Clive Hamilton's take on why Australia should forge ahead with an ETS is an interesting read. He does set out the differences in approach between it and a carbon tax pretty well.
Mind you, I still don't agree with his conclusion, which seems to be "yes I know, the ETS Rudd is giving us is useless anyway, but every other nation is going to use ETS so we have to use it too, regardless of its effectiveness."
There's also a surprising suggestion made:
A case could be made to modify the CPRS so that those who want to do more than respond to higher energy prices can do so. In fact, they can do that already, by clubbing together and buying emission permits that they simply retire so the aluminium smelters can’t get their hands on them.Hamilton argues that the fluctuations in carbon price are something that just have to live with, because it is easier for politicians to handle:
I don't know about that line "Business has certainty but the environment pays for it." As I noted recently, I am swayed by the argument that sufficient business certainty is exactly what is needed to drive investment in a relatively rapid change to cleaner technology.
Against this, a carbon tax fixes the price of pollution through the tax rate and leaves it to the market to decide the amount of pollution. Business has certainty but the environment pays for it. If Australia has a legally binding emissions cap, as we now do under the Kyoto Protocol and will have again under a Copenhagen agreement, then the government will be compelled to adjust the tax rate frequently and by large amounts as it tries to hit the target.
Imagine the politics of that, remembering that the GST rate is virtually cast in stone. Politically, it's infinitely easier to let the price fluctuate in the marketplace, with the peaks and troughs smoothed by business planners.
UPDATE: as for the idea that people might help reduce actual emissions by buying up permits and taking them out of the hands of industry, Andrew Macintosh writes:
....the extent of abatement through such voluntary action is likely to be tiny.
The operating revenue of Australia’s four largest conservation organisations is around $60 million per annum. Let’s make the wildly optimistic assumption that all of this money is directed to buying and retiring permits, which will cost around $25 each and will equate to one tonne of CO2-e. This would reduce emissions by 2.4 million tonnes, or less than 0.5% of Australia’s annual total. This is hardly the type of rescue package the CPRS needs.