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As the European Union (EU) strives for climate neutrality under the European Green Deal, balancing economic growth with ecological efficiency (Eco-efficiency) amid regional disparities remains a critical challenge. This study evaluates the Eco-efficiency of 27 EU countries from 1995 to 2023. For this purpose, a dynamic two-stage network slack-based measure (DNSBM) model is employed to assess production and treatment stages with intertemporal carry-over effects, and a spatial Durbin model (SDM) is applied to capture spatial spillovers and regional heterogeneity. Efficiency scores reveal a persistent East–West divide, with several Western economies operating near the frontier and several Eastern economies lagging. Spatial econometric analysis further indicates that the determinants of Eco-efficiency operate through regime-dependent spillover channels rather than uniformly across the EU. The study contributes by (1) coupling dynamic two-stage network DEA with spatial econometrics to jointly model circular-economy carry-overs and cross-border interdependence; (2) decomposing direct, indirect, and total effects of policy and structural drivers under regional heterogeneity; and (3) deriving region-specific policy guidance for an equitable Green Deal transition.
Amir Hossein Nimjerdi (2026) studied this question.