The entanglement of climate and energy policies

Increased CO2 in the atmosphere increases tropospheric temperatures, thereby changing other climate attributes. However, cutting CO2 emissions by reducing fossil fuel use raises concerns about economic development and energy security. Additional CO2 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 CO2 accumulation in the atmosphere as a sufficient statistic for both the external effects of CO2 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.