At last, something that is worth responding to
You and I have never really seen eye to eye. But we do here, with some large caveats which I will go on to explain.
1. Evaluating externalities
Ok, this is probably my main gripe with the economic view of pollution/climate change. In the end I guess I agree that to accomplish anything in this world you have to try and put a price on it. I'm just not very sure existing methods do the world justice. You tell me Tim, just how much exactly is Lake Baikal worth ? How much is clean air worth ? Analysis would probably approach this by linking it to excess deaths and then putting a price of a person as regards economic activity. It would be a number, but would it be an accurate reflection of the cost of things?
There is a damn good reason that they ARE externalities, you are right, there is no market, because economics can't get good numbers to apply to them, and in that case they ARE failures. A market that can not evaluate its goods is no market at all.
"plus a rather odd view of discount rates"
I would like to cut to the chase here and say that discounting when used in regard to the environment is a BIG fail. You can disagree, but I doubt I will accept your arguments. The value of a pound in your pocket tomorrow versus one in the hand today IS NOT relevent in the context of a world you would like your children to inherit. Discounting seems to fly in the face of what is accepted, that people will sacrifice current wellbeing for the sake of their children.
If you are going to make a market for CO2, lets at least make one that works. That means setting a value that actually achieves your goal. We will probably disagree here again, but at least its an argument solvable with a little horse trading.
A Politicans job is too keep themselves in power, an economists job is to keep themselves in money, an environmentalists job is to ensure subsequent generations have a functioning Earth. There is no mark II .. lets not fuck it up too badly.