16/05/25

CYPRUS: Cyprus rethinks EU green taxes to avoid double whammy on water, fuel

As published on: cyprus-mail.com, Friday 16 May, 2025.

The government is pursuing a full postponement of payment of so-called “green taxes” by Cyprus, according to recent statements of President Nikos Christodoulides on the matter.

Negotiations to officially alter the terms of the European Union’s recovery and resilience (R&R) funds vis-à-vis the country, to which the taxes are pegged, are at their final stage, Christodoulides revealed on Omega TV earlier this week, saying that, if needed, Cyprus would forgo some funding.

Environmental or green taxes were slated to be imposed in May in order to accelerate the EU’s green transition towards more sustainable infrastructures and energy production.

In April certain measures set to affect Cyprus had already been postponed, according to the finance ministry’s permanent secretary Andreas Zachariades, who had said a carbon tax on fuels was to be delayed until the summer, and an overnight-stay levy had been pushed out to 2026, and partly detached from conditions for receipt of recovery and resilience funds from the EU.

In his recent statements the president said that the commission was currently processing two scenarios: official postponement of the taxes, or acceptance of a small partial payment. An answer is expected from the EU by the end of the week.

“Since the Cyprus government is behind on its [green] goals, the [EU] Commission requested that within the [R&R] funding framework certain goals be achieved,” Christodoulides recalled.

“I am cognisant of the burden for people [and] I am prepared to lose some money from the R&R so as to not impose price hikes on people.”

Within the EU as a whole, green taxes include taxes on energy, transport, pollution and resources, as well as on electricity used for transport and other purposes (such as heating), and on fuel oils, including natural gas (classed by the EU as an interim fuel) and coal.

The EU Commission had published its green taxation measures as part the ‘Fit for 55’ Package which was to set the member states on the path to a greenhouse gas emissions reduction of 55 per cent by 2030 compared to 1990 levels and, ultimately, climate neutrality by 2050.

Twenty-three European countries currently impose a carbon tax on fuels, ranging from less than €1 per metric ton of carbon emissions to more than €100 in Sweden, Liechtenstein and Switzerland.

Cyprus is currently committed to a 24 per cent reduction of greenhouse gas in non-ETS emissions by 2030, relative to 2005. However, in March this year the country’s greenhouse gas concentration hit a historic high.

Critics of green taxation in Cyprus and other EU states had argued that while the green transition is necessary, the taxes would undermine competitiveness and lead to untenable price hikes for both businesses and consumers.

The most hard-hitting effect for the island’s residents was expected to be a carbon tax on petrol and diesel, which would immediately increase their price by 5.95 cents per litre and reach an increase of 10 cents by 2026. Other taxes in the books included a levy on water, waste management and overnight stays.

Additionally, compulsory participation in the European Emissions Allowance Market System (ETS2), was estimated to lead by 2027 to an overall increase in fuel costs of around 18 cents per litre.

The Cyprus Consumers’ Association had called for delaying the taxes until it became clear whether or not the public could afford them.

Compensatory measures for residents were supposed to be implemented hand-in-hand with taxation which was estimated to raise a revenue of €70 million over 18 months. These were to include subsidies for vulnerable groups and vehicle replacement schemes.

Tags

Cyprus Green taxes EU