It does, but the question is do "people" know that. I'd wager a good chunk of them haven't spent a second thinking about it. It's easier and happier to pat yourself for dropping your waste into the "right" bin and move on.
> People know big cars pollute. They don't care.
I don't think it's that simple. I think there's a strong consensus that "pollution" is bad, so resistance morphs into a denial that a particular thing is a pollutant. Restricting the discussion to CO2 for simplicity: if someone thinks global warming is a hoax, they'd deny that their car pollutes the air because they "know" CO2 doesn't cause any harm.