Deforestation contributes a quarter of all anthropogenic greenhouse gas emissions. On the island of Sulawesi in the vicinity of the Lore Lindu National Park, smallholders contribute to deforestation processes with their agricultural practices, specifically with cocoa plantations. This study assesses the impact of carbon sequestration payments for forest management systems on the prevailing land use systems. Additionally, the level of incentives which induces farmers to adopt sustainable agroforestry practices is determined. We show that low carbon credit prices have a small impact on household income. However, with rising prices, the poorest households can realise an increase of 18 percent. The majority of the households have an incentive to adopt the more sustainable shade intensive agroforestry system and stop deforestation activities with prices observed on markets. The cost-efficiency of avoided deforestation, compared to biofuels, is demonstrated. The study shows that forestry activities provide an important opportunity as climate mitigation strategies
