.
Pilot programmes in the United States illustrate this model: in New York City, a housing-focused organisation can receive up to USD 1.1 million after major precipitation to provide emergency grants to residents; in Isleton, California, a municipal authority can access up to USD 2.5 million in parametric flood coverage, with funds channelled through a regional body to support affected residents. This approach enhances affordability, speeds up recovery, and enables collective risk management.
Insurance for agriculture, horticulture, and forestry assets, including protection against fire-related losses, exists but remains underutilised. The government provides premium subsidies for certain agricultural products, such as crops and vineyards, and has established a loss-sharing mechanism to help insurers manage extreme production losses (IFAP, 2016[58]). Despite these measures, insurance penetration is low: only about 6% of the insurable market value of gross crop production is covered by subsidised insurance (Aggarwal, 2023[59]) (Swiss Re Institute, 2023[60]). Coverage for forestry assets is even more limited, as no subsidies or cost-sharing arrangements are available. This is particularly pronounced among small producers in the Centre and North, where insurance costs often exceed the potential value of forest products (Berenguer et al., 2023[61]). Low insurance uptake among households, agriculture, and forestry in high-risk areas constrains the sector’s role in wildfire risk reduction and climate adaptation. Expanding cost-sharing arrangements could increase support, either through higher government contributions to shared losses or by lowering the threshold for triggering these arrangements. However, greater government responsibility could create fiscal risks and weaken insurers’ underwriting discipline, potentially fostering moral hazard. In some countries, forestry losses are integrated into agricultural insurance programs and loss-sharing mechanisms. For example, Spain’s agricultural insurance program covers forestry products (Agroseguros, n.d.[62]) and benefits from reinsurance via the state-owned Consorcio de Compensación (CCS, n.d.[63]), illustrating a model where broader coverage and shared risk management can enhance resilience.
Accessing funding for wildfire prevention and rural resilience in Portugal is hampered by a fragmented, complex system and inefficient tendering. Key institutions such as AGIF and CCDRs are insufficiently involved in designing funding calls, resulting in overly complex or poorly adapted requirements. This disadvantages municipalities and associations with limited administrative capacity. European thematic and regional funding processes often fail to reflect local needs, favouring well-resourced applicants over those with greater need. Responsibilities are scattered across multiple funding streams (e.g. Resilience, Cohesion, Agriculture Funds), each with distinct procedures and priorities. This dispersion creates confusion and limits access, especially for integrated projects linking fire prevention with broader rural development.
While Portugal has worked towards a multi-fund approach, gaps remain in achieving a clear, one-stop-shop funding model. Access to wildfire management funding has improved through several initiatives led by the development and cohesion agency under Portugal 2030. These include the funds portal (Portal dos Fundos), which centralises information on calls, news, and application procedures; the funds desk (Balcão dos Fundos), a single-access point where users can apply and track submissions with one ID; and the funds hotline (Linha dos Fundos), a call centre providing applicant support. While these mechanisms streamline access, they do not resolve the structural issue of siloed funding calls. Persistent disparities in local technical capacity, especially in low-density and fire-prone areas, further hinder municipalities’ ability to access and manage funds, perpetuating regional inequalities. In response, AGIF established a permanent working group in 2024 to align investment priorities and improve coordination between ministries, agencies, and funding instruments. This platform marks a positive step towards a more coherent funding strategy but remains at an early stage.
Portugal’s growing exposure to wildfires underscores the need for a more integrated and transparent financing strategy for wildfire management. To make wildfire funding more effective and sustainable, data on losses, damages, and evaluation of future risks is needed. Reliable data are essential to guide funding priorities, design cost-sharing mechanisms, and align financial instruments with the country’s evolving risk profile.
A second priority is to improve public finance management to incentivise risk reduction and mitigate future financial losses. This includes defining clear ex post cost-sharing mechanisms across levels of government and between public and private actors. These mechanisms should reflect regional disparities in land ownership, economic viability, and administrative capacity, ensuring adequate support for the most vulnerable municipalities. At the same time, fiscal equalisation and market-based solutions can help wildfire-prone municipalities strengthen their capacity for risk reduction. Adjusting the Local Finance Law or introducing performance-based grants would reward prevention and resilience outcomes. Complementary market-based tools, such as Payments for Ecosystem Services (PES), could further incentivise fire-reducing land practices, recognising the environmental value of rural landscapes and supporting ecosystem conservation objectives.
A more systematic use of cost-benefit analysis (CBA) in project design and tenders would improve the targeting of investments. By integrating CBA and fire risk assessments, Portugal can ensure that public spending (beyond EU-funded programmes) prioritises prevention measures in the most fire-prone territories. In parallel, integrating fiscal risk into national budget planning can help absorb residual financial shocks. Establishing climate fiscal buffers with clear governance, costing, and allocation rules would enable faster and more transparent post-fire recovery.
Public finance management could also be improved through better financial tagging and tracking. Introducing sub-tags for prevention, suppression, and recovery, and linking these to the National Action Programme (NAP) reporting – based on funding authorities rather than beneficiaries – would enhance transparency, accountability, and strategic decision-making.
Rethinking fiscal incentives for private stakeholders could promote sustainable land management and further reduce wildfire risk. Reforming rural property taxation would help eliminate disincentives for active land use and prevention. Aligning land valuation with productivity and offering tax breaks for properties meeting fire prevention standards would encourage stewardship. In parallel, remunerating the ecosystem services provided by landscape managers such as farmers or herders can effectively support the maintenance of agroforestry mosaic landscapes and contribute to wildfire resilience in vulnerable territories. Sustaining and expanding transaction tax exemptions under the 2025 fiscal reform could also accelerate land consolidation, reducing fuel loads and improving landscape resilience. Expanding the scope of the Legal Framework for Land Structuring would reinforce these efforts.
Improving insurance coverage in high-risk areas can also strengthen financial resilience. Portugal could explore Public-Private Insurance Programmes, risk pooling across multiple hazards, or community-based insurance schemes managed locally. Expanding agricultural and forestry insurance, with tax incentives or state-backed reinsurance, would help close existing coverage gaps. Forest owner associations could play a key role by linking insurance premiums to risk-reduction actions such as vegetation management.
Finally, better coordination and information sharing are needed to overcome funding fragmentation. AGIF could play a stronger role in the design of tenders and investment calls, ensuring alignment with NAP priorities. Creating a single online platform to consolidate all wildfire-related funding opportunities would further improve accessibility. Strengthening the existing wildfire working group and maintaining coordination beyond PRR funding cycles will be essential to align PEPAC, InvestEU, and other instruments with Portugal’s long-term wildfire resilience objectives.
← 1. Damage refers to the replacement value of totally or partially destroyed physical assets considering the same standards that prevailed prior to the event. Losses refer to the foregone economic flows resulting from the temporary absence of the damaged assets and/or due to any other disruption of economic activity caused by the disaster (GFDRR, 2010[77]; OECD/The World Bank, 2019[78]).
← 2. Municipal taxes are levied on property (IMI), property transactions (IMT), and vehicles (IUC). Additionally, local authorities collect a surtax on corporate profits, known as Derrama, and can impose fines, fees and specific taxes. On average, the Municipal Property Tax represents the largest share of tax revenue in the country.