Under Kyoto, about 35 rich nations are obliged to cut emissions by 5 percent below 1990 levels by 2008-12.

It allows developed nations to pay poor countries to cut emissions from activities such as the manufacture of refrigerants and fertilisers as well as capturing greenhouse gases from farm waste and rubbish dumps.

But paying countries to avoid deforestation is not yet eligible.

Including deforestation in climate policy would put a price on carbon emissions from forest areas and allow big polluters, such as power companies and cement makers, to buy permits to produce greenhouse gases, including carbon dioxide (CO2).

"It (reduced emissions from deforestation) has to enter the agenda so that developing nations such as Indonesia can benefit," Environment Minister Rachmat Witoelar told Reuters in an interview.

"Indonesia will benefit from the carbon trade. Almost 85 percent of emissions come from land use change, which includes deforestation," he said.

"We are backed by countries with vast forest areas such as Papua New Guinea, Congo, Brazil, Costa Rica and other equatorial countries in the climate negotiations."

Participants from 189 countries are expected to gather in Bali for December's summit, which will hear a report on Reduced Emissions from Deforestation (RED) that will decide the fate of a new scheme that makes emission cuts from forest areas eligible for global carbon trading.

GREENHOUSE EMISSIONS

Indonesia is among the world's top three greenhouse gas emitters because of deforestation, peatland degradation and forest fires, according to a recent report sponsored by the World Bank and Britain's development arm.

The report says forestry and land use change are estimated to account for a staggering 2.563 billion tonnes of Indonesia's yearly carbon dioxide emissions.

Indonesia has a total forest area of more than 225 million acres (91 million hectares), or about 10 percent of the world's remaining tropical forests, according to rainforestweb.org, a portal on rainforests (www.rainforestweb.org).

Environmental groups are concerned rapidly expanding palm oil plantations, partly driven by ambitious plans for biofuels, are damaging pristine rainforests.

Witoelar acknowledged that Indonesia was a big emitter, but questioned international research saying it is the third largest emitter of greenhouse gases after the United States and China.

"I understand we are classified as a big emitter yet we are not the third biggest."

He also rejected a Greenpeace report saying Indonesia had the fastest pace of deforestation in the world in 2000-2005, with forest area equivalent to 300 soccer pitches destroyed each hour.

"They (Greenpeace) misquoted another report -- I read it, and I say those people cannot read."

Witoelar said "avoided deforestation" could attract massive funds and a meeting of finance ministers during the Bali summit aims to settle financial aspects of the new carbon trading scheme to "allow the smooth mass transfer of funds from developed nations to beneficiaries".

"We are ready. We have a grand plan to identify and restore or conserve our forest areas. We have also prepared the financial side of the deal," he said.

However, he said negotiations would not be easy.