Even cap&trade is unnecessary complexity. Just tax it. Keep increasing the tax until the pollution levels drop. Use the tax revenue to offset the taxes on productive behavior.
Cap & Trade (as I understand it) would be the government playing referrer, and polluters/cleaners building a market place to exchange credits.
Taxing would involve playing referrer, collecting taxes for this specific issue, and then allocating that tax to either public or private parties to work on productive behavior.
Taxing sounds more problematic given how dysfunctional most governments are, especially when it comes to non-regulatory procedures. More failure points in the market generation.
A variable tax to disincentivize pollution combined with cap and trade would make the most sense to me.
It seems to me the complexity argument works in favor of cap-and-trade. While the global climate and global economy are both staggeringly complex systems, we can predict the former significantly more accurately than the latter. Thus it would be simpler to set the allowable emissions by policy and let the market work out the economic side.
We don't need to predict it. We tax the pollution at its source, then measure the results. Adjust the tax up and down to achieve the desired result. (This is done in engineering all the time, it's called a feedback circuit.)
Not needing to figure out the relationship between input and output is the beauty of feedback systems, and why they are so prevalent in engineering.
For example, one of my jobs at Boeing was working on the hydraulic actuators that moved the elevators up and down. The goal was to move the elevators in proportion to the control column movements. Nobody ever bothered to figure out how far the actuator would move for a particular input. How it worked was a mechanical linkage provided feedback so when the elevator was too far, the linkage would open the valve to move it back. If it wasn't far enough, the linkage would open the valve the other way, which would move it forward.
It behaves beautifully. It also makes the 3 redundant actuators work together, despite variations in tolerances.
Eg. "The tax per gram of PM2.5 is $1. Each year, if average PM2.5 levels across America are above 5 ug/m^3, the tax will increase 10%. Otherwise, it will decrease 10%."
Then lawmakers once need to put in place the tax and set the target, and they never need to intervene again.
If someone is flooding the area around them with high PM2.5 thus that everyone nearby has respiratory problems, but the overall rate of PM2.5 across all of the US is very low (because generally, it actually is) then your proposed scheme would ensure that areas (generally cities) are going to be completely unlivable, but there'd be no reason to change because overall the tax would remain low.
In fact they'd have no reason to improve anything provided that their projection for the cost of improvement looked marginally more expensive then just paying projected future cost of the tax.
