This paper addresses a question central to the way climate change policy impacts are discussed in the United States: What are the economic costs for individual states of carbon abatement proposals? We present a dynamic computable general equilibrium model of a single U.S. state facing carbon limits. We consistently incorporate the competitive impacts resulting from carbon abatement in other states and regions. Specifically we assess the impacts on Colorado of the 1997 Kyoto agreement. Our analysis suggests that the competitive impacts which affect a state’s terms-of-trade are of crucial importance when assessing the economic cost impacts of the Kyoto agreement for a given state. Also, the overall economic impacts on Colorado are largely dependent on the extent of international trade in emissions permits.