This paper analyses environmental and socio-economic barriers for plantation activities on local and regional level and investigates the potential for carbon finance to stimulate increased rates of forest plantation on wasteland, i.e., degraded lands, in southern India. Building on multidisciplinary field work and results from the model GCOMAP, the aim is to (i) identify and characterise the barriers to plantation activities in four agro-ecological zones in the state of Karnataka and (ii) investigate what would be required to overcome these barriers and enhance the plantation rate and productivity. The results show that a rehabilitation of the wasteland based on plantation activities is not only possible, but also anticipated by the local population and would lead to positive environmental and socioeconomic effects at a local level. However, in many cases, the establishment of plantation activities is hindered by a lack of financial resources, low land productivity and water scarcity. Based on the model used and the results from the field work, it can be concluded that certified emission reductions such as carbon credits or other compensatory systems may help to overcome the financial barrier, however the price needs to be significantly increased if these measures are to have any large-scale impact.