True, in practice if the carbon tax was used as a revenue source (or even revenue neutral - basically letting you cut taxes somewhere else), then the incentive

True, in practice if the carbon tax was used as a revenue source (or even revenue neutral - basically letting you cut taxes somewhere else), then the incentive would be to make it too low to be either a good pollution deterrent or an entrepreneurial incentive. Sort of like how the gas tax is in the US. In European countries (Japan too?), the gas tax is 10-20x as high was here and their auto and energy industries are very different because of that. If the carbon tax was high enough (possibly higher than the amount that would maximize taxes collected) and the collected money was used to mitigate environmental impacts, then the tax would be better. Make it really high and the incentive to invent technology rather than pay the tax is still there. However, that's a lot of things to screw up so maybe the cap-and-trade is better in practice. And I agree that environmental entrepreneurism of the sort mentioned in that book and my blog posts I linked to would be very interesting to many ycnews readers.