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• CONTEXT : An inequitable distribution of the costs and benefits of carbon forestry could undermine its role in tackling climate change, but safeguarding local livelihoods could undercut its effectiveness. • AIMS : We simulate a reforestation program in a densely populated locality in central Mexico to analyze indirect land-use change, or leakage, associated with the program and its implications for local livelihoods. • METHODS : An agent-based, general equilibrium model simulates scenarios that deconstruct the sources of leakage and livelihood outcomes. • RESULTS : Simulations reveal how conditions linking land, labor, and food markets determine the costs and benefits of reforestation and simultaneously the potential for leakage. Leakage is lowest in remote and poorly integrated localities where declining wages foster local food production while discouraging consumption. Since leakage is tied to consumption, there is a trade-off between the program’s effectiveness and an equitable outcome. • CONCLUSION : An ideal strategy could target those localities with few remaining forests, where a program might lead to agricultural intensification rather than expanding the agricultural frontier. Alternatively, the scheme could incorporate remaining forests to avoid deforestation while encouraging reforestation. An uneven distribution of costs and benefits, where some stakeholders may draw benefits from others’ losses, could nevertheless set the stage for conflict. Acknowledging these trade-offs should help design a politically feasible program that is effective, efficient, and equitable.
