Carbon Tax vs. Cap-and-Trade System

[AggregateDemand]

Both are terrible, but cap-and-trade is downright diabolical. Creating a fiat market in which government controls supply is an arrangement so dangerous that the man who first contemplated trading negative externalities also said they should never be used. Besides the high likelihood of government abuse and inaccurate pricing due to artificial supply, cap-and-trade also allows people to profit by polluting, albeit polluting less or in less controversial ways than other businesses. Carbon-tax has no such perverse incentives. Everyone pays for polluting.

Pollution is the consequence of people doing something worthwhile and beneficial. You have to incentivize people to perform the same behaviors while emitting less carbon-dioxide. Punitive legislation, which is really just a money-grab, is not appropriate. We could put $5,000 in ecological credits on the hood of every car in America, and still spend less than $100B. Taxation and other punitive measures are just deadweight loss. We pay the government to establish and enforcement bureau to punish the people, when we should simply make better use of the money we have to address populist problems.

[AggregateDemand]

I think the point of a carbon tax is for it to be passed on to consumers.  You want consumer to factor in the environmental cost of their behavior when they make decisions.  You could also make a carbon tax revenue neutral by lowering other taxes, so I don't see how that's a major problem.

If you want to see the major problem (hiding in plain sight), remove the moralistic component of anti-pollution policy by choosing a comparative hypothetical which yields no irrational self-preference on your part.

Suppose you want Americans to have formal mahogany dining room suites. You tax them for not having dining room suites. Does the tax magically increase their purchasing power? No. Tax does the opposite, in fact, which moves Americans farther away from your intended goal, while impoverishing more people. Even Obamacare isn't that stupid. Furthermore, the people who are most hurt by carbon tax don't pay other taxes, except payroll taxes and gasoline excise tax, the two forms of taxation Democrats refuse to cut, regardless of the rapturous socioeconomic consequences.

People are not making pollution for pollution's sake so directly taxing the unintended consequences of economic growth is pointless politicking, not efficient policy. The public need capital to purchase new equipment and resources so they can behave according to their current productive patterns, without generating as much pollution.

Sumptuary taxes are an incredibly lazy way for people to avoid developing real policy.