The earth receives almost all its energy from the sun in the form of insolation. To maintain constant temperature, the amount of heat received from the sun must equal the amount lost by the earth through terrestrial radiation. This equilibrium is known as the heat budget of the planet earth.

The earth, after being heated by insolation, becomes a radiating body and radiates energy to the atmosphere in long wave form. This process is called terrestrial radiation, which heats up the atmosphere from below. The long wave radiation is absorbed by atmospheric gases, particularly carbon dioxide and other greenhouse gases, thereby indirectly heating the atmosphere.

The atmosphere in turn radiates and transmits heat to space. Of the 65 units absorbed (14 by atmosphere and 51 by earth's surface), the earth radiates back 51 units. Of these, 17 units go directly to space and 34 units are absorbed by the atmosphere through various processes like convection, turbulence, and latent heat of condensation. The atmosphere radiates 48 units back to space. Thus, total radiation returning (17+48=65 units) balances the 65 units received from the sun.

Conduction is another important process where the earth transmits heat to atmospheric layers near the surface. The air in contact with land gets heated slowly, and upper layers in contact with lower layers also get heated. This process is important for heating the lower layers of the atmosphere.

Additionally, there is variation in net heat budget at different latitudes. The surplus heat from the tropics is redistributed polewards, preventing the tropics from progressively heating up or high latitudes from permanently freezing. Thus, the earth neither warms up nor cools down despite huge heat transfer.