This study examines the integration of green and digital priorities—termed the Twin Transition (TT)—within the Smart Specialisation Strategies (S3) of European Union (EU) regions during 2014–2020. Aligning with the EU's European Green Deal and Digital Compass, the research explores how regions incorporated these priorities into their innovation strategies and assesses the economic impacts, particularly amid the COVID-19 pandemic. The analysis reveals significant variation in the adoption of green and digital priorities across regions. Utilizing a growth convergence model, the study finds that digital technologies positively influenced productivity in less developed regions pre-pandemic; however, this effect diminished post-pandemic, benefiting only low-productivity areas.

Conversely, green policies generally posed short-term economic challenges, with negative effects on overall productivity, though some positive impacts were observed in lowerproductivity regions. The combined effects of the twin transitions mirrored these trends, with positive outcomes for less productive regions but negative impacts overall. The findings underscore the need for a balanced approach to regional development, viewing digital and green policies as complementary.

Policymakers are encouraged to tailor strategies to specific regional contexts, investing in digital infrastructure and skills for immediate economic benefits, while supporting green initiatives for long-term sustainability. Strong governance and stakeholder engagement are essential to promote sustainable and equitable regional growth amid emerging challenges.