Cyprus continues to lag in the development of infrastructure, policies, and other measures to mitigate the impacts of climate change, said the Cyprus Fiscal Council.
“Estimates of the impact at the fiscal, macroeconomic, and social level should be a cause for concern,” said the Fiscal Council, highlighting not only environmental but also political risks of non-compliance with EU obligations.
In a note ahead of the 2026 state budget and 2026–2028 Medium-Term Fiscal Framework (MTFF), the Fiscal Council warned that Cyprus faces significant risks from physical climate impacts. Some progress in covering financing needs is expected from the proposed green taxation, but this will not adequately address the country’s high sensitivity and exposure to climate threats.
Cyprus continues to lag in climate adaptation infrastructure and policies after years of underinvestment, the Council added. The National Energy and Climate Plan (NECP) is described as "unambitious, vague, and lacking clear implementation timelines", with many targets either delayed or deteriorating.
Financially, the estimated annual cost of the EU Emissions Trading System (ETS2) is €160 million, but this assumes full NECP implementation.
"The cost of inaction is expected to be far higher", the Council highlighted, potentially leading to tax hikes or politically difficult spending cuts.
The Council also pointed to growing concerns in credit markets, as rating agencies increasingly integrate climate risks and ESG (environmental, social, governance) criteria into their assessments.
According to European Central Bank data, up to 70% of Cypriot bank clients are at high risk from climate change. This could restrict access to credit, raise borrowing costs, and amplify social inequalities, warned the Council.
Rising energy, food, healthcare, and social protection costs will disproportionately affect households, threatening social cohesion, it added.
The Council called for a substantial increase in national investment, not just to meet EU targets, but to protect the economy and society. It urged strict timelines, measurable progress indicators, better coordination among Ministries, and a shift from viewing climate expenditure as a cost to seeing it as an investment in resilience. Delays will only multiply risks and future costs, it warned.
Source: CNA