As for the setting the level of carbon taxes, you [Bob] and Gene keep assuming that there is a global government that sets taxes in a vacuum. Instead, we have a multi-player game, where any politically sustainably prices are set at levels that the chief emitters are willing to agree to.Although TT appears to say that big players will agree on the level of tax, I add that it's easily possible that taxes will vary by country, first, because it is a question of sovereignty and second, because taxes will bite at different rates in different places, i.e., taxes must vary from country to country if they are going to be effective.
The downside to this logic (many tax rates instead of one tax rate) is that it invites "destructive tax competition" among countries competing to be the site of polluting industries as well as inviting free-riding, i.e., "our citizens will not be taxed, but we will benefit from the carbon reductions that result from you taxing your citizens."
So -- one rate or many rates? Please comment.