The Australian federal government on Monday has been warned to seriously consider the risks involved with investing in carbon offsetting schemes in poorer nations.

A new report released on Monday found that carbon offsetting programs involving forest and land use in developing countries are open to corruption and low governance.

The scheme, known as Reducing Emissions from Deforestation and Degradation in developing countries (REDD), compensates nations for cutting their carbon emissions by stopping deforestation and preventing land degradation.

According to Australian Council for International Development executive director Marc Purcell, the report showed the scheme is open to corruption and comes with significant risks.

"The risk is that baselines are set unrealistically by developing country authorities and it's not actually accurate around the forest's carbon stocks," Purcell told Australia Associated Press on Monday.

"There's risks the local inhabitants, the communities that live in the forests, will be bypassed (and) they won't be consulted and so they won't actually receive any revenues."

Purcell said some projects are unaccountable, while companies will be taking advantage of the low governance.

He warned that all of these things have to be overcome before Australia and Australian companies can start buying carbon offsets with REDD with confidence.