[chidg]

Australia tried something similar with a carbon tax a few years ago - not for fuel, but for carbon emissions generally. The policy was very well designed and ensured that lower income earners were compensated for any increase in costs to the extent that they had a net benefit, and in the short time it was operating, was successful at reducing emissions.

Unfortunately for us (and the world) this was too complicated for many Australians to understand and the political right exploited that to tell a scary story about a 'new tax', leading to their election and the removal of the scheme.

While economists (and rational thinkers) generally love carbon pricing schemes, they have been pretty unsuccessful politically because people are generally too stupid to understand them and cynical politicians in bed with the fossil fuel industry are happy to play to that.