Clearance of forests to create farmland in developing countries emits nearly 20 percent of greenhouse gases blamed for climate change, according to the UN's climate science panel. Trees store the greenhouse gas carbon dioxide when they grow and release it when they rot or are burnt.

Ahead of a UN meeting late next year in Copenhagen at which delegates from around the world will attempt to agree to a successor to the Kyoto Protocol on global warming, policy makers are increasingly looking at ways to make tropical forest preservation a tradable commodity.

Developing countries like Brazil and Indonesia stand to earn billions of dollars from trading carbon credits if the meeting results in forestry deal.

Movement in the United States, the developed world's largest greenhouse gas polluter, toward forestry offsets ahead of the Copenhagen meeting could increase the odds the world agrees to such a system. "Everybody is going to stand up and take notice of that" if the United States embraces forestry projects, said MacWhinney.

It would also be dramatic since the EU's Emissions Trading Scheme, on which carbon credits have traded since 2005, allows some trade in reforestation credits under the Kyoto pact, but not in forest preservation, also known as avoided deforestation.

Forestry offsets were included in the main US climate bill that died in the Senate in June. MacWhinney said nongovernmental groups have worked with US lawmakers and offsets should appear in the next main climate bill after the next US president takes office. Candidates Barack Obama and John McCain both support regulation of greenhouse gases.

In March, Merrill Lynch struck a deal to invest US$9 million over four years to finance a project to protect 750,000 hectares of forest in Indonesia.

And the state of California is looking to include domestic forestry projects in its climate plan.

To be sure, forestry preservation projects come with risks. Michael Brune, executive director of the nonprofit group Rainforest Action Network, said pitfalls may include the potential for illegal logging to occur in areas that are meant to be protected.

To fight that, the United Nations is working with developing counties to set up a monitoring system using satellites to limit illegal logging.

MacWhinney said policy makers in United States are open to forestry offsets because as the world's top industrial greenhouse emissions polluter it will need a large supply of cheap credits.

A recent report by consultants McKinsey & Co said forest preservation may generate carbon credits more cheaply than technology to store underground carbon emissions from coal-fired power plants.

(For summit blog: http://summitnotebook.reuters.com/) (Reporting by Timothy Gardner)