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Cyprus promotes environmental tax reform to help fiscal consolidation

06 June, 2014

Cyprus in line with EU targets, prepares a national action plan for green growth, after the approval of the Cabinet, said Minister of Agriculture and Natural Resources Nicos Kouyialis in a speech at a conference about the prospects of environmental tax reform in times of economic crisis. The conference was organized by the European Commission Representation in Cyprus and Cyprus University of Technology.

The new strategy of the Ministry of Agriculture for green growth, will include institutional, social and economic measures that will touch a wide range of sectors and activities such as agriculture, industry, tourism, fisheries, water and mineral resources and forests.

According to the Minister the measures that are processed will aim to provide incentives for efficient resource management and will promote financial and regulatory tools, including both environmental taxation and the abolition of incentives that have negative effects on the environment.

“The project will aim to create green jobs and to stimulate supply and demand of environmentally friendly goods,” the Minister said.

He noted that green taxation is a really effective tool that can contribute to the economy and the environment.

Former Minister of Finance of Germany Hans Eichel explained the ecological tax reform in Germany, pointing out that it is better to increase and broaden taxation and pricing of carbon and energy than any other indirect or direct taxes like value added tax and corporation or income tax.

He referred to the beneficial effects of the ecological taxation to reducing labour cost and creating new working positions as well as to fiscal consolidation in general and the promotion of renewable energy resources.

Chairman of the Council of National Economy of Cyprus Christopher Pissarides said that waste management in Cyprus should be more effective and that the current system does not help the people to recycle.

He also stressed the importance of a single environmental policy, instead of many environmental policies by the different municipalities in Cyprus, pointing out the need for local authorities reform.

The Cypriot Nobelist also said that environmental taxes for electricity consumption will not benefit Cyprus at the current stage, because the Electricity Authority of Cyprus is a state controlled monopoly and has no incentives to use renewable energy sources.

"Environmental taxes in Cyprus before privatization will be a waste of time and will simply add cost to the consumer," he said.

He added that the only thing that can work in Cyprus are further regulations that will focus on green growth and will impose specific percentages for solar and wind energy production by Electricity Authority of Cyprus, thus reducing the production by conventional fuels.