Industrial transformation and pollution governance in the digital era: environmental externalities from Thailand’s Eastern Economic Corridor

Purpose This study examines the nexus between industrial transformation and environmental sustainability in Thailand’s Eastern Economic Corridor It evaluates industrial technical efficiency relative to air pollution externalities and assesses the efficacy of existing governance frameworks. Design/methodology/approach A mixed-methods design combines a normalized output distance function with stochastic frontier analysis, using gross regional product as the desirable output, capital and labour as inputs, and AIR and PM10 as undesirable outputs. A Translog model provides robustness testing, while the rational implementation model assesses pollution-governance implementation, monitoring, coordination, and accountability. Findings Technical-efficiency scores are close to unity, but inefficiency is not statistically distinguishable from zero. The normalized Cobb–Douglas model shows a significant positive relationship between AIR/GRP and production, while PM10/GRP is insignificant, indicating heterogeneous pollution effects. Translog sensitivity results are consistent, with model-selection tests favouring the more parsimonious Cobb–Douglas specification. Governance analysis identifies persistent challenges in institutional coordination, monitoring credibility and accountability. Practical implications The study advocates shifting from “Command-and-Control” to market-based instruments (MBIs), such as carbon taxes and emission trading schemes, alongside IoT-based real-time monitoring to reduce asymmetric information. Social implications Persistent environmental pressures may generate social and human-capital costs that are not fully reflected in conventional measures of regional economic performance, underscoring the importance of integrating environmental protection with industrial and regional development. Originality/value This study offers an integrated framework combining normalized output-distance analysis, stochastic-frontier diagnostics, robustness testing and qualitative governance assessment to evaluate sustainable industrial transformation in an emerging economic corridor.