Reducing emissions from deforestation and forest degradation plus (REDD+) encourages economic support for
reducing deforestation and conserving or increasing existing forest carbon stocks. The way in which incentives
are structured affects trade-offs between local livelihoods, carbon emission reduction, and the cost-effectiveness
of a REDD + programme. Looking at first-hand empirical data from 208 farming households in the Bolivian
Amazon froma household economy perspective, our study explores two policy options: 1) compensated reduction
of emissions fromold-growth forest clearing for agriculture, and 2) direct payments for labour input into sustainable
forest management combined with a commitment not to clear old-growth forest. Our results indicate that
direct payments for sustainable forest management - an approach that focuses on valuing farmers' labour input
- can be more cost-effective than compensated reduction and in some cases is themost appropriate choice for
achieving improved household incomes, permanence of changes, avoidance of leakages, and community-based
institutional enforcement for sustainable forest management.