We model the firm's objective as a function of output and environmental ethics. The cost of emission increases with production and is weighted by firms’ environmental ethics, leading firms to endogenize the optimal emission-output level. Firms with higher environmental ethics have higher marginal financial output and emit less because of the higher emission cost. More importantly, we argue that the one-size-fits-all carbon pricing is not optimal. Instead, carbon emissions should be priced based on the efficiency of the emission. Given a fixed carbon cap, switching to efficiency-based carbon pricing increases social welfare. Using emission data from 1995 to 2020, we provide empirical evidence to support the theory.