If all else fails, try good policy
I would prefer to see the revenue raised by a carbon tax returned to households in the form of lower income or payroll taxes, because I am skeptical that the government is sufficiently good at targeting research dollars to worthy projects. (I have, by the way, made the same argument about subsidies to economic research.) On the other hand, knowledge about new technologies is to some extent a public good, so the Dodd proposal passes the basic test of economic logic.
Senator Christopher J. Dodd had a small group of New Hampshire voters enthralled as he discussed -- of all things -- a carbon tax on businesses to discourage them from polluting.
"Price is the last real barrier" to forcing businesses to install cleaner technologies, Dodd told the dozen or so people at one of his "kitchen table" campaign events at a home in this southern New Hampshire city last week. He detailed his plan to raise $50 billion a year for alternative-energy research by imposing a fee on polluters.
Addendum: Today's San Francisco Chronicle has an article about increasing the tax on gasoline.
Update: Here is a Dodd op-ed on his policy.