It is easy to imagine how ecosystem management on forest lands leads to a reduction of greenhouse gas emissions. The more difficult step is finding an institutional approach that provides incentives for ecosystem management and other environmentally aware management practices. Mexico's forestry sector offers valuable lessons as most forest land is held as common property by local communities. While Mexico has promulgated environmental laws that incorporate ecosystem management approaches, the involvement of local communities and local community management are little understood aspects of the climate change agenda, often referred to at the end of policy papers as an afterthought with no real integration into policy. This presentation discusses evidence suggesting that Mexico's community forestry sector manages resources in ways compatible with an ecosystem management philosophy. Whether a community's management practices mitigate climate change depends on wider institutional features. Several critical points will be addressed: whether local communities are ”good stewards” as countries increasingly decentralize environmental policy; the extent that timber and non-timber production are complements or substitutes; and when communities should receive subsidies for reducing GHG emissions beyond their baseline level of effort.