To a first approximation, cap-and-trade is exactly equivalent to a carbon tax, in terms of its economic effects. Either way, you have to document emissions, and you make people emitting without first buying permits pay a hefty fine, the same way you would impose tax penalties if people tried to hide their emissions and avoid paying the tax.

The big difference is the parameter that is controlled by the government. Under a tax, the government controls the price. Raising the price of emissions would presumably lower the desired quantity. But what is the trade-off here? How much do you have to raise the price, in order to elicit the right quantity reduction.

Cap and trade lets us directly control quantity. Yes, the Europeans screwed this up, early on. They gave away too many permits, and the price cratered. But the fact is, we have a much better idea of how much we need to reduce emissions, than we have of what price we'd have to set to elicit those reductions. So let's set the path for emissions reductions, and let supply and demand determine the price. You don't have to be a free-market ideologue to think that markets are better at setting prices than panels of government experts.

Fear over speculators is overblown. Personally, I'd be much more concerned that, in the case of a tax, lobbyists would be able to bring down the price by repeatedly convincing people that the price is already fine, and reductions are just around the corner. This is, I suspect, exactly why Exxon-Mobil has come out in favor of a tax, rather than cap-and-trade.

I more or less agree with the idea of slashing income taxes, and making up the income by taxing environmentally harmful activities. I'd add all extractive activities to the list of things to be taxed, though, with perhaps a lower rate for those that affect at-least-theoretically renewable resources -- forestry, grazing, etc. Currently the feds give access to our public lands, for grazing, logging, and so on, with way too little charged for rent.