Financial incentives for cutting carbon emissions could earn developing countries up to $ 13 billion in carbon credits per year — but there are several issues for policymakers to tackle first, says a new study.

The study, published in the latest issue of Philosophical Transactions of the Royal Society B, analyzes the best ways to reward developing countries that manage to reduce their carbon emissions from deforestation.

Authors Johannes Ebeling and Ma Yasué estimated the carbon credits that could be generated by reducing emissions from deforestation (or RED), based on annual deforestation data from 1990-2005.

They found that a 10 percent global reduction could generate a "carbon finance" of up to about $ 13 billion per year.

They suggest that the funding issues faced by forest conservation might be addressed by linking RED efforts with the international carbon market, responsible for transactions worth $ 33.3 billion in 2006.

A scheme known as REDD (reducing emissions from deforestation and degradation) has been proposed for the new protocol that will replace Kyoto in 2012.

But REDD will mainly benefit countries with a record of heavy deforestation, which may hinder political support from countries with a good RED record, the authors warn.

Ebeling told SciDev.Net that a solution must be found so that countries with restricted deforestation are compensated.

Another major concern is that countries that could benefit most from RED credits, such as the Democratic Republic of Congo and Liberia, score low on governance. These countries, say the authors, tend to have higher deforestation rates and less success in conservation.

"Even if lower deforestation rates are achieved, weak governance structures may make it difficult to pass on benefits to rural populations, and corrupt government agencies may show little interest in sharing benefits fairly or support bottom-up conservation initiatives," write the authors.

Following last year’s UN climate-change meeting in Bali, there has been some debate about forest conservation methods. Suggestions have included incorporation into carbon trading schemes and an international fund for tackling deforestation.

"Given that deforestation accounts for over 20 percent of anthropomorphic carbon dioxide emissions, it is essential that (RED credits) are at the centre of the process," says Matthew Owen, director of Cool Earth, a UK non-governmental organization.

"Relying on a fund would give a limited amount of cash but, with RED credits, nations will be able to independently trade them in a global carbon market, that will only grow in size." (ENN)