Andrew Sullivan in the Daily Dish has a great piece on the complexities of pricing carbon.

… Oil, coal, nuclear, windmills, solar power and all other alternative energy sources have social costs and benefits, and if I get cancer from water pollutants created in the production process for a solar cell, I’m just as dead as if I am killed by AGW-caused floods.  And it is not simply energy alternatives.  How do we justify placing a tax (or subsidy) on the use of various kinds of energy, while not doing it for making television ads, gardening tools and software, never mind watching television, gardening and doing Google searches? 

In order to achieve the “fairness and social optimality” that we started with when discussing the AGW effects of carbon, we are logically led to demanding that the government measure the social value of almost every economically significant action, and then set up incentives to manage the population so as to achieve social goals.  Because this is an impossible analytical task, in practice this means the purely political management of society based on relative power.  What is this but unadulterated  socialism in a green dress?

Invoking Hayek, he concludes:

I yield to few men in my admiration for Hayek and his ideas.  His prediction that the welfare state would lead to serfdom, however, has (thus far) not been correct.  I don’t think that a carbon tax will be the one event that will push the free world into socialist slavery.  But it does seem clear that the same dynamics he described decades ago have re-emerged, simply with a different theoretical justification.  The same problems with planning that he highlighted will also be present now.

Taxing carbon to reflect its social costs seems like a common sense idea.  Unfortunately, it simply provides another excuse to politicians to raise taxes and exert more power over us.