This is, as Greg Mankiw notes, a smart and interesting post. His assessment of the inter-state puzzle is spot on. (Will Wilkinson has written persuasively on the same subject.) I think my main disagreement with Hennessey is on my perception of the risks involved. Basically, I am more worried than he is, and so though I come down on roughly the same side of the issue as he does:
Therefore, I conclude the best policy is for the U.S. not to impose a domestic carbon price in the near future. To the extent policymakers believe severe climate change is a risk that should be addressed, I instead recommend they focus on pushing carbon-reducing technology R&D, and reducing tariffs and other trade barriers to the exchange of such technologies, as Dan Price has recommended.
But I’m pretty sure I’d favor spending a lot more money on the effort — somewhat less than Shellenberger and Nordhaus, but closer to them than to Hennessey or to our own Jim Manzi.