Environmentalists and free trade proponents sharply disagree on the role that trade plays in impacting environmental welfare. Contrary to environmentalist contentions, trade liberalization can improve environmental regulations, and WTO jurisprudence is more welcoming of domestic environmental regulations than popularly perceived. But, counter to free trader claims, trade’s positive impact often works through stronger regulation—not through simple increases in wealth. In addition, though evolving WTO principles welcome fairly applied environmental regulations, specific decisions have applied these principles inconsistently and have been too quick to find unfair trade protectionism. Both sides can gain from a more nuanced understanding.