Environmental regulations often generate environmental improvements at home, yet their consequences may extend far beyond the countries that adopt them. The international incidence of environmental regulation remains poorly understood. We study where the resulting environmental damages emerge and who ultimately bears their costs using China's 2017 ban on waste imports, which triggered a large reallocation of global recycling activity. Combining international trade data, administrative records, direct measures of firms' waste mismanagement, and local pollution data in the main destination for diverted waste, we examine the international incidence of environmental regulation by tracing the rarely observed process linking trade reallocation to firm behavior, pollution exposure, and welfare. The ban increased pollution-intensive plastic waste imports, lowering input costs for downstream firms using recyclable materials. Meanwhile, imported waste displaced domestic recyclables, leading firms to adopt harmful disposal methods. The environmental damages from air pollution exceeded the economic gains from access to lower-cost inputs.

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3 June 2026     Paper Number CEPDP2191

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This CEP discussion paper is published under the centre's Green Transition programme.