In another paper (Butterfield 2011), one of us argued that emergence and reduction are compatible, and presented four examples illustrating both. The main purpose of this paper is to develop this position for the example of phase transitions. We take it that emergence involves behaviour that is novel compared with what is expected: often, what is expected from a theory of the system's microscopic constituents. We take reduction as deduction, aided by appropriate definitions. Then the main idea of our reconciliation of emergence and reduction is that one makes the deduction after taking a limit of an appropriate parameter $N$. Thus our first main claim will be that in some situations, one can deduce a novel behaviour, by taking a limit $N\to...