The entanglement of climate and energy policies

Increased CO 2 in the atmosphere increases tropospheric temperatures, thereby changing other climate attributes. However, cutting CO 2 emissions by reducing fossil fuel use raises concerns about economic development and energy security. Additional CO 2 is also directly beneficial for plants. Adaptation measures are an alternative, but those that are public goods are unlikely to be efficiently deployed without explicit government action. A model is developed to illustrate some of these complex policy trade-offs. The analysis is simplified by focusing on CO 2 accumulation in the atmosphere as a sufficient statistic for both the external effects of CO 2 and the global transition from fossil fuels to alternative energy sources. JEL Classification: D62 Externalities; H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies; O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products; Q32 Exhaustible Resources and Economic Development; Q42 Alternative Energy Sources; Q52 Pollution Control Adoption and Costs; Distributional Effects; Employment Effects; Q54 Climate; Natural Disasters and Their Management; Global Warming.