This post originally appeared on Ezra Klein‘s blog at The American Prospect, where I am guest-blogging this week with a promise "to keep the doom and gloom to a minimum."

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Speaking of doom and gloom, I was pleased to see the environmental policy-related dark cloud over Matt Yglesias lift somewhat over the weekend. The reason? First the EPA halted two new coal-fired power plants that were on the verge of construction — plants that had been opposed for years by environmentalists — and then President Barack Obama announced that California (along with 13 other states) could start regulating tailpipe emissions. In his glee, Matt observed:

Cap and trade or carbon tax legislation will, I’m convinced, be an integral element to any serious climate policy. But … there’s quite a lot that responsible regulatory policy can do.

No kidding. It’s true that this question of the relative role of cap-and-trade vs. regulation has been bouncing around the enviro blogosphere for a while now. And believe it or not, as necessary as a robust, functioning cap-and-trade system is to addressing climate change, the opinion among many environmentalists is very much that government regulation, i.e. emissions cuts by decree, holds the key to a low-carbon future. The reason? The emissions cuts are going to have to be really, really, really big and markets, while very good at the trading part, don’t do such a good job with the capping part.

This is a problem since climate scientists keep raising the bar we need to overleap in order to maintain anything approaching a normal climate. NASA’s James Hansen shocked a lot of people recently when he declared that the emissions targets we’ve been using for the last decade are way too high. When you do the math (or when you watch someone else do the math), it looks like we’ll need to cut worldwide net carbon emissions to zero by 2030. Meanwhile, President Obama’s plan, as aggressive as it is, only gets us back down to 1990 emissions levels by 2020. That leaves not a lot of time for a whole lot more cutting.

So it’s worth taking a look at Europe, which has the only functioning cap-and-trade system currently in existence, to see what we can expect from cap-and-trade. I’m afraid it’s not pretty. Central to the system, in fact the only way to reduce emissions right now, is the ability of carbon emitters (i.e. power companies) to buy "carbon credits" by paying companies in the developing world not to emit carbon. I’m sure you will be shocked, shocked to discover that these companies are gaming the system to the tune of billions of dollars in credits and very little in the way of cuts.

As an AP investigative report documents, the system that’s supposed to "validate" these projects, i.e. determine if a given project is truly supplanting something dirtier (e.g. building a hydroelectric dam instead of a coal-fired power plant), simply doesn’t work. No one’s arguing, by the way, that payments to the developing world for help with emissions cuts won’t be a part of the climate solution. But it would be nice if the payments were linked to actual cuts in emissions, which is simply not the case now. So far, so bad in the world of carbon markets.

The point of all this is that, with the stroke of a pen — by not building coal-fired power plants (since it certainly appears that we now have an effective moratorium on any new plants in the U.S.), and by allowing a group of states representing half of the domestic automobile market to legislate large increases in gas mileage starting with the 2011 model year — the government will likely be taking more carbon out of the atmosphere in that period than the European cap-and-trade system will. Cap-and-trade will certainly help smooth the bumps in the road to a low-carbon economy. But it will be governments — through mandates, efficiency requirements and infrastructure spending — that will pave the way.