At the initiative of Cyprus and a group of other EU member states, a reference has been added to the European Council Conclusions calling for a review of the framework governing the new EU Emissions Trading System (ETS2) for road transport and building heating. Stressing the need for a balance between climate goals and competitiveness, Nicosia is seeking a more flexible and socially fair approach for small and island states, as well as a postponement of ETS2’s implementation until 2030.
Cyprus, already heavily burdened by the existing emissions trading system for industry and energy due to its reliance on fossil fuels, is expected to face additional pressure with the launch of ETS2, which extends the scheme to road transport and heating from 2027.
Following the intervention of the group of member states including Cyprus, the Council Conclusions now call on the European Commission to propose additional measures to stabilize prices, taking into account the social and economic impact.
Under ETS2, fuel companies will also be required to purchase CO2 emission allowances. The price of these allowances will be determined through market auctions, and the cost is likely to be passed on to consumers.
According to government sources, the core issue for Cyprus is striking a balance between the EU’s climate ambitions and economic competitiveness.
The Republic of Cyprus, the same sources noted, supports the transition to a green economy, but ‘with realism and social fairness.’ It does not question the ambition of the targets but calls for a more flexible and practical approach, particularly for small, island, and peripheral states such as Cyprus.
Cyprus believes that the planned launch of ETS2 in 2027 should be reconsidered. Together with other countries – including Poland, Italy, the Czech Republic, Malta, Bulgaria, Romania, Slovakia, and Estonia – it proposes suspending or delaying the system’s implementation until 2030. This would allow time for technical improvements to the mechanism, for the Social Climate Plans to be implemented in advance to support vulnerable households, and for energy prices and inflation to stabilize.
According to the same sources, as an island state, Cyprus places particular emphasis on the need for energy storage capacity, support for small and medium-sized enterprises (SMEs) adapting to green requirements, stronger energy interconnections with the European grid, and the development of renewable energy within the island’s geographical constraints.
At the same time, Cyprus is calling for references to the specific challenges faced by islands, such as increased emissions caused by natural disasters and limited CO2 absorption capacity due to small forest coverage.
Position on the 2040 Emissions Target
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Cyprus supports setting a quantified emissions reduction target for 2040, provided that it is realistic and achievable, based on detailed impact assessments for each member state and accompanied by support and funding mechanisms.
‘Cyprus’s approach is practical: to advance the green transition, but in a way that does not overburden citizens or undermine the competitiveness of the European and Cypriot economy,’ the sources said.
The EU has established the Social Climate Fund, which will finance energy-efficient home renovations, clean transport, and subsidies for the energy transition of vulnerable households.
Cyprus stresses that the fund must become operational first so that the introduction of ETS2 does not burden households and small businesses without adequate preparation.