I respond to your comment #7. I recognize that your first paragraph may have been a bit tongue-in-cheek, but will respond anyway.

Buying a coal mine has the same problem that buying forest land to protect it from logging or conversion to agriculture has in the offset business. It is hard to ensure that the “developer” or logger won’t just go cut down or burn some other forest. The same potential “leakage” occurs if I buy a mine.

In contrast, if there are 4 billion emission allowances issued and I buy and permanently hold 100 of them, then actual emissions will be only 3,999,999,900 tonnes. There is not the same potential for leakage here as there is in the forestry example or in the coal mine example. Conservation easements on land have similar problems that I won’t go into here.

Regarding your second paragraph; both caps and taxes will be politically-set. There’s no difference on that score.

Maybe the caps in Waxman-Markey are scientifically-inadequate, but, in general, a cap does not have to be inadequate; and the adequacy of a tax is not a certainty. What happens, for example, if demand elasticities are not what is predicted? We could adjust the tax rate, but that gets us back to a politically-set situation and still no guarantee of adequacy because prices of fuel are influenced by multiple unpredictable factors.

By the way, I favor a carbon tax. I just don’t like some of your arguments on this particular matter of virtue.

Instead of buying up carbon allowances on a market that would surely be manipulated, why not buy coal (or if you’re ambitious, a coal mine), and sit on it, keeping the CO2 out of the air? Analogous to a conservation easement where people put land into a trust to keep it away from developers?

But seriously, why should additional reductions below a politically-set and scientifically-inadequate “cap” depend on the willingness of people (like you?) to buy up allowances? We need a system that rewards innovation and conservation: a revenue-neutral carbon tax.

If allowances (instead of emissions) were capped, one could purchase allowances and voluntarily retire them without using them as a permit to emit. By purchasing allowances and withholding them from emitters, total emissions would be reduced below the intended emission cap.

Re Daniel Rosenblum’s comment #2: Carbon fees could potentially obviate the need for renewable energy standards if the fee revenue is used to subsidize new, low-carbon energy sources. The fees and subsidies could be determined to give new renewables an immediate $100-per-ton price advantage over fossil fuels — far higher than any of the current carbon-tax proposals — but the fees would start out at zero because there would initially be no “new” sources. As renewables gain market share, the per-unit ($/MWh) fees would increase and subsidies would decrease, but the $100-per-ton price advantage would be maintained. The fee revenue would not be recycled to taxpayers, but ratepayers would nevertheless benefit because price competition from a growing, subsidized clean-energy industry would help maintain moderate retail electricity prices.

1) Volatility under cap-and-trade is projected to delay needed investment in low-carbon energy by a decade. (“CO2 Price Volatility: Consequences and Cures,” Brattle Group.) Volatility in the EU’s cap-and-trade system (with a loose cap, depressing carbon prices) are thwarting investment in alternatives. (See “Lessons Learned…,” GAO.) Volatility does have an upside — for traders (e.g., Goldman Sachs), but not for Earth’s climate. (“Could Cap and Trade Cause Another Market Meltdown?,” Mother Jones.)

2) Renewable Electricity Standards: Germany’s experience (reported by RFF) and economic theory suggest that until carbon prices (under cap or tax) reach levels that make burning coal for electricity more expensive than burning natural gas, an RES would displace relatively expensive gas with renewables but do little to reduce coal use. In contrast, a briskly-increasing carbon tax, made possible (politically and economically) by recycling the revenue directly to taxpayers, would be an efficient, fair way to phase out coal first, followed by phase-out of other less-carbon-intensive fuels while immediately opening up financing and predictably-expanding markets for renewables.

3) ACESA would lock-in and reinforce an inadequate cap and would breathe new life into the coal industry. (Rep. Boucher assures us of coal’s bright future under ACESA.) Because ACESA would also create vested interests in allowance trading and offset selling who would resist future reforms, I wholeheartedly agree, it’s worse than no legislation. (Which would leave EPA to regulate sources of GHGs — an inefficient and cumbersome prospect, but likely easier to reform than ACESA.)

I feel the anxiety of many climate policy advocates as we’re confronted with a choice between ACESA and the prospect of starting over. That’s why it’s crucial to put a more effective, fairer and more sustainable plan on the table now, before ACESA fails.