In this paper, we study the tail sensitivity of US industry returns to changes in carbon-driven climate risk. We find that such sensitivities can vary across industries as well as across the carbon market’s implementation phases. Although industry size has a mitigating effect on our findings, they are robust to the factor model used when filtering industry returns. The industries most exposed to transition risk have increasing tail carbon betas as tail sensitivities increase with an industry’s greenhouse gas emissions. Our findings are consistent with the idea that investors’ perception of an industry’s exposure to transition risk depends on both climate risk and market conditions.