There is much speculation as to what will, and what should, emerge from next month's climate change conference in Bali, Indonesia, where participants from some 189 nations will gather to map out the path to an effective successor to the Kyoto Protocol.

Whatever shape a post-Kyoto regime takes, be it a bigger and better treaty with greater international compliance and more stringent emissions targets or a radical rethink on climate policy, there are several major drivers of climate change excluded from Kyoto that will be high on the agenda in Bali.

Not least of these is the issue of deforestation, which alone accounts for an estimated 20–25% of global greenhouse gas emissions. Indonesia is the worst offender, chopping at least 1.2–1.4 million hectares annually, both through illegal logging and forest clearance primarily for palm oil plantations. Ironically, many of these plantations have come about as a direct response to the increased global demand for biofuels, which are touted as a clean energy source but in reality can lead to enhanced emissions through land-use change.

The need to include deforestation in international climate policy was first formally proposed in Montreal in 2005 by Papua New Guinea, Costa Rica and the Coalition of Rainforest Nations. In a joint statement, they argued for financial compensation in the form of tradable credits to be given to developing countries that voluntarily undertook to reduce their emissions from logging and burning. These credits could then be purchased by rich nations as part of their obligation to meet emissions targets.

In anticipation of the UN Climate Change Conference, Indonesia is pushing hard for adoption of such a scheme by the international community, a possibility that will be discussed at length during the second week of the talks.

The idea of first-world polluters paying poorer nations with intact forests to protect their trees in order to keep carbon in the ground, while protecting biodiversity, is very attractive.

But giving credits for 'avoided deforestation' will be prone to the same problems as other aspects of the global carbon market. One of the issues being debated is whether such a scheme will reward nations like Brazil, which is currently chopping vast swaths of the Amazon, while effectively short-changing those that are already protecting their forests. This could, in effect, incentivize deforestation in the lead-up to implementation. There is also concern about whether a one-off payment for avoiding deforestation will result in a long-term commitment to conservation. And will setting specific areas aside for conservation just divert the problem elsewhere?

What is clear is that convincing incentives to alter land use in the long term will be needed to make this scheme work. But its effective implementation would be a hallmark of success at the Bali conference.