The impact of climate change will hit Cyprus’ economy, a study released on Tuesday said, projecting that as much as €29 billion will be lost from the island’s gross domestic product by 2050 unless action is taken.

The study, by the Economics Research Centre of the University of Cyprus (UCy), assessed “the macroeconomic impact of physical and transition risks of climate change for the Cypriot economy”.

It examined how climate change affects the economy, focusing on physical risks from higher temperatures and environmental degradation.

Using a model developed by UCy, the study linked emissions, temperature, productivity and sectoral activity through an energy sector and a climate module.

Climate change appears to create a productivity shock that spreads through supply chains, household demand and fiscal channels.

The experts analysed three scenarios derived from the Intergovernmental Panel on Climate Change: business-as-usual, middle-of-the-road, and sustainability.

The results showed sizable, long-run declines in GDP, investment and consumption, with cumulative discounted GDP losses under business-as-usual reaching about €29 billion by 2050 and €162 billion by 2100, versus €4 billion and €23 billion under sustainability.

Tourism, financial services and agriculture are particularly affected, with large implications for the external balance and tax revenues – for example forgone VAT from tourism.

Under the business-as-usual scenario, tourism stands to lose approximately €3.8 billion by 2050; under the middle-of-the road scenario the losses would be €2.4 billion; and under sustainability the losses would be limited to €500 million.

In the financial services sector, the losses under the three respective scenarios would come to €2.3 billion, €1.5 billion and €300 million.

In agriculture, GDP loss under the respective scenarios is projected at €500 million, €250 million and €60 million.

The study said that timely mitigation measures – provided they are well designed – can significantly restrict GDP losses both overall and for individual sectors.

The air transport sector represented the highest emissions multiplier for greenhouse gas emissions, while electricity production was the largest single emitter of sulphur oxides.

“Given that Cyprus must reduce its sulphur oxides emissions by 45 per cent during the 2020 to 2029 period, decarbonisation in this sector is a priority,” the authors stressed.

The study calls for further measures to decarbonise electricity generation, for example by expanding the use of renewables and importing natural gas.