The easiest place I've found to do this achievement is on board the ship at the start of 'Infiltrate Octan Tower' on Free Play mode. This level is located in Cloud Cuckoo Land (take the rocket ship to the right of the portal to a new area and slide down the slide. Access the level on the double-decker sofa).
There is a room that can be accessed either by using explosives or starting a fire (if you explode it by accident, inside is a place you can also start a fire). Characters able to start fires include Caveman, Lady Liberty, Kabob Bob and Wiley Fusebot.
To start the fire stand on the area and press K (keyboard controls - I'm told it's B on Xbox Controllers).