In this paper, we introduce polluting emissions in the sequential bilateral oligopoly model with a productive sector of Julien and Tricou (2012), which extends the bilateral oligopoly model of Gabszewicz and Michel (1997). We define an equilibrium concept, namely the Stackelberg Cournot equilibrium with emissions. By modelling emissions as a negative externality, we show notably that the leader pollutes more (less) than her direct follower in the presence of strategic substituability (complementarity). Thus, we study two kinds of regulation to control the levels of emissions, namely three taxation mechanisms, and a permits market. Then, we compare the two kinds of policies, and we show that preferences matter, i.e., the effectiveness of economic policy also depends on preferences.