Deforestation and forest degradation account for 20 percent of annual total greenhouse gas (GHG) emissions. The vast majority of these forestry emissions come from deforestation in developing countries. Currently, there is significant dialogue at the international level about how to integrate reducing emissions from deforestation and degradation (REDD) into the existing climate change regime through market-based incentives. This paper examines the issues that arise when trying to create an economically and environmentally robust market-based REDD policy. It givesan overview of the role of forests in climate change, and is followed by an examination of design elements that will affect the integrity of a REDD policy, including issues of scope, monitoring, baselines, leakage, stakeholder interests, permanence and liability, and the potential impact of REDD credits on the carbon market. It gives an overview of the issues facing developing countries that would host REDD activities.