A spatial econometric analysis of the relationship between institutional structure and the environment: Evidence from EU countries and Turkey

The creation of a sustainable environment, ensuring the continuity of ecological life, preserving biodiversity, and combating climate change, along with addressing the climate crisis and the associated environmental problems, which have become one of the most important global issues of today and the future, is of critical importance. Within this framework, the study examines the effects of institutional structures on carbon dioxide emissions, which are considered the main determinant of environmental pollution, within a spatial context. For this purpose, a panel dataset covering 24 European Union countries and Turkey for the period 2002–2023 was utilized, and a institutional quality index was constructed using six governance indicators through Principal Component Analysis. In line with the study's objectives, empirical analyses were conducted employing Static and Dynamic Panel Spatial Models, with estimations performed using the DSDM approach. The results indicate that carbon emissions exhibit positive spatial dependence across countries, implying that continent-wide emission strategies generate spillover effects. Institutional quality was found to reduce emissions both directly and indirectly through spatial effects, suggesting that institutions create feedback effects that lower emissions in both the host and neighboring countries. The results also show that economic growth directly increases carbon emissions; in contrast, growth in neighboring countries reduces the emission level of the relevant country. Urbanization has a mitigating effect on carbon emissions both directly and spatially, whereas fossil fuel-based energy production has an amplifying effect on emissions in both dimensions. Based on these findings, policies aimed at strengthening institutional structures, supporting sustainable urbanization, and promoting the use of renewable energy should be emphasized.