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Klaus Desmet, Dávid Krisztián Nagy, Esteban Rossi-Hansberg In discussing trade policy in the context of climate change, some people are quick to argue that trade might have to be restricted. After all, trade involves transportation, and unfortunately, transportation is an important source of carbon emissions. In addition, there is growing support for carbon border adjustments, a tariff on carbon-intensive imports (e.g. Elliot et al. 2010, Mehling et al. 2019, Farrokhi and Lashkaripour 2020, Kortum and Weisbach 2020). Yet, by facilitating locations to switch specialisation, trade may also...