Hans-Werner Sinn discusses public policies against global warming from a supply-side perspective. He argues that reducing demand for fossil fuels is insufficient to mitigate global warming because suppliers may respond by extracting carbon more rapidly, accelerating warming. The paper examines the remaining policy options from an intertemporal supply-side perspective. Global warming is a significant externality, with carbon dioxide levels in the atmosphere currently at 380 ppm. Before the Industrial Revolution, CO₂ levels were around 280 ppm, and the temperature was about 14°C. The current increase of 1°C has not been a major problem, but future increases could be severe. The Stern Review estimates that CO₂ levels could reach 900 ppm by 2100, leading to a 5°C temperature rise, which would have serious consequences. The paper highlights that reducing demand for fossil fuels is not enough to mitigate global warming because it does not address the supply side. The extraction of carbon from underground and its conversion to CO₂ is a critical factor. Even with efficient combustion processes, CO₂ emissions are inevitable. The only exceptions are sequestration and afforestation. The paper also discusses the economic implications of resource extraction, noting that the limited absorption capacity of the atmosphere may constrain resource extraction more than scarcity itself. The economics of resource extraction must shift to consider waste accumulation. The market failure associated with CO₂ emissions is different from the static marginal externality model used in textbooks. An intertemporal analysis is needed to understand the optimal allocation of resources over time. The paper discusses the nature of this market failure, the role of property rights, and the impact of global warming on resource extraction. The paper concludes that the current generation's preferences may not be optimal for future generations, and that policy interventions are necessary to address the intertemporal allocation of resources. The inclusion of global warming in the production function changes the definition of intertemporal Pareto optimality, requiring a flatter extraction path to reduce global warming. The paper emphasizes the need for policies that consider both the supply and demand sides of fossil fuel extraction.Hans-Werner Sinn discusses public policies against global warming from a supply-side perspective. He argues that reducing demand for fossil fuels is insufficient to mitigate global warming because suppliers may respond by extracting carbon more rapidly, accelerating warming. The paper examines the remaining policy options from an intertemporal supply-side perspective. Global warming is a significant externality, with carbon dioxide levels in the atmosphere currently at 380 ppm. Before the Industrial Revolution, CO₂ levels were around 280 ppm, and the temperature was about 14°C. The current increase of 1°C has not been a major problem, but future increases could be severe. The Stern Review estimates that CO₂ levels could reach 900 ppm by 2100, leading to a 5°C temperature rise, which would have serious consequences. The paper highlights that reducing demand for fossil fuels is not enough to mitigate global warming because it does not address the supply side. The extraction of carbon from underground and its conversion to CO₂ is a critical factor. Even with efficient combustion processes, CO₂ emissions are inevitable. The only exceptions are sequestration and afforestation. The paper also discusses the economic implications of resource extraction, noting that the limited absorption capacity of the atmosphere may constrain resource extraction more than scarcity itself. The economics of resource extraction must shift to consider waste accumulation. The market failure associated with CO₂ emissions is different from the static marginal externality model used in textbooks. An intertemporal analysis is needed to understand the optimal allocation of resources over time. The paper discusses the nature of this market failure, the role of property rights, and the impact of global warming on resource extraction. The paper concludes that the current generation's preferences may not be optimal for future generations, and that policy interventions are necessary to address the intertemporal allocation of resources. The inclusion of global warming in the production function changes the definition of intertemporal Pareto optimality, requiring a flatter extraction path to reduce global warming. The paper emphasizes the need for policies that consider both the supply and demand sides of fossil fuel extraction.