“It is possible to switch Cyprus to a low-carbon economy in the medium to long term, in line with the broad European Union sustainability strategy, thereby promoting employment and economic growth while at the same time achieving significant environmental improvements,” Theodoros Zachariades, deputy lecturer at the department of environmental science and technology of the Cyprus University of Technology, and academic advisor of the University of Cyprus’s economic research centre, said.

Zachariades said that while his proposal, included in a paper titled “Don’t let a crisis be wasted – Proposal for a green tax reform in Cyprus,” could be revenue-neutral for the government, it could also help enterprises reduce costs.

“The proposed reform can be gradually implemented with a gradual increase of the tax in a five year-horizon,” Zachariades said adding that a proportional gradual decrease of non-wage labour cost, such as social insurance contributions by employers and employees, could accompany the increase in the tax. “This way, consumers and companies will have time to adjust to expected increased fuel prices as well as their consumption and production patterns. Future decisions with respect to energy investment will take into account that energy intensive behaviours will be cost more compared to today”.

Zachariades added that the amount of the carbon levy could “which has to be determined following a careful study, will not increase excessively retail fuel prices given that global oil prices have already dropped considerably in the past months”.

While the tax could apply to fuel across all economic sectors, it could also apply to other resources such as water as well as other environmentally harmful activities including waste production, air pollution, use of fertilizers and pesticides.

The introduction of a green tax could in addition reduce Cyprus’ dependency on energy imports, improve air quality and contribute to climate change adaptation, Zachariades said, adding that several case studies in Europe have demonstrated that shifting taxation from labour to environment is less detrimental to employment and growth than other direct and indirect taxes. Denmark, Finland, France, Germany, the Netherlands, Portugal, Sweden and the United Kingdom already adopted environmental fiscal reforms while Ireland introduced partial measures in the same direction (carbon tax, plastic bag levy), and the government of Italy is also at an advanced stage of adopting similar measures, he said.

A committee on green tax reform in Cyprus, comprising of representatives of the finance ministry, business groups and other non-governmental organisations and academics, should therefore be formed and work on revenue – neutral environmental fiscal reforms within six months, Zachariades said.

Source: Cyprus Mail