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Abstract

A substantial fraction of the production in the emerging economies satisfies the consumption in the developed countries. This causes the notorious carbon leakage problem where the embodied carbon emissions in exports are not counted in the traditional territorial production-based emission accounting (PBA). We calculate the consumption-based emissions using latest available Eora data in a multiregional input–output (MRIO) model and then perform fixed effect and random effect panel regressions, dynamic panel regression, and heterogeneous panel regressions using the PBA data and consumption-based accounting (CBA) obtained from the MRIO model. The results show that the inverted-U-shaped Environmental Kuznets Curve (EKC) does not exist for CBA. Indeed, results obtained in this paper show that the consumption-based EKC is linearly increasing.