By Greg Ip

World leaders will gather later this month in Paris to set new targets for greenhouse-gas emissions. The targets will be the easy part. Meeting them with the least possible harm to the economy will be much harder, requiring a deft mix of science and economics.

President Barack Obama missed a golden opportunity to show how when he formally killed the Keystone XL pipeline last week.

In explaining his decision, Mr. Obama said saving the planet from a warmer climate will require that some fossil fuels, such as the carbon-intensive oil from Canada’s tar sands, be left in the ground…

…Nonetheless, it’s not too late to apply market mechanisms to greenhouse-gas emissions elsewhere. Mr. Obama could still make a number of decisions during the rest of his term that affect the production of fossil fuels, from leasing federal land for coal mining and oil and gas drilling to easing the ban on exports of U.S. crude.

One potential area for this approach: Michael Greenstone, an economist at the University of Chicago, reckons that the climate damage of coal mined from the Powder River Basin in Montana and Wyoming is five times as great as its market value. The federal government could take those damages into consideration when calculating leases and royalty rates on federal land…

Continue reading at the Wall Street Journal…

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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...
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...
Climate Law & Policy
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Climate Law & Policy
As countries around the world implement policies to confront climate change, EPIC research is calculating which policies will have the most impact for the least cost.