Preparation and implementation of green taxation reform in Cyprus

Cyprus needed technical support to define several options for a targeted environmental tax reform to address the main environmental and climate challenges of the country. After 16 months of implementation, the Cypriot Ministry of Finance was ready to launch a legislative initiative for a revenue-neutral environmental tax reform, while also proposing measures to dampen the effects of the proposed reform for households and businesses.

Context

Cyprus is one of the most vulnerable regions in Europe in terms of climate change consequences.

According to the Country Report for Cyprus 20201, Cyprus is among the Member States with the highest greenhouse gas emissions per capita. Among the EU-27 MS, Cyprus ranks second highest in municipal waste per capita generation. Moreover, according to the National Strategy for the Management of Municipal Waste, promoting separate collection, increasing sorting at source, reuse, recycling, and significant reduction of landfilled waste are key priorities. Also, Cyprus has been suffering from water scarcity over time and the situation is worsening because of climate change.

Support delivered

The selected private consultant provided the Cypriot Ministry of Finance with a report on best practices at EU level on selected environmental taxes, a report on the assessments of the tax base and revenues, environmental/behavioural impacts, proposals for the essential elements of the forthcoming draft legislation putting in place the environmental tax reform, a consultation event with various stakeholders and recommendations for measures to dampen the social impact of this reform. A conference with stakeholders was organised in Nicosia on 22 June 2022 to discuss the reform options and their potential environmental and social impacts.

Results achieved

After the end of the project, the Cypriot Ministry of Finance was able to select from the developed reform options and proposed to the Parliament a couple of targeted measures to address the environmental challenges identified and to deliver on the respective target and milestone defined in the national Recovery and Resilience Plan (RRP). Over the medium to long term, the project should contribute to a reduction of C02 and other greenhouse gas (GHG) emissions, a better use of materials (less waste) and water resources, and environmentally friendlier consumer’s and producers’ behaviour.

More about the project

You can read the documents related to the project here: