I'd like to raise issues with some of the points:

First of all, any restrictive regulation is politically unattractive, because there is money coming in from the industries, and because nearly half of the population does not support government intervention (in pure hypothetical cases). I think that this argument should be left alone from an economical perspective. However, as a practical one, cap-and-trade would have more backing, even if the caps were tighter, because income from selling credits would increase, stimulating a decrease in use and costs for the polluters may be decreased.

I am not sure that Kyoto can be used as a good example of cap-and-trade not working, because it is a voluntary agreement, with many countries opting out. It is also not a very good example, because the market is not established and is only in the developing stages. Sulfur dioxide cap-and-trade system is a better example.

With government taxes vs. cap-and-trade (last part), the difference between taxes and cap-and-trade was well covered by Ronald Coase's Theorem. The theorem supposes that in trading both parties benefit, whereas government intervention through taxes or legal action tends to punish the party that harms the other party. Both parties under a trading scheme would benefit financially with the understanding that the overall economy may have to be reduced somewhat through caps but to a lesser extent monetarily than with taxes. I would also like to add to this that private parties, which are involved in a trade are much more efficient at profit and presumably resource maximization than is the bureaucratic machine, which spends much money and resources on following procedure. This may be the real crux of the discussion: carbon taxes WILL be more inefficient economically per unit carbon reduced than cap-and-trade.

Transmission out.

What if, in addition to the cap and trade system proposed today, governments offered dividend "rewards" to shareholders of targeted companies for reducing their carbon footprints? In other words, Carbon Offset Dividends. What makes this idea worth exploring?
It provides financial incentive to the owners of companies (their shareholders) to reduce their carbon footprint.
It will lift some fiscal pressure from shareholders on company leadership for short-term returns. This, in turn, can help them to make the longer-term decisions necessary for structural change.
Both wealthy and middle class people can benefit. Basically anyone who invests. And that's something both political parties can get behind!
It will increase investment (even from green investors) in companies that actively work toward reducing their carbon footprint. And provide incentive to companies who currently don't have plans do do so.
It opens the door and gives a voice to agents of change inside the power structure of energy, automotive and oil companies (if they invest in them).
If done right, it won't cost a thing. Dividends can be paid for with the money generated from the cap and trade system.
It provides the carrot that's missing with the stick of the cap and trade system.

Founder, Buzz Factory, Inc.