The introduction of payments for environmental services (PES) offers an opportunity for traditional and indigenous populations to be compensated for contributing to carbon sequestration in meeting the challenge of ameliorating global warming. As one mechanism among several for promoting biodiversity conservation and sustainable development, pro-poor PES initiatives could eventually be incorporated into an international post-Koyoto framework to encourage reduced emissions from deforestation. Brazil's Proambiente PES scheme for small farmers in Amazonia has enjoyed some limited success, but it has fallen short of expectations. Its performance has been undermined by the lack of a national legal framework, limited funding, reduced implementation capacity, poor cross-sector collaboration and incompatibility with existing regional development policies. These challenges are being addressed by the federal government in cooperation with civil society with a view to scaling up Proambiente into a national programme.