How NAFTA affected U.S. vehicle emissions: Demand growth and usage patterns

Abstract

This study quantitatively assesses the impact of the North American Free Trade Agreement (NAFTA) on U.S. vehicle emissions, emphasizing consumption-driven pollution, which is often overlooked in trade-related environmental analyses. Using a Bayesian estimation approach, we analyze how NAFTA altered vehicle purchase behaviors and utilization patterns. Our findings indicate that NAFTA significantly increased U.S. vehicle emissions. This effect was primarily driven by income-induced increases in high-emission truck ownership and their expanded use. This research contributes to the literature by clarifying the environmental trade-offs of trade liberalization, providing essential insights for policymakers balancing economic gains and environmental impacts.