The only thing that can save us from global warming (and solve the peak oil problem and make us rich)

A single-nation regime of carbon restrictions (cap-and-trade or carbon tax), or even a bunch of such regimes, will not fight global warming by reducing carbon emissions. The reason is this: global warming is determined by the total amount of fossil fuels that get burned, worldwide; the rate of burning essentially doesn't matter. If we don't burn those fossil fuels, somebody, somewhere will. Just imagine: We stop using fossil fuels, so the price goes way down, meaning other countries can use them more cheaply, so they use more. Absent a cheaper alternative, all the oil and coal and gas that is now in the ground is going to get burned, and the carbon from all that oil will go into the atmosphere.

The only way global warming can be halted is if carbon-neutral renewable energy becomes cheaper than fossil fuel energy. That would give the entire world an incentive to let the oil, coal, and natural gas stay in the ground forever and ever. The key fossil fuel benchmark that we have to beat is coal; oil is so easy to get, so easy to transport, and so important for making so many other products (fertilizer, plastics, etc.) that it's highly unlikely we'll stop using it soon. Also, burning coal releases much more carbon than burning oil. That's why Google's renewable energy initiative is called "Renewable Energy cheaper than Coal". Solar power is currently the main hope for beating coal-fired power plants.

Of course, it would be even better if we could get a substitute for oil, allowing us to leave tar sands, oil shale, and deepwater oil in the ground. That substitute would need to be liquid, and it has to include the types of hydrocarbons that we use to make plastics and fertilizer. If it comes, it will be a "next-generation biofuel" along the lines of this:

A startup based in Cambridge, MA--Joule Biotechnologies--today revealed details of a process that it says can make 20,000 gallons of biofuel per acre per year. If this yield proves realistic, it could make it practical to replace all fossil fuels used for transportation with biofuels. The company also claims that the fuel can be sold for prices competitive with fossil fuels.

Joule Biotechnologies grows genetically engineered microorganisms in specially designed photobioreactors. The microorganisms use energy from the sun to convert carbon dioxide and water into ethanol or hydrocarbon fuels (such as diesel or components of gasoline). The organisms excrete the fuel, which can then be collected using conventional chemical-separation technologies...

[T]he new process, because of its high yields, could supply all of the country's transportation fuel from an area the size of the Texas panhandle. "We think this is the first company that's had a real solution to the concept of energy independence," says Bill Sims, CEO and president of Joule Biotechnologies. "And it's ready comparatively soon."

The company plans to build a pilot-scale plant in the southwestern U.S. early next year, and it expects to produce ethanol on a commercial scale by the end of 2010. Large-scale demonstration of hydrocarbon-fuels production would follow in 2011.

Now, I can't say whether this specific technology will pan out. But this is the kind of thing we need a lot more of.

And that's where carbon restrictions come in. No, they won't reduce global carbon emissions this decade. But they will encourage our country to develop this type of new energy technology, which A) really does have the potential to halt global warming (and save us from "peak oil" in the bargain), and B) will make the nation that develops the dominant technology incredibly, incredibly rich. That's why Japan is pushing ahead with new carbon restrictions - not because they seriously believe they can make a dent in global warming, but because they want their companies to be the first to make the big energy breakthroughs.

Yes, carbon restrictions will hurt our economy in the short run, and will hurt many specific industries in the long run (though not, interestingly, the oil industry; Exxon is one of the main investors in the aforementioned startup). But it's still worth doing, because this tech race is one America needs to win. It saddens me that our business community does not yet seem to realize this, and is thinking mostly about the short-term.