Plastic dumping grounds: the international incidence of environmental regulation

Deniz Atalar, Banu Demir and Swati Dhingra

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Can environmental regulation reduce pollution globally, or does it merely shift environmental burdens across countries? We study China's 2017 ban on plastic waste imports, which abruptly closed the world's largest destination market for plastic waste recycled into manufacturing inputs. The ban triggered a major reallocation of global waste flows and provides a rare opportunity to study a central question in the pollution haven literature: when one country tightens environmental policy, where does the displaced environmental burden go? Displaced waste did not flow to the world's weakest regulators. Instead, it was redirected disproportionately towards Turkiye, a country with weaker waste-management outcomes than China and sufficient capacity to absorb part of the displaced trade. Using newly assembled data linking global trade flows, firm-to-firm production networks, waste management practices, and regional air pollution, we trace the consequences of the ban from international trade diversion to firms responses and local environmental outcomes. The dominant environmental mechanism differs from the textbook pollution haven narrative. Cheaper imported plastic waste displaced domestically generated waste. Domestic waste suppliers lost buyers and increasingly disposed of unsold waste through dumping and open burning. Cities more exposed to displaced domestic waste experienced significantly larger increases in particulate air pollution. Embedding these mechanisms in a quantitative model with environmental externalities, we find that economic gains from cheaper imported inputs are modest while estimated damages from local air pollution are substantial, implying negative net welfare effects for Turkiye. Our findings show that environmental regulation can export environmental costs through market displacement, shifting pollution burdens toward countries less equipped to manage them.

Date: 2026-06-03
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