After making a strong case for Europe to adopt the cap-and-trade strategy back in 1997, the United States took two important steps in the other direction since then.

One such development is the recent proliferation of coal-fired power plants built all over the Mid West. Within the next ten years we can expect to see dozens of coal-plants at the 1,500 MW range spewing out about a million tons of sulphur a year into the atmosphere.

The second development is the re-introduction of the Carbon Tax idea to the U.S. Congress. Dem. Pete Stark of California, for example, who proposed the first carbon tax measure 16 years ago, has again proposed to charge $25 per ton of carbon released.

The Europeans are a bit surprised that, after showing Europe how the free market forces can curb carbon emissions successfully, the US is now intending to go the other route of “taxation at the source”.

But the idea is not a new one. President Bill Clinton for example has managed to have a similar tax bill, the BTU Tax bill, go through the House of Representatives only to be stopped at the Senate. If it had cleared through the Senate, the BTU would bring tax liabilities to the “heat content” of different fuels.

The attractiveness of the carbon tax is that it definitely associates a cost to the carbon content of all fuels. Polluting the environment, no matter its scale, is penalized from the get go.

In the cap-and-trade system, on the other hand, many companies might get away with carbon emissions that are below the “certified limits”. And that's a crucial point since cap-and-trade policy might bog down in implementation nightmares. Who is going to determine the “caps” on an industry by industry, and company by company basis? Wouldn't that require a new immense federal bureaucracy of its own?

However the momentum right now seems to be still with the cap-and-trade idea. As of this writing in April 2007, five different cap-and-trade measures are currently being evaluated in the U.S. Senate.

However, if the United States ends up adopting a carbon tax approach, it will by default withdraw itself from the increasingly lively cap-and-trade market in Europe and other parts of the world. India, to wit, is fast credentialing many of its utility companies with the U.N. to earn carbon credits to trade in EU. China will not be too far behind India in creating a new cash cow out of the “carbon cap credentialing” business.

If the U.S. also joins the cap-and-trade bandwagon in earnest, many experts agree that the New York City might easily become the leading carbon credit trading capital of the world. Until then, New York must suffice by watching the amazing growth of the London carbon credit exchange.

However, regardless of which policy approach is finally adopted, neither yet clearly answers how the “proceedings” will end up being used to slow down and eventually reverse the global warming. I'm afraid the task is too monumental to be achieved by just merely “planting more trees” with the revenues accrued through one or the other approach.

Both of these proposals represent the “fund raising” phase of the global campaign to stop global warming. But once the funds are there, how will they be spent to have a real impact on global warming? That question is still not answered.