A new study by the University of Cyprus Economics Research Centre (ΚΟΕ) outlines the scale of economic damage Cyprus may face as temperatures rise and environmental degradation accelerates. The report, published on Tuesday, warns that climate change could severely undermine the island’s economic structure and long-term stability unless mitigation policies are implemented rapidly.
The study evaluates physical climate risks and quantifies their impact on economic output, identifying which sectors are most exposed. It notes that air transport and electricity generation are primary sources of direct emissions, while areas such as food manufacturing exert strong indirect environmental pressures through their supply chains.
Three scenarios and their economic cost
The ΚΟΕ assessment models three different climate pathways. Under the Business as Usual scenario, cumulative discounted GDP losses could reach €29 billion by 2050 and €162 billion by 2100. The report stresses that these estimates reflect both the physical impact of climate change and the vulnerabilities embedded in the structure of the Cypriot economy.
Sectoral losses are also substantial. The study estimates that tourism could lose about €3.8 billion by 2050, financial services around €2.3 billion and agricultural output approximately €0.5 billion under the Business as Usual pathway. Losses are significantly lower under the Middle of the Road scenario, while the Sustainability scenario reduces the damage to a fraction of current projections, with total GDP losses limited to €4 billion by 2050.
Environmental indicators signalling growing pressure
The analysis highlights several areas where Cyprus diverges from EU standards. Air transport in Cyprus has the highest greenhouse gas emissions multiplier, reaching 3,129 tonnes per million euro of output in 2018, a rise of more than 100 percent since 2010. The electricity sector remains the dominant producer of sulphur oxides, generating 10.8 tonnes per million euro of output, and continues to be a major focus of EU emissions reduction requirements.
In contrast, maritime transport has recorded the largest improvement in environmental performance, although its multipliers remain below those of the EU average.
Overall, most EU economies maintain lower pollution intensity than Cyprus, a difference the study attributes to more advanced technology and more efficient production processes.
Mitigation policies and fiscal considerations
The ΚΟΕ also examines the effectiveness of mitigation policies equivalent to one percent of GDP until 2030. These include carbon taxation, public investment in clean energy infrastructure and targeted incentives to accelerate the adoption of renewable technologies. According to the researchers, such measures could significantly narrow the gap between climate scenarios, reduce long-term losses and strengthen the resilience of the economy.
Policy implications and priorities
The findings point to the need for sector-specific interventions. The study notes that air transport requires immediate attention due to the accelerating rise in its emissions multiplier. It also underlines the importance of continuing the decarbonisation of electricity generation, particularly given Cyprus’ obligation to reduce sulphur oxide emissions by 45 percent during 2020 to 2029.
A broader structural challenge concerns the way different sectors contribute to pollution both directly and indirectly. The ΚΟΕ argues that policy design must reflect the full chain of economic interactions rather than focus solely on the most visible emitters.
A narrow window for action
The study concludes that Cyprus has a limited opportunity to prevent long-term economic damage on an unprecedented scale. In its view, the Sustainability scenario is achievable only through early, well targeted and fiscally coherent interventions. Without them, the current trajectory risks locking the country into decades of rising costs, lower output and increasing vulnerability to climate shocks.
Source: CNA