This report, jointly produced by CIFOR and Forest Trends, examines the potential benefits to local livelihoods from participation in forest carbon projects, as well as possible threats. Different project options such as multi-species, community-based reforestation and multiple-use agroforestry, are evaluated in terms of their capacity to meet CDM criteria for emissions offsets and sustainable development. The report distills lessons learned from experience in pilot carbon projects and social forestry on how carbon projects can enhance local benefits, and suggests conditions necessary for project success.