Complex systems rarely work entirely the way their designers intend; there are certain to be unintended and unexpected consequences. Change or design of complex systems is really an exercise in directed evolution where both the system and designers respond and co-evolve. The problem is that systems tend to find stable local solutions to the forces of the system environment, and perturbing them from such states so they can evolve to a new (hopefully better stable local minima) requires a large initial force in the right direction. The goal in making changes is to restart system evolution that is stuck in a stable local solution that is inferior to nearby superior stable local solutions.

With that observation, it is a bit worrisome that some people are looking for "the" answer, instead of assuming that multiple mid-course corrections will be necessary. Compare the Waxman-Markey bill to the Clean Air Act (CAA). Waxman-Markey attempts to craft a 40-year program. The Clean Air Act instead directed the EPA to come up with a series of solutions, as necessary. It was general enough that the Supreme Court in 2007 (Massachusetts v. EPA) was able to say that the EPA had to regulate greenhouse pollution if it was a danger.

The only thing to be said for the Waxman-Markey approach is that we may not have the stomach for making mid-course corrections in a few years. For example, IMO, the Clean Air Act could have never been passed in any of the years after 1980. If we can pass something today, it doesn't mean we will have the leadership to do it again any time soon. However, that argues even more strongly for an approch like the CAA.

I'd like to add 3 points to this fine article

1.The point where the increasing marginal cost of taxing pollution (either through a direct tax or through cap and trade) meets the diminishing marginal benefit, is known as the 'equimarginal point' and in economics this concept is called the 'equimarginal principle'.

2.In regards to the benefits, the one thing this article left out is the benefit of decreasing CO2 production which should at least slightly slower the onset of global warming.  Although the producers of CO2 like to lie that their output has no costs, global warming, and other pollution raise production costs in myriad ways from increasing health costs to decreasing farm yields.

3.Although I haven't researched this myself, Sean Casten is quite correct according to the textbook we used that compliance costs have always been significantly lower than the effected industries predict. This can, no doubt, be easily researched on the pollutants that cause acid rain and other pollutants that have either been outlawed (CFCs for instance) or have been subjected to a cap and trade system.  The reasons, of course, are twofold.  First, as Sean Casten mentions, the system is dynamic.  Putting money into finding compliance solutions almost always results in lower costs for those solutions.  Secondly, it's in the effected industries interest to put the highest number out as possible in order to drive political considerations.  I'm not saying they intentionally lie, but...

To give an example of how I paid for CFC regulations just recently: I own a 1990's vehicle that needs a recharge of refrigerant, and it uses the A/C R-12 refrigerant that I can't get refilled because no one has the ability to get it, and no one is authorized to service the A/C units (it requires certifications and equipment that are cost-prohibitive).  The automobile repair facility or manufacturer doesn't get paid by the government to work on my car, and neither will they work on my A/C any longer because of government regulations and costs prohibiting it.  Rather, I HAVE TO PAY to convert the A/C to R134 because of the government's cap on refrigerant, or I would have to convert it myself with hours of labor and parts costs absorbed by me.  Where is the zero-transfer of wealth in this picture?

My expenditures just increased and well beyond the cost to the industry or the government. In fact, I was the only one to lose in this scenario...as always with government regulations. Pragmatism is the rule--not speculation or wishful thinking with economic models.  None of these optimistic thoughts outweigh the philosophy that practicality that I will pay for the cost of government regulation, whether it is in finance, manufacturing, energy production or air conditioning service and repair!