I have some serious reservations about including CDM projects (especially in China and India) in any U.S. carbon market. The pitch is "It's cheaper to reduce emissions in developing countries". The argument is usually made by carbon traders, one of these days I'll post the counter-arguments.
From Carbon Positive:
The United States will see a market in the trade of greenhouse gas emissions within five years more than twice the size of Europe’s and worth $1 trillion by 2020, according to carbon market projections out this week.
The forecasts comes as political momentum builds toward a national ‘cap and trade’ scheme in the world’s biggest economy and, by most estimates, largest greenhouse emitter. There are thirteen bills in the US Congress proposing to cap greenhouse emissions and trade in emission permits while the three remaining candidates with realistic chances of becoming the next US President all favour policies to establish emissions reduction targets and implement emissions trading.
A report by New Carbon Finance concludes that a carbon trading scheme is inevitable within four to five years. If the scheme were based on the most supported of the proposed Congressional bills, the Lieberman-Warner bill, it would likely produce a price on carbon of $40 a tonne by 2015.
Similar work conducted by Point Carbon estimates that implementing Lieberman-Warner would see a carbon market trade of $150 billion in the first year, 2012, on the back of the issue of 5.7 billion emission permits, each worth one tonne of CO2-equivalent emissions.
However, the New Carbon Finance report warns that the carbon price could be significantly lower than $40 tonne – imposing less cost on US industry and consumers – if linked to other schemes internationally. The thrust of the emissions cap legislation so far opposes the linking of a national scheme with the international market for carbon offsets, such as that of the UN’s CDM under the Kyoto Protocol. These credits are earned for emissions reduction projects mainly in developing countries where they can be done cheaply....MORE