James Hansen has again been lecturing Congress on the virtues of tax-and-dividend. I'm no policy expert, but neither is Dr. Hansen, so I'm going to share some of my own amateur observations for the benefit of fellow Grist wonks.
Hansen did some calculations and came up with the following dividend estimates for a $115/ton (equivalent to $1/gallon) tax:
Single share: $3000/year ($250 per month, deposited monthly in bank account)
Family with 2 children: $9000/year ($750 per month, deposited monthly in bank account)
Wow! Free money! That sounds enticing. Of course, the money has to come from somewhere, so people's energy costs would, on average, increase by the same amount. But with that much money sloshing around there are bound to be huge inequities. For example, I live in northern California, where we have a mild climate and little coal power, and I don't need to drive much, so I might see my net income rise by maybe a couple thousand dollars. That would be nice, but folks back east who are paying more wouldn't like it one bit.
The tax rate and dividend should increase with time. ...
[The tax rate should increase until fossil fuel energy is not competitive with clean energy.]
Nothing's going to happen until the tax rate is high enough to overcome the price barrier. Once it does, there will be a "tipping point" at which clean energy will start to overtake fossil fuels and a variety of positive feedback mechanisms (competition, technology, economies of scale, learning by doing) will make the transition self-sustaining and gradually less dependent on price supports. So what is needed is a high price incentive right away -- not a gradually escalating incentive.
However, a high price incentive does not imply a high tax; it is possible to have an initially high and declining carbon price incentive implemented through an initially low and increasing carbon tax.