Cyprus will implement a reduced carbon tax on fuel starting June after the European Commission rejected requests for postponement.
The tax will increase fuel prices by 3-4 cents per liter, rather than the initially planned 6-8 cents, following negotiations with EU officials.
According to information obtained by Phileleftheros, the European Commission informally notified Cyprus that suspending the carbon tax implementation would result in the loss of €50-60 million from the Recovery Fund. However, the Commission has responded positively to Cyprus’s request to reduce the tax by 50%.
The Ministry of Finance is preparing legislation to impose the reduced carbon tax for an 18-month period. The bill is expected to be approved by the Council of Ministers in the coming sessions and submitted to Parliament in June.
For 2026, the green tax was originally planned to increase by an additional 10 cents per liter, but with the 50% reduction, next year’s environmental fee will likely be around 5 cents. By the end of 2026, fuel prices will have increased by a total of 8-9 cents per liter.
When the European Emissions Trading System is implemented across Europe in 2027, increasing fuel costs by 18-20 cents per liter, Cyprus will be able to deduct the green tax paid during 2025-2026. This will result in a net price increase of approximately 10-12 cents per liter in 2027.
The government will also announce compensatory measures including subsidies for vulnerable population groups and vehicle replacement schemes.
Additionally, a waste disposal tax will be reduced from the initially proposed €35 per ton to €10 per ton, resulting in an estimated annual cost of €22 per household (about €1.70 per month). A water green fee of €0.01 per cubic meter has also been approved.
A tourist accommodation tax of €2.50 per night in hotels is expected to be implemented in 2026, though this is not included in the Recovery Fund commitments.
