This paper analyzes institutional design, organizational capacity, and interplay in markets for ecosystem services. It examines the development of a market-based mechanism to commercialize forest carbon in Mexico through the Clean Development Mechanism (CDM). This is compared with a State-run carbon forestry program aiming to provide emission rights to voluntary, retail-based, carbon markets.

Markets for ecosystem services are being promoted across the developing world, amidst claims that the provision of economic incentives is vital to bring about resource conservation. This article argues that equity and legitimacy are also critical dimensions in the design and implementation of such markets, if social development goals beyond economic gains are to be achieved. The article examines this issue by focusing on two communities involved in a project for carbon sequestration services of forests in the state of Chiapas, Mexico.