While new taxes are always a difficult sell, a carbon tax program that disbursed some income to utility customers could be politically palatable. Entrepreneur Peter Barnes proposed such a “cap and dividend” program to Congress in September, and the stalled economy has increased the appeal of any plan to send cash directly to struggling voters.

The cap and dividend concept combines a tax on carbon producers with tangible benefits for utility customers. The program would tax fuel producers if the carbon released from the use of their product exceeded a defined limit. If a coal mine’s carbon output exceeded this limit—the “cap”—its taxes would go up. The producer would then pass along its increased costs to coal-burning utilities, encouraging those companies to develop alternatives. The customer rebate—the “dividend”—is a recognition that raising the price of fossil-fuel power would raise the retail price of all power, at least until new sources come on line. (The Carbon Tax Center provides a helpful FAQ on the concept.)

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