Trade, politics, and the environment: Tailpipe vs. smokestack

The vast majority of economic research on environmental regulation in open economies focuses on producer generated—“smokestack”—pollution; we instead consider consumer generated—“tailpipe”—pollution. We examine how political opposition to environmental regulation varies with a countryʹs trade regime, and show that the impact on environmental policy of a move from autarky to free trade can depend critically on who ultimately generates pollution, producers or consumers. We find that opening to trade may raise industry opposition to smokestack regulation, but reduce its opposition to strict tailpipe policy.