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Green Taxes Are Coming To Cyprus—And Everyone Will Feel The Cost

Cyprus is embracing the green transition with a new wave of environmental taxes, aiming to slash greenhouse gas emissions by 32% by 2030. While the shift is considered necessary and legitimate, it’s also set to hit the pockets of households and businesses nationwide.

Experts, officials, and economists agree: green taxes are critical to bridging the cost gap between fossil fuels and cleaner alternatives. But concerns are mounting over how these levies will affect competitiveness, and whether consumers can absorb the shock.

The Carbon Price Surge: What’s Coming

The most impactful measure is a carbon tax on petrol and diesel, expected to initially raise pump prices by 5.95 cents per liter, increasing to 10 cents by 2026. That’s just the start.

By 2027, the EU’s new Emissions Trading System (ETS2) will come into play, potentially pushing fuel costs up by another 18 cents per liter.

Add to this:

  • A new water tax of €0.01 per cubic meter has already been approved by the Council of Ministers.
  • A waste fee tied to the “pay-as-you-throw” scheme.
  • A planned overnight hotel fee has now been postponed to 2026.

These taxes, part of Cyprus’s Recovery and Resilience Plan, were originally due by November 2023, but have been delayed until May 2025, according to Finance Minister Makis Keravnos.

However, carbon tax implementation is now expected this summer, pending the finalization of compensatory measures, said Andreas Zachariades, the finance ministry’s permanent secretary.

What Will It Cost—And Who Pays The Most

According to a new University of Cyprus Centre for Economic Research report, green taxes are set to dent household well-being, particularly for lower-income families.

Key findings:

  • Fuel and water taxes will increase household spending by 0.37% on average.
    Lower-income households will feel a disproportionate impact.
  • The state stands to gain €54 million annually from fuel taxes—€33 million from households and €19 million from businesses.
    The overnight hotel fee could bring in another €34 million per year.

The Government’s Pledge: Balance Pain With Support

Despite the burden, the finance ministry has committed to a fiscally neutral policy—meaning all revenue from green taxes will be offset by equivalent support measures.

Planned compensations include:

  • Subsidies for vulnerable groups.
  • Incentives to replace vehicles with greener models.
  • Support schemes for businesses adapting to sustainable practices.

By 2026, total revenue from green taxes is expected to reach €70 million, matched by an equal value in compensatory measures, according to Zachariades.

Supporters Say It’s Necessary. Critics Want A Delay.

Economist Tasos Yiasemides said the cost of transformation is high, but stressed the importance of long-term sustainability and the government’s plan to cushion the blow: “The state’s commitment to a fiscally neutral policy and the adoption of support measures will help protect consumers and businesses.”

However, the Cyprus Consumers’ Association remains unconvinced. President Marios Drousiotis called for delaying implementation until economic conditions allow.

Even a 1 cent fuel increase, he warned, would cost consumers €9 million a year. While he acknowledged the ripple effect on other goods, he noted that price increases may not be prohibitive—yet.

The Bottom Line

Cyprus’s climate goals are ambitious—and green taxes are part of the cost of getting there. But balancing environmental responsibility with economic fairness remains a delicate act.

As the green transition gains momentum, the real test will be whether the government can deliver on its promise: a fairer, cleaner future that doesn’t leave the most vulnerable behind.

Bank of Cyprus Upgrade Signals Fresh Optimism For Greek And Cypriot Banks

Regional Banks Enter A More Favorable Cycle

Bank of Cyprus and Eurobank are well positioned to benefit from a renewed re-rating of Greek and Cypriot bank stocks, according to Cyprus-based investment firm Roemer Capital, which upgraded Bank of Cyprus to a buy rating and reaffirmed its positive view on Eurobank.

The firm cited easing geopolitical tensions, resilient economic growth in Greece and Cyprus, lower funding costs and Greece’s expected transition to developed-market status as the main factors supporting the sector.

Roemer Capital also lowered its cost of equity assumptions, updated its forecasts following first-quarter 2026 results and extended its valuation horizon to the end of 2027, raising target prices across its banking coverage.

Bank Of Cyprus Gets The Largest Upgrade

Bank of Cyprus received the biggest revision, with Roemer Capital upgrading the stock from hold to buy and setting a target price of €11.10, implying potential total upside of 27%.

The firm highlighted the bank’s strong capital generation, profitability and projected 100% dividend payout, describing it as the strongest capital-return story among the banks under coverage. Roemer Capital maintained its buy rating on Eurobank, assigning a target price of €4.90 and forecasting potential upside of 28%. The report said the bank is well placed to benefit from loan growth, improving operating performance and merger-and-acquisition synergies.

National Bank of Greece and Piraeus Bank also retained buy ratings, with expected returns ranging from 25% to 36%. Optima Bank was upgraded to buy, while Alpha Bank remained at hold on valuation grounds.

Why Growth Still Sets The Region Apart

According to Roemer Capital, Greek and Cypriot banks continue to benefit from stronger economic fundamentals than many western European peers. The report pointed to faster economic growth, healthier balance sheets, low levels of non-performing exposures, capital ratios approaching 20% and strong customer deposit bases.

Analysts expect performing loans across the sector to grow at a compound annual rate of 6% to 8% through 2028, supported by private investment, digitalisation, green manufacturing, supply-chain expansion and a gradual recovery in household lending.

The report also said the conclusion of lending under the EU Recovery and Resilience Facility is unlikely to materially affect credit growth, as banks have already shifted back towards traditional commercial lending. Roemer Capital expects Euribor to remain between 2.2% and 2.5%, a level it believes should support both lending activity and net interest margins.

Geopolitics, Valuation And Market Structure Support The Case

The report said improving geopolitical conditions have strengthened the investment outlook, noting that Brent crude prices have largely returned to pre-war levels while Greek government bond yields have stabilised at around 3.5%. Although geopolitical risks remain, Roemer Capital believes the likelihood of a major inflationary shock or significant pressure on bank profitability has eased.

Another important catalyst identified by the firm is Greece’s expected promotion to developed-market status by FTSE Russell, STOXX and MSCI over the coming months.

According to the report, the reclassification should improve liquidity and attract a broader base of international investors. Roemer Capital also said Euronext’s acquisition of the Athens Exchange is expected to strengthen market infrastructure and increase international visibility, particularly for Bank of Cyprus and Optima Bank.

The firm noted that Bank of Cyprus has already benefited from its Athens listing, with average daily trading value increasing from less than €400,000 before its September 2024 move to nearly €6 million afterwards.

Economic Momentum Remains A Core Tailwind

Roemer Capital said both Greece and Cyprus have moved beyond post-crisis recovery and are now supported by private-sector-led growth. For Cyprus, the report highlighted recent tax reform and efforts to simplify the legal and regulatory framework, while also noting that limited foreign banking competition continues to support domestic lenders.

Overall, Roemer Capital expects Greek and Cypriot banks to remain well-positioned for profitable loan growth over the coming years.

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