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The provision of energy is a primary contributor to climate change and environmental pollution, the latter including air pollution from aerosol emissions and a broad range of other human health effects and ecosystem damages. At the same time, aerosol emissions also reduce radiative forcing, leading to a masking of part of the warming due to rising CO2 concentrations and temporarily reducing the adverse impacts of climate change. Using an energy-economy-climate model linked to atmospheric chemistry, health impact and life cycle assessment models, we show that the societal costs of the health impacts of environmental pollution substantially exceed the economic benefits from masked warming. We further highlight the unequal burden of these issues on developing countries and explore the implications for human development, global inequality and international climate policy.