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This chapter analyses the policy implications of the climate change challenge. Are \ncurrent emission reduction pledges made in Copenhagen/Cancun enough to \nstabilise the climate and limit global average temperature increase to 2 oC? If not, \nwhat will the consequences be? What alternative growth pathways could stabilise \nthe global average atmospheric concentration of greenhouse gases (GHG) at \n450 ppm, the level which has a 50% chance of keeping the temperature rise to 2 oC? \nWhat policies are needed, and what will be the costs and benefits to the economy? \nHow can the world adapt to the warming that is already occurring? To shed light on \nthese questions, this chapter first looks at trends to 2050 in GHG concentration and \nemissions (including from land use), temperature and precipitation under the \nEnvironmental Outlook Baseline scenario of “business-as-usual” (i.e. no new \naction). It then takes stock of the state of climate policy today. Most countries use a \nmix of policy instruments, including carbon pricing (carbon taxes, cap-and-trade \nemissions trading, fossil fuel subsidy reform), other energy efficiency policies, \ninformation-based approaches and innovation policies to foster clean technology. \nThe chapter then looks at what further action is needed by comparing different \nmitigation scenarios against the Baseline. These include various scenarios to \nstabilise GHG concentrations at 450 ppm and 550 ppm using different technology \noptions, e.g. carbon capture and storage, phasing out nuclear power, and increasing \nthe use of biofuels; linking carbon markets; and various emissions permit allocation \nrules. The chapter concludes by outlining how limiting global warming will require \ntransformative policies to reconcile short-term action with long-term climate \nobjectives, balancing their costs and benefits. Timely adaptation policies to limit \ndamage by the already changing climate will also be essential.