How should governments design climate policies in the presence of inequality, uninsurable risk, and fiscal constraints? To address this question, we develop a climate-economy model with incomplete markets and idiosyncratic labor-income risk, where Ricardian equivalence fails and optimal long-run capital taxes are positive, leading to important inter-temporal wedges. We analytically show that the optimal carbon tax equals the social cost of carbon (SCC) adjusted for fiscal distortions. Calibrating the model to the U.S., we show that these adjustments are quantitatively negligible: high levels of household inequality, income risk, and fiscal distortions do not, in themselves, justify lowering climate ambitions. Welfare gains under the optimal policy come almost entirely from efficiency and environmental amenities, with almost no effect on redistribution and insurance, and are fairly evenly distributed across households.

Increasing climate risk is making property insurance unaffordable and unavailable. I study a novel Australian policy response: government-provided, mandatory, risk-based reinsurance for cyclone damage in home insurance. Public reinsurance reduces premiums by 21\% and increases insurance availability by 11\%. These gains are not a subsidy but arise from eliminating large pre-existing markups in private reinsurance and catastrophe bond markets, flowing primarily to insurers most constrained by tail-risk exposure. The markup reduction stems from neutralizing the high premium for spatially-correlated and ambiguous risk, with increased competition providing additional benefits. This demonstrates that insurance market dysfunction originates from frictions in tail-risk reinsurance markets, and that targeted, cost-neutral interventions in these upstream markets can restore affordability and availability in home insurance.

As climate-change uncertainty rises, societies increasingly rely on new technologies to adapt. While such measures can improve resilience, they may also foster maladaptation—private responses that reduce damages locally while imposing external costs on society.

We model a private agent that can invest irreversibly in a clean adaptation technology under stochastic climate risk. In a business-as-usual scenario, the agent instead relies on a lower-cost practice that partially mitigates climate impacts but generates a negative externality (e.g., intensive soil fertilizer use). Adopting the clean technology achieves comparable adaptation performance without these social damages. We characterize the privately optimal investment trigger and robustness choice, and then study policy design when the government can subsidize adoption. The optimal subsidy balances fiscal costs against avoided external damages and accounts for how subsidies affect both the timing and design of private investment, reducing the likelihood of widespread maladaptation.

This study explores an effective and well-balanced carbon pricing revenue recycling portfolio to guide policymakers. Using municipality-level data from Canada, we assess the impacts of carbon tax recycling schemes on economic performance, equity outcomes, and environmental effectiveness, and examine public acceptance of balanced schemes. We show that, among various revenue recycling options, distortionary tax cuts impose the smallest economic costs, green spending achieves the largest reductions in GHG emissions, and direct household transfers slightly increase income inequality despite being intended to improve equity. We also find that allocating a larger share to green investment best balances the triple dividends and public acceptability. These findings highlight the importance of designing a scheme that not only delivers triple dividends but also gains public support.