Leveraging Economic Efficiency for CO2 Reduction and Energy Transition: The Role of Climate Vulnerability, GVC Integration, Digitalization and Energy Intensity

This study investigates the nonlinear effects of economic efficiency on CO2 reduction and energy transition, with a particular focus on advancing SDGs 7, 9, and 13. Using panel data from 61 countries, the analysis applies a slacks‐based measure of directional distance functions (SBM‐DDF) and threshold regression models to explore the complex relationship between economic efficiency, CO2 emissions, and energy transition. Key findings reveal that while economic efficiency has generally improved over time, significant regional disparities remain. Improvements in economic efficiency lead to substantial reductions in CO2 emissions and promote energy transition, but the relationship is nonlinear, influenced by factors such as climate vulnerability, global value chain (GVC) integration, digitalization, and energy intensity. Heightened climate vulnerability and deeper integration into GVC amplify the emission‐reducing effects of economic efficiency, whereas increased digitalization initially attenuates its decarbonization impact before shifting toward a suppressive effect, while concurrently reversing its influence on energy transition from inhibitive to facilitative. Furthermore, under higher energy intensity, economic efficiency exerts a more pronounced influence on both carbon abatement and the acceleration of energy transition. The study also highlights heterogeneity across income levels, with upper‐middle‐income countries experiencing stronger positive effects. These findings emphasize the need for tailored, context‐sensitive policies that account for regional and sectoral dynamics to optimize economic efficiency for sustainable development.