Carbon trading means no additional tax burden is placed on the economy, the biggest emitters simply pay to those that go green.

By limiting the number of certificates, you can steer exactly how much CO2 will be emitted in any given year.

And the cost of CO2 means that procedures that reduce CO2 emissions become financially viable, starting with the most effective ones.

Assuming you can track CO2 emissions correctly, it’s a genius instrument.

A carbon tax would have similar incentives. Green producers and products get taxed less than brown producers. It also doesn’t matter if the product comes from Timbuktu or Savannah, it just matters how green or not green it is.

Carbon trading would result in billionaires and large funds finding a new way to make more money at the expense of everyone else and solve little.

It is not genius. It creates a new financial instrument for the mega banks to extract yet another rent from.

A tax at CO2 origination is simpler, less opportunity to game, and more effective.

Carbon trading is a huge subside to the current polluters at the expensive of future polluters, indifferent to future polluters polluting more or less than current ones.

It is a great way to destroy a market (and a very important one), creating monopolies everywhere.

> Assuming you can track CO2 emissions

Also assuming that you meaningfully enforce violations. Although this is also a problem for a tax.

Carbon trading works great as long as two things are true:

1) The total amount of emissions are set for all participants with the sum of all participants emissions being set based on current scientific data for stopping climate change.

2) No double counting. If you sell it off you can't also use it.

The climate talks failed on the carbon trading discussions because people would not agree to those.

While carbon tax is nice and possible a good method to combat climate change, it is not immune to those problems. Carbon tax also have an rather uneven impact, so I personally see it as a tool to be used in specific industries where the benefit costs analysis show the intended incentives without causing unintended side effects such urbanization.

cash settled carbon futures!

carbon volatility index!

carbon tax default swap!

I want it all

And how would your carbon tax work without allowing others to profit from it? Excise taxes already exist, they just go to fund more government that is still perpetually out of money to do the things that "must be done".

Most economists argue for revenue neutral carbon taxes. You redistribute collected taxes equally to everyone.

The point of carbon taxes is to affect behavior, not fund government.

At which point you increase the size of the bureaucracy and the state leading to more government control. A decade or two later there's a financial crisis and the government just happens to tap into the carbon tax fund as a "temporary measure" or perhaps the fund just lends money to the government that the government eventually can't pay back.

I'm saying that whichever way you slice it, it's still possible for this to be abused.

Well, not really. If run at the national level, once carbon dividends become ingrained in the public's mind it becomes a political 3rd rail to raid that cookie jar. Welfare benefits are very hard to claw back.

And w.r.t. size of the bureaucracy, not so much either. The size of actual government bureaucracy is quite insignificant compared to size of transfer payments in this case. Like 1% or less.

And this particular tax has fantastic property; since it will drive down carbon use, the amount of tax collected will go down over time, thus reducing it's drag on the economy.

Hardcore market fundamentalists, like myself, love carbon taxes.

> Welfare benefits are very hard to claw back.

I agree with your post, but I would note that this is not entirely true in the US. Benefits that such as SNAP and Medicaid that are only used by a vulnerable segment of the population have been a frequent target for clawbacks. Social Security and Medicare are much more resistant to politically-motivated clawbacks yet not resistant to meddling in general since they are not enjoyed equally.

A benefit that exists at the level of “everyone gets $N per month” would seem to be much more resistant to political meddling.

>If run at the national level, once carbon dividends become ingrained in the public's mind it becomes a political 3rd rail to raid that cookie jar.

The US government has a debt problem. The Social Security fund has lent money to the US government. Why can't similar things happen for the carbon tax fund?