First off, what do I mean by "innovation?" I mean an improvement in the price or performance of a good or service or introduction of a new and improved good or service. In the context of energy, that means an improvement (price or performance) in the provision of energy services or a new way to provide energy services that offers superior price or performance. That clear?
RE the "obvious flaw" in my proposal, I don't think you've really read this fully. I'm not even close to advocating just throwing "innovation at it" let alone an "innovation-first" strategy here. What I propose is making fossil energy as expensive as is politically feasible via a carbon tax, and then making good use of the revenues to (1) subsidize remaining abatement opportunities that are more expensive than the carbon price signal alone allows for, (2) to structure most (all hopefully) of those investments to actually drive down the real cost of those abatement opportunities over time, so as to conserve limited resources/maximize long-run abatement subject to political economy constraints, and (3) devote some portion of revenues to addressing substantial innovation-related market failures to ensure we continue to drive improvements in the price and performance of abatement opportunties, further maximizing abatement. That's a plan to specifically address the fact that fossil fuels may remain quite cheap, even over the long term.
You charge that I ignore the role of conservation or efficiency in reducing energy use and thus contributing to both abatement and increasing WTP by reducing household carbon footprint. That's half fair. Efficiency is certainly one of the abatement opportunities this policy suite aims to unlock. Although as we all know, there are a host of other non-price related market failures to address to fully unlock efficiency opportunities. But you are absolutely correct that where cost effective, reducing energy consumption could help improve WTP for climate policy. I could have (should have) made that a clearer part of my case. Thanks for the addition. It is also fair to say that while efficiency is part of the package of abatement I have in mind, my language is biased towards the supply side.
Finally, RE "getting the climate job done," this is indeed deliberately vague. I personally don't see any climate policy strategy, real or proposed, that looks like a realistic strategy to get to 450ppm at this point in time. If we hadn't blown the last 20 years on policies that failed to recognize and plan for the fundamental political economy constraints on climate policy design, perhaps we would still have a shot. But probably not any more.
I can't actually predict or promise a specific outcome as far as concentrations of CO2 or temperature stabilization. No one really can. Policy makers have no direct control over those factors. What they cna try to influence is the decarbonization rate of the economy (changes in CO2/GDP). That was Roger Pielke's point in the letter to the FT editors that sparked this exchange.
What I can tell you is that a policy suite that is designed around the multiple constraints on climate policy design, not just around economic efficiency, will succeed at accelerating decarbonization much faster than those that do not. And I can certainly say that if political economy constraints are binding, preventing the carbon price from reaching the social cost of carbon, then making good use of revenues is absolutely essential to maximizing the rate of decarbonization.
I don't see this as wishful thinking. I see it as our best hope. Do you have another alternative in mind?
p.s. I know I promised you a longer direct exchange on this topic a while back. I hope we can return to that soon. My apologies for getting sucked up in this and other work.