Exposure of plants to ozone inhibits photosynthesis and therefore reduces vegetation production and carbon sequestration. The reduced carbon storage would then require further reductions in fossil fuel emissions to meet a given CO2 concentration target, thereby increasing the cost of meeting the target. Simulations with the Terrestrial Ecosystem Model (TEM) for the historical period (1860-1995) show the largest damages occur in the Southeast and Midwestern regions of the United States, eastern Europe, and eastern China. The largest reductions in carbon storage for the period 1950-1995, 41%, occur in eastern Europe. Scenarios for the 21st century developed with the MIT Integrated Global Systems Model (IGSM) lead to even greater negative effects on carbon storage in the future. In some regions, current land carbon sinks become carbon sources, and this change leads to carbon sequestration decreases of up to 0.4 Pg C/yr due to damage in some regional ozone hot spots. With a climate policy, failing to consider the effects of ozone damage on carbon sequestration would raise the global costs over the next century of stabilizing atmospheric concentrations of CO2 equivalents at 550 ppm by 6 to 21%. Because stabilization at 550 ppm will reduce emission of other gases that cause ozone, these additional benefits are estimated to be between 5 and 25% of the cost of the climate policy. Tropospheric ozone effects on terrestrial ecosystems thus produce a surprisingly large feedback in estimating climate policy costs that, heretofore, has not been included in cost estimates. © 2005 Springer Science+Business Media