We show that climate policy can unlock large environmental gains from trade by inducing economies to specialize according to their environmental comparative advantage. We explore the effects of a carbon tax in a quantitative trade model. In our benchmark, a $100/tCO₂e carbon tax reduces global greenhouse gas emissions by 44.7%. The environmental gains from trade account for roughly one-third of the abatement from the non-technique margins—scale, industry composition, and international sourcing—with the technique effect the largest margin. This finding holds for a wide range of carbon tax rates and sufficiently broad policy coverage.

Consumers adjust their diets for environmental reasons, yet the emissions consequences remain unknown. I estimate a nested logit demand system for protein-rich foods using bar code-level data from a European retailer, linked to product-level emissions intensities. Accounting for substitution can reverse the sign of a policy’s emissions effect: buying local yields at best a small reduction and, under naive accounting, an increase. Removing beef and cheese lowers emissions by about 35%, vegetarianism by about 20%, and Pigouvian carbon taxes by up to 6%. My estimates imply an across- to within-group substitution ratio within the range of quantitative trade-and-climate calibrations.

Can protectionism by a clean economy be climate policy? We study the U.S. tariffs of 2025, the clearest instance of geoeconomic fragmentation so far, in a multi-country, multi-sector trade model with global input-output linkages. Global emissions fall in every scenario, but mainly because the world becomes poorer. The one margin on which a tariff could be the right climate instrument is sourcing, the country a good comes from. We show analytically that a tariff on dirty origins makes sourcing cleaner in the protected market (green protection) but dirtier in all other markets, since higher input costs erode the competitiveness of the clean country abroad (brown sourcing). Both forces appear in every scenario. Sourcing lowers emissions under the tariffs as applied, but this gain rests on the U.S. market alone. When partners retaliate across the board, the U.S. market shrinks and the net sourcing effect turns brown.

Consumption growth in the United States slowed markedly following the 2007–2009 financial crisis. We argue that costly regulatory interventions targeting banks with foreclosure-related misconduct contributed to this decline by constraining credit supply. Using variation in county-level exposure to affected banks, we show that tighter regulatory controls reduced mortgage loan origination, leading to weaker house price recoveries and lower household wealth. We find that consumption growth slowed more in counties more exposed to these banks, consistent with a wealth effect transmitted through housing markets. The decline in mortgage lending reflects a reduction in the number of loans rather than in average loan size, suggesting that regulation operated primarily through extensive-margin credit supply.

We use a quantitative international trade model with climate policies to explore the distributional effects of carbon pricing across countries. Our analysis addresses two key questions facing global climate action: which countries bear the greatest burden of climate policies, and how these policies can be designed to ensure fairness. We present three main findings. First, efficient climate policies that disregard distributional concerns significantly exacerbate between-country inequality. Second, equity can be achieved alongside efficiency when climate policies are complemented by economically feasible international transfers, either equalizing carbon tax costs or accounting for historical emissions, with minimal economic impact on high-income countries. Third, carbon tax schemes with heterogeneous pricing – featuring lower rates for low- and middle-income countries – do not necessarily result in fairer outcomes.