While the physical processes driving energy fluxes in the high latitudes are universal, some of the controlling factors such as permafrost, temperature, and vegetation play a special role. Annual net radiation at Arctic treeline is larger over subarctic forest than over tundra as a result of smaller albedo during the snow-cover period. The absorbed solar radiation is notably larger in late winter. During the snow-free period, in well-watered areas, there is a hierarchy in potential evaporation from very high rates for shallow tundra lakes and ponds to low rates for well-drained upland heath terrain. With abundant moisture and warm conditions, open coniferous forests, dwarf deciduous forests, and sedge fens have similar energy and water balances. During the growing season when moisture is limiting, a sedge fen, more so than a coniferous forest, curtails its evaporation rate. Under cold conditions, however, coniferous forest has the smaller evaporation. Soil heat fluxes in summer comprise from 10% to 15% of the net radiation and are fairly uniform both temporally and spatially. The carbon budget of peatlands, which are major global repositories of carbon, responds strongly to air and soil temperatures and to the water balance. Warm and wet conditions support strong photosynthesis and a substantial methane flux. Warm and dry conditions favor strong respiration carbon losses from plants and soil. In a 2 x CO2 world, substantial changes in temperature, precipitation, and energy and water balances are anticipated and these will drive substantial changes in the high-latitude carbon budget.