In discussing "green" energy the following question inevitably arises: should we tax "black" energy (coal, petroleum, gas, etc.) or should we instead install a cap-and-trade regime whereby emissions are capped at a given level and entities can trade pollution permits?
The main argument for taxation is simplicity, whereas for cap-and trade is the certainty of a pre-determined volume of emissions. The EU already operates an active emissions market, quite successfully at that. See below for a chart of futures prices for CO2 emissions (click to enlarge).
We can immediately see the Achilles heel of a market-based cap-and-trade system: as prices for CO2 permits drop - recently from 30 euro/ton to 8.85 euro/ton - industry can simply put off becoming greener until economic conditions improve. This regime, therefore, does not drive continuous greening but does so only on a marginal basis: pressure to change varies with economic activity, since most activity is still "black".
The answer to the tax or trade question is quite simple: both. Taxation, ideally steadily rising on a pre-determined basis, will constitute the constant pressure towards "greening", whereas the permit trading system will provide variable impetus for marginal profits. Think of polluting, in broad terms, as running a business that has both fixed and variable costs.
Now, couple the above with one more "missing link", the appropriate monetary system (see my recommendation for The Greenback), and we're off to the Green Races.