Deforestation and forest degradation has now taken centre-stage in efforts to control global greenhouse gas emissions, as the developed countries-having in the main failed to convince their own electorates to bear abatement costs-have pledged large sums to stop it. It is in the interests of both donors and recipients that the costs of abatement are matched by compensation payments. The paper examines the abatement in greenhouse gas emissions achievable in Papua New Guinea (a heavily-forested tropical country) by the reduction in deforestation and forest degradation (REDD), and its opportunity costs. Its methodology takes advantage of recent modelling of the emissions from deforestation in PNG and integrates this with financial models developed by the author for the logging and palm oil industries. The analysis helps to achieve a fuller understanding of the complexity of designing and implementing policies for REDD that not only adequately compensate for a country's opportunity costs but do so in a way that improves the welfare of regional communities.