The government hopes to win them over by spending some of the cash raised by the carbon tax to compensate households for higher energy bills.

BBC: Australia plans to impose carbon tax on worst polluters

Second, governments should not pick winners or give out extensive subsidies. (Translation: Ethanol is a bad idea, and other existing "renewables, " such as wind power, are unlikely to ever be more than a niche source.) Better to have a small carbon tax to place a price floor for competing technologies, and offer large cash prizes, similar to the X-Prize for private space flight, for specified energy breakthroughs.

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