Nothing in the structure of either of these mechanisms would preclude the use of both, especially as regulators struggle to find solutions for both industrial aspects of climate change and individual aspects. It's really a question of what is politically feasible.

For example, one could imagine cap and trade instituted at the firm level, covering scope 1 (direct) and scope 2 (indirect) emissions. In the oil and gas industry, this solution only really handles a part of the emissions, as consumers burn most of the gasoline. So, in addition to a cap and trade, one could implement a carbon tax at the pump, to try and encourage conservation by shifting the price.

Tom Arnold Chief Environmental Officer TerraPass

It is not so much a price on carbon, rather the cost of carbon dioxide, which is very dear indeed.  

Politically, paying consumers to make a choice seems doable.  Like the Alaskan oil revenue paid to citizens, carbon taxes paid monthly to consumers would allow the choice to buy taxed fossil carbon or energy alternatives, such as insulation and solar heat.  Avoiding taxes is as American as apple pie.

The actual sentence was:

>So lets agree that the idea that both carbon taxes and emissions trading are needed is unlikely to be common ground.

The key word in that phrase was "needed". You can have both a carbon tax and emissions trading system. It is done all the time. But if the emissions trading system works properly then the tax is not needed.

>Like the Alaskan oil revenue paid to citizens, carbon taxes paid monthly to consumers would allow the choice to buy taxed fossil carbon or energy alternatives, such as insulation and solar heat.

I agree with you. And while I still think you would some rule based regulation and public initiatives in addition to make it work, this is an excellent replacement for carbon trading.

How about...

(1) Calculate how much carbon dioxide humans can pump into atmosphere without dramatically changing climate.

(2) Divide by number of people on planet.

(3) Issue debit card that is reduced each time you consume energy from fossil fuel or wood. Products would be labeled appropriately.

(4) INDIVIDUALS are free to sell their allotment to others... anywhere on the planet... whatever price they can get.

(5) Each year, everyone gets a new allotment based on the latest scientific information.

(6) Unused CO2 emissions carry over into the following year, just in case someone wants to save up for that flight around the globe.

No taxes on CO2 emissions. No offsets. Individuals decide what they want to do with "their" CO2. I suppose if we find a clear means of removing CO2 from atmosphere, the people willing to pay for it could earn CO2 emissions, but only AFTER the CO2 is removed from the atmosphere.

One problem with offsets, is that entities receieve the credit before the CO2 is actually removed from the environment; they should not get "paid" until after the work is done.

Forward!

Monbiot has been pushing this - though I forget the name of the person who invented it. Things to note on this:

1) Much closer to a carbon tax than most proposals.  Consumers only need to purchase carbon credits when they buy fuel for transport or heating. Most carbon credits are bought by industry. So most of the cost of carbon credits are paid indirectly in the form of higher prices for consumer goods.

2)Still unneccesarily complicated. Assume for the moment you want to use permit auctioning, rather than a tax. Do the same rationing, but sell the permits as far up stream as possible. Anyone who extracted or imported fossil fuels would have buy permits. You as a consumer would not have buy permits for  your gasoline or heating fuel or electricity, because the permits would have already been bought, and included in the price of the fuel you buy. Of course fossil fuels are only one source of emissions. HFC manufacturers and so on would also have to buy permits.  So would meat producers, though some methods of animal husbandry are more greenhosue gas intensive than others.  So would unsustainable forestry (and you would have to define this). So would cement manufacturers. And so on.

The advantage of this is that only a small minority would have to pay directly for permits. The vast majority, not only of consumers, but businesses, would pay for their permits directly in the form of higher prices for raw materials or parts and supplies. This not only cuts transaction costs, but since you are counting at the first place the emissions are produced, reduces greatly your margin of error.

And instead of giving consumers carbon credits to sell to make up for the higher prices, you could simply divide the cash for selling the permits.

You can avoid these costs by choosing lower carbon alternatives.

What about people who remove carbon? You still have the extreme measurement uncertainty I talked about with most means. (Bear in mind that things like renewable energy and efficiency no longer need credits in this scenario. They are automatically subsidized by needing fewer to zero permits.) But you do want to encourage them.

So provide cash incentives. Even if you are overestimating the value of what you pay for, you are not issuing a permit that will allow someone else to pollute, so you are not increasing emissions. [Not that there are not opportunity costs here; but at least 100% of any error does not translate into an emissions increase.]

And that is my key concern here. Humans are imperfect; some people on Grist seem to think I'm more imperfect than average. My concern is that whatever system we set up to solve global warming, allow for that imperfection - not set up a system where errors multiply and cascade.