Look at it this way- say you can make a ton of money manufacturing widgets, but you also make a ton of CO2. There is no law against this discharge, so you do it anyway. Climate change might cause you many problems, but it's 50 years or more until you start to personally feel the heat. This is a classic "tragedy of the commons" scenario.

To take your second part first, taxing is part of the free market. The free market is a creation of and tool for use of government. Regulation to ensure cost internalization, information symmetry, contractual enforcement, and so forth are all basics for it to work at all. And a market has no goals of its own nor does it take into account human floor levels, it's up to society (and in turn its government) to choose goal states and then use all tools to find the most efficient routes towards reaching and then maintaining them.

To go back to the first, you've just restated the question: how do you "tax" the externality? How do you find the right rate? How do you adjust it and account for changing factors? It's government that sets the goal, but government tends to be bad at figuring out implementations and then reacting with high temporal or spatial granularity. In this case we have two linked problems, and we don't care about the "how" at all so long as its within framework requirements, we care about the end of "net zero carbon increase in the atmosphere" (or long term dealing with past emissions, though that'd require taxing other sources). This is exactly the sort of situation that's an ideal fit for using "market" (massively crowd sourced value apportionment utilizing capitalism) to optimize. On the one side is energy generation, which must directly pay per unit for the cost of dealing with their own emissions, and on the other side is finding the ways to most efficiently remove each unit and then collect the money. That would be expected to vary over time and by location, and to feedback into each other (and overall demand/efficiency) via the simple mechanism of price.

Maybe if we had a single "world government" but then the cure (not to the mention the process required to get to that state) might be worse than the disease!

This is probably a more effective approach than the usual cap-and-trade carbon tax models.

(nitpick: s/the free market/market mechanisms/ - free market implies lack of regulation and government involvement)

1. Political buy-in to set a cost of carbon emission 2. Economic viability of removal (often referred to as carbon capture and storage, or CCS)

1 is non-trivial, but happening. Canada has a provincial carbon tax measure which requires setting a price. A price is also defined in the European cap-and-trade system.

2 is also non-trivial, as the economics are pretty bad right now. However, CCS costs are projected to decrease rapidly. [0]

Right now, integrating CCS is on average more expensive than purchasing carbon credits. Carbon offsetting companies are, to your point, an example of private enterprise filling a gap.

[0] http://www.ccsassociation.org/why-ccs/affordability/

Just shard your operation so that no one "company" exceeds that level.

My thought was that you'd have to be over N volume of CO2 emissions to have a mandated payment.

If all companies currently follow expensive but environment-friendly processes, a rouge company can undercut them by following a cheaper but environment-harmful process. This will either force other companies to follow the rogue company, or they go out of business.

You seem to be implicitly saying that property rights cannot be established and enforced, as this is how markets are used to solve such problems. Similar things have been done though, no?

2. The market pulling billions of people out of poverty is probably the opposite of failure.