Free Will this is not a tax on one commodity. It is a tax on all commodities. Everything uses energy, everything you buy requires transportation, therefore everything including coffee is affected. There just isn't any substitution, just reduction.
Your example is simplistic but lets go with that.
Why do you assume that as a coffee a day drinker you will be fully compensated?
The government calculates that the average coffee drinker has 2.3 cups per week, your compensation will be based on this ($13.8). If you drink more than the average you lose, you drink less you gain. The compensation will be simplistic, based on some median value and will not reflect personal circumstances, I can guarantee that.
Just as depending on how much coffee you drink will affect whether the compensation is good or bad, any tax and compensation package on Carbon is going to be disproportional. Families, especially young families with high out of pocket expenses and electricity usage will be more affected. It'll also be disproportionate to anyone that commutes to work a long way and have a greater impact on regional centers, or where it's cold or hot.
What then happens when the tax is successful and usage is reduced? If all this compensation is flowing back to the underclasses and the utilities are getting less revenue from decreased usage just how are they supposed to invest in renewables? Where is their incentive? How is there any economic gain to them?
We have already experienced what happens when revenue decreases, they raise prices! As an example Telstras landline rental used to be $19.90 per month, it's now $33 per month. The price increase is to compensate the loss of landline revenue to mobile phones. Expect utilities to do the same, we'll all be worse off for no benefit whatsoever.
