This study focuses on the possibility for income generation through carbon sequestration in land-use related projects under the Clean Development Mechanism (CDM) of the Kyoto protocol. The carbon sequestration potential of agroforestry and forestry projects was studied in Nepal, Uganda and Tanzania. Carbon sequestration in biomass was 0.43 and 2.0 Mg C ha^-1 year^-1 in regeneration of natural forests in Tanzania and Nepal, respectively. Carbon sequestration rates in planted forests were 4.0 Mg C ha^-1 year^-1 for Eucalyptus woodlots in Uganda and 5.9 Mg C ha^-1 year^-1 for Pinus patula plantations in Tanzania. The economic profitability of these land-use systems was calculated using the Net Present Value (NPV). Based on a carbon price of 10 US $ per ton (Mg) and an annual interest rate of 10%, the NPV increased by between 4.9 and 6.5% for these systems when the carbon value was added to the timber value and value of non-wood products. This increase in value is probably too small to justify the cost in relation to project development, establishment of baseline, carbon monitoring costs, assessment of leakage and documentation of the effect on sustainable development.