Slow but Tangible Progress: The Economic Dividends of Decarbonisation in Cyprus

Instability in global energy supply and fluctuating international oil and gas prices push European countries to reduce fuel import dependency through energy saving measures and faster deployment of renewable energy. Calculating the fuel import bill, as usually done to illustrate the impact of the continent’s energy dependency, offers only a partial picture of the challenge. This paper applies an economy-wide assessment for Cyprus, a country which greatly relies on imported fossil fuels but has made some progress towards decarbonisation. We combine energy, economic and trade statistics with technical calculations and find that renewables deployed in the last decade have already today contributed to very substantial net benefits of 469 million Euros at 2023 prices, leading to a benefit-cost ratio ranging between 11 and 19. Input-output modelling shows that economy-wide benefits have led to a cumulative additional value added of the order of 1.4 billion Euros’2023 during the decade 2015-2024, with a 0.5-1% GDP increase per year thanks to renewables investments and avoided fossil fuel imports. The approach presented here minimises the uncertainties and assumptions that are necessary to run more sophisticated economic models and can offer credible insights on the economic dividends of decarbonisation policies in any country, contributing also to improved energy security.