<p>This paper examines how U.S. monetary policy indirectly affects industrial and energy-related carbon dioxide emissions through production. Using an instrumental variables approach, we exploit the interaction between state-level manufacturing employment shares and monetary policy shocks to capture differential exposure across states. We find that a 1% point increase in the Federal Reserve’s intended funds rate, unrelated to anticipated economic developments, leads to an average cumulative reduction of 0.2% in industrial CO₂ emissions and 0.11% in energy-related CO₂ emissions. These findings underscore the unintended environmental effects of monetary policy and the need to consider them in long-term climate strategies.</p>