Avoided deforestation may be financed through a multilateral fund for climate change in the future. There is a concern that payments for REDD should benefit the poor, and that it is necessary to design incentives that make sustainable forestry more profitable than deforestation or degradation. By applying a dynamic and non-linear programming model we tested a number of interventions and development trends to see how they affected deforestation and forest degradation in villages in Senegal, Tanzania and Uganda over the next 20 years. Cultivable land has already been cleared in most of the investigated villages. Thus deforestation is likely to occur only in villages with a substantial remaining woodland area. In villages with little remaining woodland harvesting of wood-fuel leads to serious degradation in a few years. Reduced growth of population is likely to reduce deforestation in most cases. Higher producer price of charcoal leads to less deforestation and more degradation. Policies that make crop production relatively more profitable normally lead to more deforestation and less forest degradation. Production quotas may be an effective measure to reduce forest degradation, but when charcoaling gets less profitable villagers will allocate more labour to land clearing and crop production, thus increasing deforestation. These results may be useful both in setting the REDD baseline, and in the design of measures to achieve REDD effectively.