During the programming period 2014-2020 the sustainability transition represented a key pillar of the EU Cohesion Policy. However, the bulk of extant studies still investigates the impact of such regulatory framework on socio-economic growth, neglecting its contribution to achieving environmental targets such as carbon abatement. This study aims to fill this gap, by analysing the effects of green Cohesion Policy funds in terms of PM2.5 reduction across municipalities with a heterogeneous level of territorial capital in Italy.

Through the application of panel Spatial Durbin Models (SDM), the study highlights that such programs of financial support display both a significant direct and indirect effect in municipalities characterized by a high economic capital. Indeed, funds targeting carbon abatement tend to reduce PM2.5 concentration levels both in the municipalities where such projects are implemented and in the neighbouring administrative units. This contribution rather shows how these green funds are associated only with significant spillovers in the cluster of Italian 2 municipalities exhibiting a strong presence of Tourism infrastructures.

The study does not find either significant direct or indirect effects in the municipalities mainly located in the Centre-South of Italy with high levels of human capital. The study also discusses how these findings might be related to the local institutional capacity and to the capability to select and implement projects actually contributing to carbon abatement.