Renewable Investments, Environmental Spending, and Emissions in Eastern Europe: A Spatial-Economic Analysis of Management and Policy Decisions Efficiency

The transition to a low-carbon economy is a key challenge for Eastern Europe, where economic growth, energy investments, and emission reduction policies interact in complex ways. This study employs a spatial econometric approach to assess the effectiveness of renewable energy investments and government environmental spending in mitigating CO2 emissions across the region. Using panel data and spatial Durbin models (SDMs), we identify significant spillover effects in emissions reduction, revealing those environmental policies in one country influence neighboring regions. The results indicate that renewable investments have a positive but localized impact on emissions reduction, whereas government environmental expenditure exhibits diminishing returns beyond a threshold of 0.01 GDP. Threshold regression analysis confirms that excessive spending may lead to inefficiencies, reversing its expected benefits. Additionally, stochastic frontier analysis (SFA) highlights disparities in energy efficiency, with some countries demonstrating stronger optimization strategies than others. These findings underscore the importance of policy coordination and targeted investment strategies to enhance the effectiveness of decarbonization efforts. Strengthening regional cooperation and optimizing environmental expenditure allocation can significantly improve sustainability outcomes in Eastern Europe.