In its just released Policy Options for Reducing CO2 Emissions, the non-partisan Congressional Budget Office confirms the superiority of carbon taxes over various types of cap-and-trade schemes. The CBO concludes that:
A tax on emissions would be the most efficient incentive-based option for reducing emissions and could be relatively easy to implement. If it was coordinated among major emitting countries, it would help minimize the cost of achieving a global target for emissions by providing consistent incentives for reducing emissions around the world. If other major nations used cap-and-trade programs rather than taxes on emissions, a U.S. tax could still provide roughly comparable incentives for emission reductions if the tax rate each year was set to equal the expected price of allowances under those programs.
Responding to interest in cap-and-trade programs, the CBO study "explores ways in which policymakers could preserve the structure of a cap-and-trade program but achieve some of the efficiency advantages of a tax." In other words, the CBO recognizes that a carbon tax is the "gold standard" and then tries to figure out how to reduce the disadvantages of cap-and-trade.
If Congress in its wisdom decides to approve a cap-and-trade program, it should make that program as similar as possible to the carbon tax "gold standard." But why settle for second best?