I see! I was thinking about something else and didn’t notice the difference.

If the goal is to burn fossil fuel with less pollution, then you need to track who’s doing the pollution. Once you know who that is, you can tax them or give them permits.

But if the goal is to reduce fossil fuel burning and encourage alternatives, then it’s enough to tax *fossil fuel* sources and let them pass the added costs on until those costs reach final customers. Customers might still pollute when they burn, but it will cost them more and alternatives will be relatively cheaper than they would otherwise. Fossil fuels become more expensive for all uses and the uses do not have to be tracked — the market passes those expenses wherever the fuel goes.

When the goal is to burn with less pollution, then you must measure the pollution. Polluters win just as much by finding ways to hide their pollution as they do by actually reducing it. Lots of information to track, lots of chances for corruption.

The more that we can get alternative energy sources to replace fossil fuels, the better off we are when the fossil fuels get scarce enough to drive up the price. It’s like when you’re driving, you want to start looking for a gas station before your engine starts sputtering because you’re running out of gas. The time that free markets signal that supply is down and cannot go up, may not be the best time to start building a whole new infrastructure. But this is a different problem from fossil fuel pollution.

If we just focus on getting alternative energy, that doesn’t stop fossil fuels from polluting while they’re still getting burned. It doesn’t even stop the alternate energy from polluting.

A different problem. Taxing fossil fuels is easy. Taxing them when they pollute according to how much they pollute is much harder.

To do a carbon tax you have to track the carbon fuel sources, and tax them. And you have to figure out what to do with the money. Apart from that, the market could take care of itself.

You say they’re practically the same thing. Is it that the advantage of regulating carbon is large enough that the details don’t matter? Or have I missed the point?

YB: Once you track the carbon fuel sources sufficiently to tax them, you could also just require sources to have a permit… and that’s cap-and-trade.