I study the environmental impacts of the US monetary policy shock using air pollution records from satellite images. An unexpected tightening reduces output but increases air pollution. The puzzle is explained by a clean investment channel: An increase in firm financing costs hinders clean investment and subsequently increases pollution. The channel has emerged since the global financial crisis. Consistently, the pollution increase after a tightening is stronger in states with a more environmentally friendly credit policy and a higher clean energy share. Regarding environmental amenities in consumer welfare, the optimal monetary policy should control inflation with a moderate environmental impact.
