This was originally a response to George Will's column here, but I didn't have the room. Here it is:
I'm sorry if I'm repeating someone, but I don't have time to read 80+ people yelling.
Cap-and-trade are property rights. When one company sells their carbon permits to another, where does money go to the government? Money goes from one company to another. There are probably terrible ways to do this, and for all I know the government is doing one of them, but neither this article nor the counter-arguments in it are relevant to the debate.
The problem with a tax is that we don't know how much damage we're doing to the environment, compared to the good done by making a car or a house. If the government puts in a tax, they are incentivized to raise it with every rhetorical victory of the left. They can't fix the price of trading carbon permits once they are in private hands.
If they institute taxes on carbon and then lower them equivalently on something else, what good did that do?
What good does it do to give the government a steady income of carbon taxes? What good use could they do with it? It's much better to give them money once to purchase the (extra) permits at auction, because then the price is only used as a rationing system and it doesn't provide the government the capacity to do great harm.
We are not "creating a new market", that's true. But, we are reflecting something that is a cost to society in the monetary system. That's a good thing. While rights are, in fact, something that the government can't take, rather than something the government gives us, we must also address the Tragedy of the Commons. Actually, the granting of the ability to emit some amount of carbon annually in exchange for a one-time registration, they are protecting our ability to do business as usual against being constantly punished by continuous taxes. Property rights allow us to share more efficiently. Just as land is best used because they are private, and the oceans that are public are overfished, the extension of property over the air is a good thing.
Now that I have that off of my chest, the problem is that this is a good solution to a problem that doesn't exist. Cap-and-Trade isn't creating scarcity, it's allowing the scarcity of the the ability of nature to absorb carbon to be considered by business, we don't know how scarce that is and so the cap is too hard to set. We don't know how much our carbon affects the atmosphere, so we don't know if we need to bother with this at all.
My point is that cap-and-trade is a better, more right-wing/conservative/libertarian idea than carbon taxes by long, long ways. But it's a solution to a non-existent problem, and that's a problem by itself.