Climate change poses a glaring challenge for the present generation who fast needs to mitigate the causes of the same in order obtain a sustainable world. This definitely calls for complete phase out of fossil fuels which have been instrumental in enhancing the calamity. The social optimum by today’s standards requires an immediate aggressive renewable fuel intervention apart from a gradually rising carbon tax which falls in the long run. As more and more renewables are used in relation to fossil fuel, faster will be the advent of carbon free era. And as more fossil fuel will be locked up in the earth the global warming too will reduce drastically.

Concentrated efforts need to be made in direction of de-carbonization through consistent policy advocacy that provides the requisite stability and certainty to invest in new low-emissions generation capacity. The policymakers, however, should keep the vital interests of the key stakeholders such as the customers, shareholders of energy companies, employees and communities in view. In fact policy makers are required to better integrate fossil fuels policy and climate change policy in order to ensure the transition of the society to a decarbonized energy system at minimum cost.

The optimal policy mix must involve an aggressive subsidy for renewable energy sources to bring those sources into use and a gradual increase in carbon tax to phase out fossil energy sources. Therefore, briefly the future of fossil fuels in light of carbon constraint shall be subject to the following:

• A trade-off between global warming damages and welfare from consumption: wherein the policy optimizes welfare by choosing the shares of output allocated to saving and end-of-pipe mitigation. But this is subject to the optimal carbon tax along with introducing the renewable and fossil fuels together
• Fossil fuel extraction costs: One should expect a rise in the cost for remaining stock of reserves. This enables one to consider the important role of untapped fossil fuel in the fight against global warming
• Use of fossil fuels alongside renewables which will finally lead to an era of fossil free or rather carbon free era. This will additionally promote tech-innovation in the sector
• Shift will occur when the cost of fossil fuel (inclusive of the carbon tax) touches the cost of the renewable

As of now the international efforts have failed to establish a stringent system of carbon pricing with some major governments having backed out of crucial watershed treaties; while there are other who are continuously moving forward to spur the transition away from fossil energy by using policy which increases the competitiveness of renewable energy production. Thus, the world first needs a consensus to out-beat the global warming phenomena and formulate policy with respect to fossil fuel phase out, renewable subsidies and carbon pricing. With significant carbon sinks, like those of Indonesian Rainforest, disappearing in the world it is now more than ever vital to formulate a global policy for a smooth fossil fuel phase out.