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There is strong scientific consensus that the climate is drastically changing due to increasing levels of carbon dioxide in the atmosphere, and that these changes are largely due to human behavior. Scientific estimates posit that by 2050, we will begin to experience some of the most damaging consequences of climate change, which will only worsen as the world becomes more populated and resources become scarcer. Considerable progress has been made to explore technological solutions, yet useful insights from a psychological perspective are still lacking. Understanding whether and how individuals and groups cope with environmental dilemmas is the first step to combatting climate change. The key challenge is how can we reduce a tendency to inaction and to understand the psychological obstacles for behavioral change that reduce climate change. We provide a social dilemma analysis of climate change, emphasizing three important ingredients: people need to recognize their own impact on the climate, there is conflict between self-interest and collective interests, and there is a temporal dilemma involving a conflict between short-term and longer-term interest. Acknowledging these features, we provide a comprehensive overview of psychological mechanisms that support inaction, and close by discussing potential solutions. In particular, we offer recommendations at the level of individuals, communities, and governments.