What price carbon? That question is splitting even those who agree that government should be pursuing policies to promote clean energy.
Supporters say making industries that burn fossil fuels pay to spit out carbon dioxide would encourage a shift to cleaner, alternative-energy sources by making it more expensive to burn coal, gasoline or natural gas. Some favor a cap-and-trade system, which sets a limit (the cap) on emissions and creates a market where companies can buy and sell permits to discharge carbon dioxide (the trade). Others favor a simpler tack: Tax companies on the carbon they emit.
Critics, meanwhile, say any price on carbon is misguided. A better, less costly approach, they say, would be for governments to invest directly in clean-energy technologies.
The Wall Street Journal asked three experts—David Weisbach, a professor of law at the University of Chicago; Eileen Claussen, president of the Center for Climate and Energy Solutions; and Ted Nordhaus, chairman of the think tank Breakthrough Institute—to debate the issue.
Here are edited excerpts of their discussion:
WSJ: Do we need a price on carbon? If so, what’s the best way to do it?
MR. WEISBACH: We need a price on carbon for the simple reason that activities that result in emissions don’t bear their full cost.
A carbon tax ensures that when people choose to use fossil fuels or engage in other activities that emit greenhouse gases, they see the full price. Without a carbon tax, people don’t consider all of the costs of their activities when making choices, such as how much to drive, how big a house to buy and so forth. Without a tax, it is as if we subsidize pollution relative to its price in a complete market…