We consider the role played by the EU Emission Trading System (EU ETS) as a possible driver of outward Foreign Direct Investments (FDI) for Italian manufacturing firms. Using a panel dataset of about 22,000 firms covering the first two phases of the EU ETS and the pre-EU ETS period, we measure the patterns of FDI towards countries not covered by EU ETS. Results show that the EU ETS had a weak effect on the number of new subsidiaries abroad (extensive margin), while it had a larger impact on production taking place in foreign subsidiaries (intensive margin), especially in trade-intensive sectors.