Abstract Cap-and-trade schemes are designed to achieve target levels of regulated emissions in a socially effi- cient manner. These schemes work by issuing regulatory credits and allowing firms to buy and sell them according to their relative compliance costs. Analyzing the efficacy of such schemes in concentrated industries is complicated by the strategic interactions among firms producing heterogeneous products. We tackle this complexity via an agentbased microeconomic model of the US market for personal vehicles. We calculate Nash equilibria among credits-trading strategies in a variety of scenarios and regulatory models. We find that while cap-and-trade results improves efficiency overall, consumers bear a disproportionate share of regulation cost, as firms use credit trading to segment the vehicle market. Credits trading volume decreases when firms behave more strategically, which weakens the segmentation effect