United Nations warned that corruption is undermining grants to stop logging

Campaigners say countries intend to abuse system by pocketing billions in subsidies while continuing to fell trees

A revolutionary scheme backed by the World Bank to pay poor countries billions of dollars a year to stop felling trees is the best way to stop logging and save the planet from climate change, according to wealthy countries and conservationists, yet documents seen by the Observer show the plan is actually leading to corruption and possibly more logging.

Human rights and environment groups yesterday called for a radical rethink of the United Nations scheme, known as Redd (Reduced emissions from deforestation and degradation), after it emerged that many countries were trying to cheat the system.

Under Redd, 37 mainly tropical countries have requested more than $14bn in grants from rich countries by 2015 in return for cutting their carbon emissions from logging and other forestry activities. This is expected to lead to an income of more than $10bn a year by 2020 when a global carbon offset scheme is running. The carbon money flowing from rich to poor countries will then theoretically dwarf international aid and could reduce global emissions by 17-20% – more than that emitted by all the world's transport.

But analysis of the 16 forestry reform plans so far submitted by Redd countries to the World Bank shows that many intend to abuse the system in order to collect the money while carrying on logging as usual.

Documents seen by the Observer show that the Democratic Republic of Congo wants to open up 10 million hectares (25m acres) of new logging concessions as part of its plan. The country, which is ranked as one of the most corrupt in the world, argues that it will reduce emissions by planting more trees elsewhere.

Guyana intends to use some of its Redd money to pay a property dealer from Florida to build a road and a major hydroelectric plant in some of its most densely forested areas. Indonesia has said it will impose a moratorium on the conversion of its extensive peat forests to palm plantations, but only after 2013, allowing logging companies to ravage its forests until then. Other countries are setting the present rate of deforestation deliberately high or are ignoring all present logging, so that they can be paid to do nothing.

The environment groups, which include Global Witness, Greenpeace International, Fern and Rainforest Foundation, also fear that Redd is being used by governments to victimise and steal the carbon rights of people who live and depend on the forests.

Last month police arrested a UK-based businessman alleged to have paid government officials and others in return for the emission rights on 20% of Liberia's forests. Interpol said last year the chances were "very high" that criminal gangs would seek to take advantage. Peter Younger, Interpol environment crimes specialist and author of a report for the World Bank on illegal forestry, said: "Alarm bells are ringing. Redd is simply too big to monitor. The potential for criminality is vast and has not been taken into account."

Simon Counsell, director of Rainforest Foundation, said: "Redd has been touted as the quickest and cheapest way of preventing climate change, but what we are seeing are expensive and ill-conceived plans that fail to address the underlying causes of deforestation, and might make things worse. Redd needs to be taken out of the hands of the World Bank, and a new global institution [must be] established to rigorously oversee payments to tropical countries on the basis of the actual amount of logging or deforestation that is averted."