Can any of Environmental Defense’s three main points stand up to scrutiny?

ED: A carbon tax can be gamed as easily as a carbon trading scheme.

CTC: A carbon tax may be subject to gaming, but cap-and-trade positively invites it. USCAP concedes that some allowances will be given out (not auctioned) at the outset, which means protracted, high-stakes negotiations ("a giant food fight," a leading utility executive called it) over free allowances that will be worth billions. How will these be allocated? What baseline year? Watch earth burn as the polluters jockey for the baseline giving them the most allowances! With a carbon tax, by contrast, any tax preferences or exemptions will at least be visible and locked in, and thus potentially removable. This difference is part of why former Commerce Undersecretary Robert Shapiro wrote recently that carbon taxes, compared to cap-and-trade, "are much less vulnerable to evasion and market manipulation, providing a more stable and transparent system for consumers and industry alike."

ED: "A cap is the only way to guarantee the emissions cuts scientists say we need to avert the worst impacts of climate change. No one knows what level of carbon tax will produce what level of emissions cuts … Guess wrong on a tax and we’re all co-starring in a big-budget disaster movie."

CTC: Thanks guys, but the movie has already started. Here’s what The Financial Times said about it last month:

Getting the amount of emissions a little bit wrong in any year would hardly upset the global climate. But excessive volatility or unduly high prices of quotas on carbon emissions might disrupt the economy severely. [Carbon] taxes create needed certainty about prices, while markets in emission quotas [i.e., cap-and-trade systems] create unnecessary certainty about the short-term quantity of emissions.

And how confident is ED that cap-and-trade won’t come with the dreaded "safety valve" (lift cap if price too high) that will blow its vaunted emissions certainty to smithereens?

ED: "A carbon cap can pass Congress and a tax can’t."

CTC: A carbon tax may be the turtle, but as sure as the hare lost its lead, a cap will be sidelined for years as the financiers, lawyers, and consultants work out the details — which they’ve been doing for four years and counting for the much-touted RGGI compact for capping Northeast U.S. utility emissions. That aside, the climate issue is moving very fast. We have a rare confluence of events that may actually make it possible to go the right route. It would be tragic to lock in an ineffectual approach that would block more effective action. A revenue-neutral carbon tax is no longer anathema, and it’s past time for ED and its brethren to give it the consideration it deserves.