Regulating or taxing emissions is simply a form of collective demand for clean air, a scarce resource. I don't see how it is any more artificial than demand for land that drives up the prices for coal mines or the demand for labor that determines salaries of coal miners.
In other words, producing energy by burning coal consumes clean air. Clean air is owned by the public and the public is charging for its use.
You should also include external costs to your cost of producing coal power; then is what the CO2 taxes are an attempt to do.
That someone else is forced to pay to handle the effects of your pollution doesn't mean that this cost shouldn't be considered part of the cost of coal generated electricity.
I don't think downandout is confused with the purpose of taxes, nor do I see it disagreeing with them.
The point I think (and to which I agree) is that real costs matter because anything can be "competitive" with enough subsidization. And subsidization doesn't make things cheaper in the real sense, it simply realigns incentives.
As is, renewables are heavily subsidized, fossil fuels are taxed heavily, and there's still a gap. It's trivial to close that gap through tax policy. So then the question becomes, what is the correct level of subsidization? I'm not sure, but I don't think the answer is "more, more, more". Because eventually you will eliminate the industry that is paying the taxes to offset the subsidized one. When it's no longer economically feasible to pay those heavy subsidies, that's when you'll see why the real cost of production matters.
In other words, producing energy by burning coal consumes clean air. Clean air is owned by the public and the public is charging for its use.