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.
Again, I think we are way too late to adopt a gradual plan like this.
Gino, I’m genuinely curious as to what your solution is for dealing with climate change.