It looks like the US Senate plans to work on a new energy bill starting Earth Day (April 22). There's been a steady stream of updates from the likes of Climate Progress and Grist. The goal as usual is to produce something bipartisan - which means a lot of compromising on support for things like oil drilling and nuclear power and carbon capture and sequestration technology (CCS - aka "clean coal"). And the resulting bill will surely be thousands of pages that will be easy to attack for unfairness of some form or other.
The general approach seems likely to be essentially the "cap and trade" system that passed the US House last year, though with some variants: the cap might apply only to the electricity sector, with other CO2 reduction measures in other areas. With any such system the question of how the cap or other regulations are allocated raises fairness issues; a pure "auction" of permits would be fairest, but would also raise prices soonest which the political sector is loath to do. Others have proposed a pure tax on emissions (for example Jim Hansen in 2008, who also advocates returning 100% of revenue raised to citizens somehow). However, neglected in the recent discussion of possible regulations seem to be a couple of factors that I believe suggest a different strategy would be better: fossil carbon extraction and import quotas.
Managing a resource through a quota-type system has been done elsewhere - for example telecommunications spectrum is necessarily limited and large segments have recently been successfully auctioned off to cell phone and other services, bringing in considerable revenue to the federal government. US fisheries are almost all allocated based on locally managed quota systems. Various types of immigration into the US are managed via quotas on numbers of visas. A number of components of US international trade have been subject to quotas (textiles, sugar, lumber - generally not absolute quotas, but higher tariffs applied for imports above a certain limit).
What I'm suggesting is a total annual quota (I guess you could call it a "cap") on the production and import of fossil carbon, a total that would be adjusted down over time to meet our international commitments to address climate change. Coal, oil, and natural gas companies would, each year, pay for an allocation of permits to extract or import a certain quantity of fossil carbon. No offsets in this system. If companies want to trade permits between themselves, that would be fine, but every ton extracted or imported would have to have a matching permit.
This is a focus on extraction, not emissions. The present political focus on emissions is the essential reason for complexity in the proposals. Emissions occur in thousands (electric sector) to millions (vehicles) of sources, while extraction is limited to a relatively small number of companies. It misleads people because CO2 emissions are a natural part of the biological carbon cycle - we breathe out CO2 ourselves. So emissions controls have to carefully distinguish between the source of the carbon anyway. A large part of the complexity of the various proposed bills is also centered on issues of interaction with the biosphere: growing or preserving trees as offsets, the qualification of bio-fuels, various farm-related issues (such as emissions related to production of meat). Carbon capture and sequestration is an unproven technology that also features heavily in proposals, but it is a distraction: CCS in most practical proposals does not "re-fossilize" the carbon, it remains in the form of buried CO2, and over centuries will almost certainly return to the terrestrial carbon cycle.
And that is the essential problem with fossil carbon. David Archer's popular book "The Long Thaw" describes the effect of our extraction on the world's carbon cycles: we are annually adding billions of tons to the world's active carbon repositories. Even though much of what we emit is taken up by the land (the terrestrial biosphere absorbs a little over a quarter of our emissions) and upper oceans (a little under a quarter), that take-up is in rough balance on the short term, so stopping emissions completely will not immediately reduce atmospheric CO2. Burning fossil carbon adds carbon to the total available to the surface carbon cycle. Other concerns such as methane release from livestock or deforestation do have a short-term impact, but they essentially just redistribute carbon within that surface cycle, not adding or subtracting from it on the thousand-year time-scale. Fossil carbon has a much more pernicious long-term impact.
That is, I strongly believe the best solution is to regulate the short-term and long-term problems separately. Short-term, management of forests and livestock and even CCS if it ever works are essentially geo-engineering problems, where we're shuffling things around within the situation (total surface carbon) we've been given. Managing fossil carbon is a different beast: when we extract it, we are committed to burning it. And when we burn it, we are committed to having it part of the surface carbon cycle for thousands of years.
Archer has a carbon cycle simulation program online; the main variable to fiddle with is the "Transition CO2 spike", in Gton C. The resulting graphs are plotted only on 10,000 year and million-year timescales, so you can't easily see the worst effects in the shorter term. But try, for example, increasing the default 1000 Gton "spike" to 3000 Gtons, which could easily happen over the next century if we don't do anything to limit our fossil carbon emissions. Atmospheric CO2 then stays above 350 ppm for most of the next 100,000 years. Temperature spikes to an average 10 degrees C above pre-industrial levels, and remains at least 3 degrees C high for thousands of years. That is a world of utter catastrophe for humans and most of the species we share our planet with.
The essential problem we need to address is limiting the extraction of coal, oil, and natural gas. A quota on fossil extraction and import would do the job. All the rest of these proposals might be useful in addressing the short-term problems we will face, but let's tackle that fundamental long-term real problem first.