Carbon transition risk is increasingly reflected in asset prices and is central to the sustainability debate. We study how carbon risk affects the cross-section of expected U.S. equity factor returns using carbon tilts, defined as the value-weighted difference in carbon transition risk between a factor’s long and short legs. While carbon-intensive factors earn lower realized returns, forward-looking expected returns based on the implied cost of capital indicate a positive carbon tilt premium that increases with unanticipated climate concerns and over time. Carbon risk varies across investment styles and is most pronounced for strategies linked to profitability, investment, and valuation.