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…

Continue reading at the Wall Street Journal…

Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Environment
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Environment
Producing and using energy damages people’s health and the environment. EPIC research is quantifying the social costs of energy choices and uncovering policies that help protect health while facilitating growth.
Climate Change
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Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...