David, I'm glad you found my graphics and post comparing cap and trade for acid rain with cap and trade for global warming
helpful. Despite the number of brilliant people, like Paul Krugman, working on these issues, it's incredible how often I hear people repeat the same, obviously ignorant statement that cap and trade worked for acid rain, so the same logic will work for global warming.
But after reading your proposal, which is well presented and interesting on a number of fronts, I'm left with a question: is what's wrong with cap and trade the logic behind the trading, or the logic behind carbon pricing more generally?
In the end, a cap and trade policy is functionally equivalent as a carbon tax, and motivated by much the same logic: price carbon emissions to spur private investment in low-carbon alternatives. Especially once cap and trade bills include the inevitable cost containment measures, as each Congressional proposal ultimately does, they wind up establishing a variable carbon price with a fixed upper limit, much like what you propose here. Yes, there are many problems with trading, particularly with the system envisioned in Waxman-Markey
(vs., say the Cantwell-Collins CLEAR Act
), but isn't the real reason to be skeptical of carbon pricing in general the fact that we need major technological and infrastructural change to tackle climate risks - nothing short of a shift in the global energy system - and we have little if any evidence that government-imposed price signals can spur such changes.
In fact, we should remember that we didn't get the Internet or personal computers by taxing telegraphs or typewriters. We got the IT revolution after decades of smart, public investments (mostly via DOD) in computer science, communications infrastructure, and the government procurement of a whole host of technologies at the cutting edges of their fields, from radios to radar and microchips to the Internet. For that matter, without critical public investments in innovation, education, infrastructure and technology procurement or market creation, we would not have a whole host of the major technologies and industries of the 20th century
, including jet engines and commercial aviation, gas turbines and gas-fired power plants, nuclear plants, hydropower (and a habitable American West), wind and solar power, highways, etc. etc.
When America is serious about technology or infrastructure transformations, the government leads the way with public investments that catalyze the entrepreneurship, research, innovation and infrastructure we need. Why should we expect the clean energy transformation to be spurred by anything different? Why should we expect carbon taxes or similar pricing regimes to lead the way?