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This work extends traditional trade models to consider energy and the environment by intro-ducing energy as ubiquitous (intermediate) input, using a household model where energy enters directly into consumer decisions, and assuming externalities related to land and energy consump-tion. Under plausible conditions, globalization and capital flows increase demand for energy, leading to decline in food production and loss of environmental land. Identical technologies and similar resource constraints across countries are not sufficient for factor price equalization. Al-though the social optimal policy includes a land tax and an emission tax, under certain conditions the use of only one instrument may be worse to the environment, in contrast to no intervention at all. Furthermore, technological changes, e.g., agriculture biotechnology and second generation biofuels, are shown to lessen the land constraint