The correct option is indeed I, II, and III, as all statements highlight essential functions of the Earth's atmosphere that are crucial for sustaining life. Statement I emphasizes that the absence of an atmosphere would lead to extreme temperatures, as direct solar radiation would not be moderated, resulting in freezing conditions. Statement II notes that the atmosphere plays a vital role in maintaining the Earth's average temperature by trapping heat, a process central to the greenhouse effect. Lastly, Statement III points to the capability of gases like carbon dioxide in absorbing infrared radiation, enhancing the greenhouse effect and thereby regulating the climate. Together, these statements illustrate the atmosphere's critical role in temperature regulation and overall Earth's habitability, which is a key concept in environmental science as covered in UPSC-level sources.