Increasing global demand for food and energy and the prospect of a forest conservation mechanism in the United Nations Framework Convention on Climate Change represent major opportunities and challenges for bioeconomy development at tropical forest margins. Tropical forests are both a source of new agricultural land and providers of global ecosystem services, i.e. competing objectives for both national governments and the international community. This proposal adopts an interdisciplinary policy research approach to addressing two crucial research gaps towards cost-effective and socially compatible environmental policies in the context of the Amazon region: (1) The role of alternative instrument design options in affecting policy cost-effectiveness and welfare impacts in spatially heterogeneous bio-physical and institutional settings, and (2), quantitative measures of the resulting scope for environmental policy choice and design given multiple tradeoffs among bioeconomy development objectives. The research plan integrates bio-economic scenario analyses with insights from econometric impact and policy case studies as well as spatial overlay and simulation techniques from environmental geography. Results are expected to support national policy makers, donors and international organizations in designing equitable and environmentally effective strategies for sustainable tropical forest bioeconomies.