I have a personal scheme which I would suggest, though it is only opinion. I owe much of the inspiration to Mike Gravel. I would propose we reduce coal and oil subsidies for development as quickly as we safely can. We should tax major polluting industries and fuels and electricity by the expected magnitude of how it will effect the environment when burnt. This includes greenhouse gases, but perhaps more importantly pollutants such as heavy metals, and sulfur and nitrogen dioxides, which cause acid rain. We can probably come up with good enough estimates for the 'cost' of these pollutants, burdened by society.

By taxing them, we influence demand. This pushes down the economics to individual buyers, and in some sense fully internalizes externalities. This will create a fairly efficient market by itself, without the need for the extraneous regulation of a cap and trade system. You simply tax the source.

I would propose that the tax be in some sense 'international'. Many countries would pay into it: the tax would be paid either at the source of production or, for imports, by tariffs, though the tariff will only be charged when a country imports fuel or electricity into the pact, not between the pact (since it's already been taxed, and the externalities already reburdened). The money would only be shared amongst pact countries.

The money from this tax can be spent in a few areas. One, as financing to help people switch to new infrastructure. One of the problems with a fuel tax is that, over time, it hurts people who can't afford the capital to make the switch. This would help alleviate that, providing the liquidity for the switch, under the new economics of the system within the pact. Two, the money can be spent in R&D for development of new technologies, either in the environment, or in infrastructure, or in health. Exclusive agreements, or import tariffs on any of the technology developed through this program would be outlawed through the pact. Three, the money can be held as an international emergency relief, or emergency prevention fund, for ecological or biological disasters. The expected problems of a warming climate include increasing drought, flood, hurricanes, disease, and crop failures. Proper infrastructure can reduce the likelihood or magnitude of these disasters enormously. These infrastructure improvements are difficult to produce in third world countries, partly because of the inefficient capital markets. But if there's money set aside for such development, it's far more likely to happen. Finally, money will, it is true, have to be spent on enforcement and measurement. This will probably have to be international. But the massive economies of scale for fossil fuel based power and electricity mean that enforcement and taxation will be a cinch compared to, say, the US federal income tax.

One of the nicest advantages of this system is that there's actually an economic incentive for nations to agree to it, unlike, for example, the Kyoto Protocol. Once the first nation has put their foot in, there's a pot of money, and cheap access to capital, technology, and trade agreements luring every other. It would even attract many third world nations, such as the IMF and Worldbank do now, as the should capital would be cheaper, and the terms less onerous.