In this paper, we first test the validity of the Environmental Kuznets Curve (EKC) hypothesis, using a large sample of approximately 190 advanced and developing countries, over a period of 34 years (1989- 2022). We find that (CO2) emissions respond positively to increasing income per capita, up...

Within a two-country model, this paper identifies a novel emission leakage channel that is caused by moral behavior of (atomistic) consumers. In a non-cooperative emission tax game between the countries, the leakage effect lowers the governments’ marginal benefit of emission taxation, so...