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    • If I was to set up a carbon tax program I would set a floor for the price of credits, meaning that the U.S. government would buy credits for say $100 per credit. 

      Set up the buying and selling of credits like any exchange. You could theoretically trade it on the CBOT.

      If there are more credits issued than penalties in a given year, companies that curbed their pollution still have a financial incentive since excess credits can still be sold to the government.

      Credits sold to the government would be “shredded”: they could not be re-sold to polluters.

      Credits would also have an expiration date, say a year from issuance, so that polluters couldn’t buy up several years’ worth of abuse.

      The pollution limit for the country, the pollution limit for companies, as well as the floor price for credits, would need to be determined and adjusted by a Federal Reserve type of governing board like the Fed interest rate.

      If a polluter couldn’t buy up enough credits for the auto plant, the plant needs to be idled until it’s average pollution is back in compliance.

    • My concern is it has the word tax in it so you would expect enormous emotional pushback. It sounds like taking someone's money. I don't know what the alternative is because the word regulation does not sit well either.

      Maybe the best course of action is to simply fund clean energy because that feels like progress, ushering in the future, expanding the economy, providing jobs, and providing a soft landing for coal miners. If you tax coal away (it gets hit hardest and soonest) you make a lot of enemies, including Trump and his supporters.

    • Interesting thoughts, Dave. I feel that you need to provide some level of protection to the coal miners, whether it’s retraining in new jobs and/or providing an annual subsidy to cover part of the difference between what they made as a miner and what they’ll make as an entry level employee. You don’t want those communities to turn into another Detroit.

      Unfortunately, we don’t have a track record of protecting displaced workers: typically the money or loans go to the declining or bankrupt companies.

    • What is the logic of providing credits at all? Why not just tax emissions and let the market sort out which economic activities are most favored? I think credits would create a kind of shelter for some unfavorable economic activities.

      Consider: I impose a blanket emission tax on smoke. Everyone has to expend various efforts to reduce their smoke emissions. If the tax does not reduce emissions enough, I raise it higher. Eventually the smokeless fires prevail. The smoky fire users are mightily disadvantaged.

      But wait, I also create a smoke tax credit system. So some previously advantaged smoke fire users have the resources to buy credits and continue emitting smoke. They buy credits instead of investing in low-smoke technology. Their inefficiencies are perpetuated and the air remains smoky.

    • When you say that we should "fund clean energy", who will be the arbiter of which technologies to fund? If we make the decision governmental, we know from experience that this tends to lock us into a conservative approach. For example, consider the technological innovation rates of private launch companies versus NASA-directed rocketry in recent years. But how do we promote the rocket science equivalent in energy production? We have to give private energy-providers some market incentives. We can hand out grants where there are high barriers to market entry - where risky investment is needed; but in much of the energy market we already have technological avenues forward. We just need to encourage adoption. For that kind of course change, a direct tax on the emission seems most efficient. Any behavior that reduces emissions is a good behavior (so far as we know). We don't need government to choose the "path".

      As for taking money, I suggest we also give most of it back. If the price of fuel skyrockets and you can't afford to drive your car without government assistance - what if you receive a fixed portion of the carbon tax as a tax credit? Then you have income which you can use to buy that more expensive fuel if necessary. But since the credit is not tied to your driving habits, you have the choice to change your driving habits and pocket the credit. That way, the tax does not debilitate those who most value their high emission lifestyle while motivating the low-emitting individuals financially.