We develop a multiproduct multi-factor model with heterogeneous firms, variable markups, and monopolistic competition in which each product has a specific environmental emission intensity. Firm-level emission intensity can vary with technology investment and through the endogenous response of product mix to a market expansion. First, we find that the product mix response is such that when varieties that are away from the core competency of the firm are cleaner, then market expansion increases firm-level emission intensity, whereas when they are dirtier, then it improves the environmental performance of the firm. Second, we find that reallocation effects across firms dominates at the industry level relative to a potentially negative product mix response. Third, we investigate changes in firm emission intensity in a unique panel dataset of Indian Manufacturing firms which reports both physical output and energy input by product. We find evidence of the importance of the across-firms reallocation effect in explaining the reduction in emissions per output in India over the last two decades. We also find evidence of the crucial role played by multi-product firms and by heavy industries in this improved environmental performance. Joint with Geoffrey Barrows (LSE – Grantham Institute).