Rather than tax* the problem (coal, natural gas, etc.), which happens to be the most affordable option for consumers today, why not focus more on developing alternative energy technologies to the point where they become economically competitive? Wind, hydroelectric, clean coal, cellulosic ethanol, nuclear, or even garbage can all be practical forms of energy if done correctly [Scott Munsterman, "Cap-and-Trade?" Let's Wake Up South Dakota, 2009.04.04].
Why not? Because that's what we did in the 1980s. We let the "affordable option for consumers," cheap oil, lull us back into gas-guzzlers and unsusainable economic practices. We forgot about the oil crises of the 1970s and let ethanol, solar, and other alternatives sit on the shelf for another generation.
Munsterman wants to wait for the invisible hand to solve everything. That's an excuse for giving this generation a free pass and leaving it to the next generation to pay the bills.
If we are real capitalists, we should accept the full costs of our polluting and unsustainable practices. The only reason coal and oil are the "most affordable" options is that their producers aren't paying for the externalities:
Just as A.I.G. sold insurance derivatives at prices that did not reflect the real costs and the real risks of massive defaults (for which we the taxpayers ended up paying the difference), oil companies, coal companies and electric utilities today are selling energy products at prices that do not reflect the real costs to the environment and real risks of disruptive climate change (so future taxpayers will end up paying the difference) [Thomas Friedman, "The Price Is Not Right," New York Times, 2009.04.01].
Indeed, let the market rule, and rule fairly. Cap-and-trade will restore that fairness.
----------By the way, we've done cap-and-trade before, in the Clean Air Act of 1990. That law from the somewhat more civil Bush Administration "reduced the sulfur emissions that cause acid rain, and it met the goals at a much lower cost than industry or government predicted."
*Munsterman appears to mix up carbon taxes and cap-and-trade. See the debate between those two programs here.