With cap-and-trade, you know the emissions but don't know the cost. With a tax, you know the cost but don't know the emissions. This sets up the divide: policy academics prefer cap-and-trade, economists less than 100% committed to reducing GHG as fast as possible prefer taxes.

Europe is going the way of cap-and-trade, and it makes sense for the US to sign onto an existing structure. For some sectors, for some countries, a tax may make sense, but the cap-and-trade system will predominate.

The developing world will not sign on to working with the developed world on tax/cap-and-trade until systems are in place. I hope that we in the US can sign onto cap-and-trade for at least some sectors.

Cap-and-trade is not currently being applied to some sectors in Europe -- all transportation, I believe. The current proposal is to tax flying. Let us hope this starts earlier rather than later!

Karen Street

A carbon tax can have the same amount of certainty as a perfect cap and trade even over a comparatively short period. If carbon taxes produce too small a reduction one year, they can have an automatic escalator clause to raise them higher than they otherwise would have grown the next until emissions reductions catch up to where they should be.

However that only compares to a perfect carbon tax to perfect cap and trade. While both a carbon tax and a trading system can be gamed, trading systems have many more openings for such gaming that a tax system. In the real world, where both are likely to be implemented imperfectly, an imperfect carbon tax is likely to reduce emissions with more certainty than an imperfect trading system. People who pay attention to empirical data, and real world performance tend to favor a carbon tax over cap and trade.

Lastly, any certainty that comes from a cap and trade comes from the cap, not the ability to trade.  Auction permits as far upstream as possible and you will have a cap with very little trading.

Count me among the carbon tax proponents. Increasing the cost/price of a product or service is almost always the best way to discourage its consumption. As for the argument that says, "but those added costs will be passed on the consumer!", I say, bring it on. It is a fallacy to suggest our energy-intensive lifestyles are not part of the problem. Our knee-jerk aversion to any kind of sacrifice is quite dispiriting, and speaks to the fact that, as a society, we still view CO2 emissions and climate change as a problem for future generations, not our own.

I also hold the cynical view that industry would water down a cap & trade system so much as to render it largely ineffective.

...I would suggest that there are plenty of legislators who prefer cap and trade precisely because it is so subject to gaming.  The only real certainty with cap and trade is that some Wall Street types will make a great deal of money.    

Either way, we're going to have a problem with rising heating costs for the poor.  I'm not just talking "starving artist" poor.  I mean "don't eat at all so you can afford to feed your daughter" poor, "walk three miles to work at 11pm because you can't spare fifty cents for the bus" poor.  These are people who already economize anywhere and everywhere possible, who have few or no luxuries they could give up, and who would be devastated by even a modest increase in their monthly bill.

If we're going to employ either a cap-and-trade system or a tax, we'll need to pair it with either efficiency projects or further subsidies for low-income utility customers.  Otherwise, we risk making things even worse for our most vulnerable citizens.

Taking accounting to the extreme since 2004.

If we're going to employ either a cap-and-trade system or a tax, we'll need to pair it with either efficiency projects or further subsidies for low-income utility customers.

True enough. And not just low income utility customers, but low income drives, low income purchasers of goods and services whose price is raised by a carbon tax.

There is a really simple way to do this. Take all of the revenue raised from such a tax. Divide it equally among the U.S. population. The very rich emit a great deal more carbon per capita than everyone one else (Yachts, private aircraft, 6,000 plus square feet homes and so on) and the rich and upper middle classes also use more than the U.S. average (more plane trips, larger homes and so on). So this will make the net effect of the tax slightly progressive - with the poor getting back more than they put in, hourly workers, and most professionals getting back about what they put in. But you still have the incentive - so you get the behavior change without the regressivity or the arguments about what programs to put the money into.