The book starts where The Carnivorous Carnival left off. Klaus and Violet are rolling down a steep mountainside in an out-of control caravan, while Sunny is held captive by Count Olaf and his henchmen. Violet devises a brake for the caravan by using the hammocks as a drag chute and spreading sticky foods on the wheels. The two siblings travel up the mountain, discovering that vicious Snow Gnats have followed them. They take shelter from the insects in a cave, discovering that it is occupied by a troupe of Snow Scouts. Carmelita Spats, the children’s rival from The Austere Academy, is one of the Snow Scouts, along with her uncle Bruce and a boy wearing a sweater, who seems to possess knowledge of V.F.D. During the night, he talks to them and leads them up the natural chimney (also known as the Vertical Flame Diversion) to the V.F.D. headquarters.
Meanwhile, Olaf, his sidekicks, and Sunny are on the peak of Mount Fraught, the tallest mountain in the region. The adults are cruel to Sunny, forcing her to sleep in a casserole dish and cook them breakfast the next morning. Olaf insists that what she has prepared is disgusting and orders the Hook-Handed Man to fetch salmon from the nearby stream. Two people, a woman with hair but no beard and a man with a beard but no hair arrive, and announce that they have successfully burned down the V.F.D. headquarters. They also give Count Olaf the first twelve pages of the Snicket File. The man gives Esmé a green cigarette which is actually a Verdant Flammable Device, device used by V.F.D. to signal in emergencies by lighting it on fire and sending green smoke into the air. Esme immediately says that they are very “in”. Sunny notices Esmé’s Verdant Flammable Device and uses one to signal her siblings under the pretext of smoking the just-caught salmon (lox) for Olaf and his evil associates.Violet, Klaus and the boy come to the V.F.D. headquarters and find it has burnt down. The boy reveals himself to be Quigley Quagmire, whom the children believed to be dead. He is the third triplet—Isadora and Duncan are the first two. Violet, Klaus, and Quigley see, rising from the cliff, the plume of green smoke being emitted from Sunny’s Verdant Flammable Device. Violet invents an ice-climbing device from a ukulele and forks, which Quigley and she use to climb the mountain, while Klaus stays at the headquarters to see if there are any clues or evidence that can be used to find more about V.F.D., who burned it down, etc. At one point, Violet and Quigley stop for a rest and Snicket refuses to reveal what happens between the two, commenting that Violet and Quigley have been deprived of privacy. It is obvious after this point that the two have fallen in love, and many references are made to their romantic attachment. When the two reach the top of the mountain, they immediately spot Olaf, his henchmen, and Sunny, Violet introduces Sunny to Quigley, and wants Sunny to return with them. But, Sunny refuses, telling her sister that she can spy on Olaf and learn useful information. Violet reluctantly agrees after Sunny herself claims, “I’m not a baby.”
Violet and Quigley travel down the mountain again. Fortunately, Klaus has figured out a lot about V.F.D. and hatches a plan to lure Esmé to them and use her to bait Olaf into giving Sunny back. They dig a pit and light a Verdant Flammable Device next to it. Esmé sees some green smoke at the bottom of the slope. She goes down it, thinking the smoke is coming from the “in” cigarettes. The children realize that two wrongs don’t equal a right and that there is a better way to rescue Sunny than kidnapping Esmé. When she reaches the bottom, she runs into three masked strangers (the Baudelaires and Quigley), and they help her climb back up the slope, hoping to somehow force Count Olaf to give up Sunny.
Claiming to be Volunteers, the three demand Sunny’s return. Olaf refuses, until Violet pretends to know the location of a missing sugar bowl (which is mysteriously important to Olaf and his group). Olaf barters for the dish, but the Snow Scouts reach the peak. Klaus, Violet, and Quigley take off their masks to convince the scouts to run. Olaf orders the two white faced women to grab Sunny and throw her off the mountain, but they leave in protest and quit working for Olaf. As they leave, they say that one of their siblings was killed when their house burned down. The scouts, apart from Carmelita Spats, and several of Count Olaf’s associates are caught in a net in a plot to recruit them to Count Olaf’s troupe. Carmelita is convinced to join Olaf and Esmé in their evil schemes, as their “daughter”.
The Baudelaires and Quigley grab a toboggan and slide down the slope, but when they reach the bottom, the frozen waterfall shatters. In the ensuing flood, the Baudelaire siblings and Quigley Quagmire are separated. Quigley and Violet call desperately for each other, and Quigley tries to tell them to meet him somewhere, but cannot be heard over the rush of the running water.