Eco-Innovation in Cyprus

Eco-innovation in Cyprus

EIO Country Profile 2018-2019

Eco-Innovation Observatory

The Eco-Innovation Observatory functions as a platform for the structured collection and analysis of an extensive range of eco-innovation and circular economy information, gathered from across the European Union and key economic regions around the globe, providing a much-needed integrated information source on eco-innovation for companies and innovation service providers, as well as providing a solid decision-making basis for policy development. The Observatory approaches eco-innovation as a persuasive phenomenon present in all economic sectors and therefore relevant for all types of innovation, defining eco-innovation as: “Eco-innovation is any innovation that reduces the use of natural resources and decreases the release of harmful substances across the whole life-cycle”. To find out more, visit www.eco-innovation.eu and ec.europa.eu/environment/ecoap

Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect the position of the European Commission.

Eco-Innovation Observatory

Country Profile 2018-2019: Cyprus

Author: Andreas Mitsios (Deloitte Développement Durable)

Coordinator of the work package: Technopolis Group Belgium

Acknowledgments This document was prepared with significant support from: • Elina Lugbull (Deloitte Sustainability); • Fabio Matagnino (The Cyprus Institute), Anthi Charalambous (OEB).

A note to Readers Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect the position of the European Union. A number of companies are presented as illustrative examples of eco-innovation in this report. The EIO does not endorse these companies and is not an exhaustive source of information on innovation at the company level.

This brief is available for download from https://ec.europa.eu/environment/ecoap/country_profiles_en

Table of contents

Summary 2 Introduction ...... 3 1 | Eco-innovation performance ...... 4 2 | Selected circular economy and eco-innovation areas and new trends ... 8 3| Barriers and drivers to circular economy and eco-innovation in Cyprus ...... 12 4 | Policy landscape in Cyprus ...... 15 REFERENCES ...... 19 ANNEX: Policy strategies and instruments ...... 20

Summary

Despite significant improvement, Cyprus continues to perform poorly in eco-innovation. The country scored only 62 in the 2018 assessment (EU average = 100). Cyprus is heavily behind the EU28 average in eco-innovation inputs and activities and socio-economic outputs. It performs close to the EU average in resource-efficiency outcomes and above the EU28 average in eco-innovation outputs. Eco-innovation in Cyprus is predominantly produced by individual actors – research institutes or enterprises – and there are no distinct and mature eco-innovation sectors. Given the country’s rich natural capital, new developments in renewable energies could also promote eco-innovation activities. Eco-innovation in the field of energy is also driven by efforts to increase energy efficiency; in fact, Cyprus is ranked first in solar DHW per capita1. The agricultural and food industries are also contributing to eco-innovative solutions. Additionally, a number of EC funded research and innovation projects in the field of eco-innovation are currently under implementation. In terms of eco-innovation drivers, there is a wide range of EC-supported funding opportunities for R&D which include eco-innovations. The country is successful in raising EU funds for research. Cyprus also benefits from its significant natural capital in renewable energies: solar and wind. Regarding barriers, the Cypriot economy is heavily dominated by SMEs; hence, it exhibits a lack of sectoral concentration and innovative businesses. Overall, the participation of firms in R&D activities is low. Furthermore, the research activity in Cyprus is often not related to the activity of local businesses. Regarding the environmental reform, despite the technical assistance has been provided to Cyprus on how to reform the civil service structure to improve and simplify environmental licensing and environmental inspections, little progress has been achieved in this direction

1 The Cyprus Institute, Climate Change and Impact, Available at https://www.cyi.ac.cy/index.php/eewrc/eewrc- research-projects/climate-change-and-impact.html

Introduction

Anthropogenic activities, and more and more episodes of Sahara dust being transported to more northern parts of the region, are leading to increases in atmospheric mineral dust and aerosol concentrations. The resulting growth in cases of respiratory illnesses are increasingly seen as serious public health concerns in Cyprus2. Looking in more detail at model results for Cyprus, the projections for climate change show an increase in extremely hot summer days with maximum temperatures exceeding 38˚C for an additional two weeks per year compared to the familiar warm summers3. In addition, the country will experience warm 'tropical' nights with minimum temperatures above 25˚C for an additional one month compared to current conditions. The need for air-conditioning and space cooling, not only during the days but also at night, is likely to increase, causing higher consumption of electricity on the island. Besides, given the ongoing decrease in rainfall observed for the last three decades, climate change in Cyprus will result in additional reductions in rainfall of 10-15% over the 2020 to 2050 period. Thus, the need for both more drinking water and more water for irrigation will result in a growing demand for additional seawater desalination plants and an emphasis on enhancing water-use efficiencies. These climate pressures placed on the society and the well-being of its population can be counteracted with a systemic transformation of production models, implementing core principles of a circular economy. For Cyprus, circular economy is both a challenge and a solution as its island character can create difficulties but also give advantages. While enterprises have lacked the size and capacity to systematically develop innovative processes and new products, there has been a slight growth in eco-innovation efforts, in many cases due to EU financial tools and national investments. This increasing involvement in eco-innovation is due to the new position of Cyprus as a regional hub for climate change research. In June 2018, the government announced the creation of an initiative to coordinate action against global warming across the Mediterranean and support the creation of a EUR 30 million climate-change research centre at the Cyprus Institute in Nicosia4, the nation’s leading multidisciplinary research institution. This initiative will also create a comprehensive plan to reduce Cyprus’s greenhouse-gas emission in line with the 2015 Paris climate accord. A major initiative was established following the 1st International Conference “Climate Change in the Mediterranean and the Middle East: Challenges & Solutions”5, organised by the Cyprus Institute in 2018 in Nicosia and attended by eminent scientists and policy makers from 30 countries as well as leaders of global stature. The principal conclusion of the conference was that regional concerted climate action is urgently needed, leading to the Cyprus government’s Initiative for Coordinating Climate Change Actions in the Eastern Mediterranean and Middle East (EMME), which was launched by the government in March 20196.

2 https://www.cyi.ac.cy/index.php/eewrc/eewrc-research-projects/climate-change-and-impact.html 3 http://weather.cyi.ac.cy/en/climate/climate-change/

4 https://www.nature.com/articles/d41586-018-05528-9 5 https://www.cyi.ac.cy/index.php/component/k2/international-conference-climate-change-in-the-mediterranean-and-the- middle-east-challenges-solutions.html 6 https://www.cyi.ac.cy/index.php/cyi/international-collaborations/cyprus-government-initiative-for-coordinating-climate- change-action-in-the-eastern-mediterranean-and-middle-east.html

1 | Eco-innovation performance

The analysis in this section is based on the EU28 Eco-innovation Index (EcoI Index) for the year 2019. The Eco-innovation index demonstrates the eco-innovation performance of a country compared with the EU average and with the EU top performers. EcoI Index is a composite index that is based on 16 indicators which are aggregated into five components: eco-innovation inputs, eco-innovation activities and eco-innovation outputs as well as environmental outcomes and socio-economic outcomes

Figure 1 EU28 Eco-innovation Index 2019, composite index

Source: EIO, 2019 Cyprus continues to perform poorly in eco-innovation, as illustrated in Figure 1. The country scored 56 in 2019 compared to a score of 45 in the 2017 assessment (EU average = 100). This places the country third from the bottom in the EU28 eco-innovation ranking. This is an improved performance in comparison to the 2017 assessment when it was placed second from last position. Nevertheless, Cyprus remains below several Member States with a small population, such as Estonia, Latvia and Malta. Figure 2 below shows the performance of Cyprus in each of the five components of the Eco- IS composite index. Cyprus significantly lags behind the EU28 average in eco-innovation inputs and activities and socio-economic outputs. It performs close to the EU average in resource efficiency outcomes and above the EU average in Eco-innovation outputs. The paragraphs below analyse the performance of Cyprus for each of the five indicators.

Figure 2 Components of the Eco-innovation index for Cyprus 2019

Source: EIO, 2019

Figure 3 Five sub-components of the Eco-innovation index for Cyprus, 2019

Source: EIO, 2019

• Eco-innovation inputs The eco-innovation input index is based on the national indicators of the government’s environmental and energy R&D appropriations and outlays, R&D personnel, and cleantech investment. Out of the total employment across all industries, employment related to research and development accounts for 0.42%, while the EU average is 1.48%. This represents an increase from 2017, when this was only 0.36% for Cyprus. No early-stage green investments were reported during the period 2016-2019. • Eco-innovation activities The eco-innovation activities index of the Eco-IS is based on the statistics of ISO 14001 certified companies and of enterprises that introduced an innovation with environmental benefits obtained within the enterprise or by end-users. 132 organisations were registered ISO 14001 per million of population in 2018, when the EU average was 172. According to Eco-IS, in 2014, the percentage of firms that introduced an innovation with environmental benefits obtained within the enterprise was 0.18% of all firms (EU average 0.25%). • Eco-innovation output Cyprus scores slightly above the EU average on eco-innovation output, with an index of 108 compared to an EU average of 100. In 2016, only one eco-innovation-related patent was reported, whereas two such patents were reported in 2014. The poor performance reflects the relatively limited available resources and the difficulty of translating research into technological innovation. Nevertheless, Cyprus is a very good performer in eco-innovation-related publications, even with a significant drop from 45.97 publications per million inhabitants in 2014 to 9.26 in 2016. This performance is considerably higher than the EU average (20.53). As regards eco-innovation-related media coverage (measured as the number of hits by a search query), the performance of Cyprus increased compared to the 2017 assessment and scored above the EU average. Specifically, the Cyprus score in 2019 was 0.45 (with a total of 360 hits in a year), which is above the EU average of 0.35. This is an increase compared to 2017 when the country scored 0.37. • Resource-efficiency outcomes The resource-efficiency outcome index is based on combined national statistics on domestic material productivity, domestic water productivity, inland energy productivity, and GHG emissions intensity. Cyprus is positioned below the EU28 average with an overall score of 68 (EU index 100) in 2018, showing a slight increase from 62 in 2016 to 68 in 2018. The country performance in this index is impacted by the relatively high consumption of fossil fuels (hence increased GHG emissions), for uses including the production of electricity. In 2015, material productivity (GDP/DMC) reached 1.51 €/kg (1.45 €/kg in 2013) when the EU average was 2.28 €/kg. In comparison, in Malta material productivity in 2015 was 2.26 €/kg (1.45 €/kg in 2016) and Latvia 1.46 €/kg (0.84 €/kg in 2016). Overall, this indicator has been improving in countries with low population. Water productivity, measured as GDP generated by domestic water consumption, was 99 €/m3 in 2016. Cyprus’s water footprint in the same year was approximately 218 m3 per year. For energy productivity in 2018 (GDP generated by domestic energy use), the country’s productivity reached 10.42 €/tonne (from 9.12 €/tonne of oil equivalent in 2016). Finally, GHG

emissions intensity in 2017 (amounts of GHG emissions generated per unit of GDP) was at 0.41 kg of CO2 equivalent/GDP (from 0.46 kg of CO2 equivalent/GDP in 2013), significantly above the EU28 average for the same year (0.28 kgCO2e/€). • Socio-economic outcomes While Cyprus's performance in socio-economic outcomes continued to be the weakest in the EU, it saw a strong increase in 2018 compared to 2016. Specifically, with an EU index of 100, the country’s score was 38 (only 4 in 2014). In 2018, eco-industry exports declined to 0.02% of all exports (from 0.03% in 2016). Employment in eco-industries increased in 2018 from 0.6% (in 2016) to 1.34% of total employment across all companies.

2 | Selected circular economy and eco- innovation areas and new trends

Eco-innovation in Cyprus is predominantly produced by individual actors: research institutes or enterprises. There are no distinct and fully developed eco-innovation sectors. However, there are common interests in the following innovation areas among both citizens and firms. • Green energy technologies • Pollution prevention and control technologies • Development • Circular economy and circular business models.

Research and development Cyprus has an attractive research system, with a high number of international scientific co- publications and foreign doctorate students, according to the European Innovation Scoreboard. The Cyprus government doubled expenditures in their 2019-2023 national strategy on research and Innovation7. The project named “Innovate Cyprus” then established a national council of Research and Innovation, and a deputy Ministry for Research Innovation and Digital Governance, providing funding of EUR 60 million.

In Cyprus, the predominant eco-innovation research hub is constituted as the local European Institute of Innovation and Technology (EIT) Climate Knowledge Innovation Community (KIC) hub8, hosted by the Cyprus University of Technology with the participation of the Cyprus Energy Agency and the Chrysalis Leap. The funding of their research in circularity of production and digitalisation amounted to EUR 400,000 of additional EIT funds.

Among their research projects is the Deep Demonstration. The EIT Climate-KIC partners in Cyprus, with the support of EIT Climate-KIC, the Shipping Deputy Ministry and the Cyprus Marine and Maritime Institute, is working to involve all relevant stakeholders in the investigation on how the shipping industry as a whole (with emphasis on the logistics and operational aspects of it, and not focusing on a specific port) can become carbon neutral by 2050.

In addition, The Cyprus Institute recently joined EIT Climate-KIC, reinforcing the role of the country. The Institute has recently implemented an innovation office with a specific mandate of pursuing sustainable innovation and entrepreneurship for the benefit of the country and the broader East Mediterranean and Middle East region.

Waste management

7 National Board for Research and Innovation Republic of Cyprus (2019), Innovate Cyprus, available at: https://chiefscientist.gov.cy/wp-content/uploads/CYRI_STRATEGY_FRAMEWORK_2019V8-Pillars.pdf 8 https://www.climate-kic.org/programmes/deep-demonstrations/resilient-net-zero-emissions-maritime-hubs/publications/

The European Commission’s Life+ instrument supports two major waste management eco- innovations, tackling:

• The development of policy tools for recycling in islands and the demonstration of an integrated waste-to-energy system for energy generation from biodegradable organic waste and wastewater • Regarding industrial waste, the demonstration of an environmentally and financially sustainable procedure for the management and treatment of returned, expired dairy products. The European joint action plan tackling (1) waste minimisation, (2) Maximisation of value from waste and (3) knowledge transfer, have proposed a set of possible actions for the implementation of the research innovation agenda as a joint action plan. Today, some initiatives showcase the efforts made in waste eco-innovation, such as from Anaergia.

Municipal Waste Treatment in Limasol Anaergia, through its subsidiary, DB technologies BV, together with its consortium partner Medcon Construction, signed a contract with the Ministry of the Interior of the Republic of Cyprus. Using proprietary technologies from the Anaergia group of companies, this facility is taking in and processing approximately 140,000 tonnes per year of unsorted Municipal Waste. As a result of separation to be achieved within this facility, about half of the mixed waste is being segregated as materials suitable for recycling, and most of the remainder is being transformed into other useful materials. Even the wastewater produced by the plant is treated to the level of water quality for reuse, with membranes from Anaergia’s Fibracast subsidiary. Equipment used in this facility includes Anaergia’s exclusive OREX™ system that extracts organic waste from MSW, and also recyclables sorting equipment, that results in state-of-the-art operations. This facility also features unique bio-drying technologies, as well as technologies from UTS Products GmbH, another part of the Anaergia group of companies. • Keywords: Waste treatment, bioenergy

• Website: https://www.anaergia.com/start-of-operations-at-innovative-municipal-solid- waste-facility-in-limassol-cyprus

Agriculture and biodiversity The agricultural and food industries are also contributing to eco-innovative solutions: waste treatment in olive oil production; compost produced from recycled plants (such as lawn, garden clippings, tree leaves, vine leaves, etc.); biological waste treatment (that turns biodegradable waste into either high-quality compost or Solid Recovered Fuel); advanced glasshouse for producing exotic flowers; organic and energy efficient production of wine and olive oil, etc. (EIO, 2016).

The Life+ EU program also supports the protection of biodiversity with the establishment of plant reserves, protection of Natura 2000 sites and awareness-raising.

Governmental measures are also put in place for the promotion of anaerobic digestion for the treatment of animal waste, thus aiming to reduce greenhouse gas emissions9. Energy Cyprus is one of the most vulnerable countries in the EU in terms of energy dependency, and security of energy supply. In fact, imported petroleum products currently contribute over 90 % of the island-nation’s energy consumption (South EU Summit, 2019). Cyprus has the highest potential for solar power of any European Union country, but currently imports most of its energy requirements. It currently has a 10 % renewable energy share, with a target of 16 % by 2020. But according to the Cyprus Renewable Energy Roadmap, the island could generate around 25-40 % of its needed electricity supply by 2030 via renewable energy sources.

Investments from the government in eco-innovation went into the development of renewable energies (mostly photovoltaic with the regional StoRE project) and resource efficiency such as roof insulation (EUR 6.5 million allocated in 2019, according to SouthEUSummit). Under the 2014-2020 cohesion policy, the country is investing more than EUR 45 million in energy efficiency improvements in residential and public buildings and SMEs (European Commission, 2017). Innovative projects can be exemplified by these initiatives:

• INSHIP (Integrating National Research Agendas on Solar Heat for Industrial Processes)10 • SmartPV (Smart net metering for promotion and cost-efficient grid-integration of PV technology in Cyprus)11.

The 2019 budget for this sector is set at EUR 64.96 million, with EUR 58.61 million committed to subsidies, of which EUR 29.81 million are directly related to generating electrical power from renewables.

Some initiatives in energy eco-innovation are on the rise, using digital transformation to increase energy efficiency, such as Aqualoop.

Energy efficiency: Aqualoop

9 Directorate General European Programmes, Coordination and Development, 2019, Europe 2020, Cyprus National reform Programme 2019. Available at https://ec.europa.eu/info/sites/info/files/2019-european-semester-national-reform-programme- cyprus-en.pdf 10 https://cordis.europa.eu/project/id/731287 11 http://www.smartpvproject.eu/

Aqualoop is a system designed to equip households with a water temperature regulator connected to home WiFi, with a weekly scheduling to make sure that people always have hot water when they need it. It allows control of the immersion heater in place of a traditional switch, giving an idea of how much hot water users have. This process is enhanced by the digitalisation of the hot water control: the mobile application Aqualoop gives users the opportunity to control the time, intensity and temperature of water flow. • Keywords: Energy efficiency, digitalisation, water control • Website: http://www.hotwatercontrol.com/en/index.html

• Contact: [email protected]

3| Barriers and drivers to circular economy and eco-innovation in Cyprus

3.1 Eco-innovation drivers There are both supply and demand factors that play a role in the growth of eco-innovations. In terms of supply, there is a wide range of EC-supported funding opportunities for R&D that also support eco-innovations. Furthermore, more companies are aspiring to get environmental certificates for their activities, to encourage the use and production of eco- friendly services and products. On the demand side, the Cypriot government’s environment-related regulations – and commitment to solutions for pressing problems like water and energy shortages, excess of waste and air pollution – are also positively affecting the growth of eco-innovation. Internal and international demand for cleaner, green products and services has seen an increase in the last decade. More than ever before, people now prefer to buy bio-products and products with eco-labels, creating special niche markets and spurring the businesses of many companies. Another driver is the research and entrepreneurship ecosystem of Cyprus. For example, Chrysalis LEAP12 is a cleantech accelerator that focuses on startup training. Chrysalis LEAP’s main principle is “Business Idea Acceleration”, hence its involvement in hosting the ClimateLaunchpad in Cyprus, guiding Research and Innovation Services (RIS) Stages 2 & 3 acceleration and running bespoke entrepreneurship training programmes. In addition, the association Startup Cyprus supports the development of new business in the country (European Commission, 2017). The country also provides numerous tools to enhance access to information that is vital to increase innovation and growth. These tools include the government getaway Ariadni (provision of e-services), development of a web-portal for SMEs and digitalisation of the ICT system of the public administration. Many awareness sessions are spreading among educational and professional institutions, as well as conferences and events on eco- innovation. Cyprus also benefits from its significant natural capital in renewable energies – solar and wind – and innovation in agriculture and the food industry. 3.2 Barriers to eco-innovations On the other hand, the development of eco-innovation in Cyprus is hindered by a series of structural factors. The R&D sector in the country is relatively new as it dates from the mid-1990s (European Commission, 2017). As such, the system is still fragmented with a lack of coordination between the different stakeholders. The governance of research is lacking whereas the interface between research and business is dispersed. In addition, there is an inadequate evaluation culture to monitor research and increase its effectiveness. The Cypriot economy is heavily dominated by SMEs; hence, it exhibits a lack of sectoral concentration and innovative critical mass. This, in turn, reduces employment prospects for R&D-related human resources and weakens the impact of relevant public policies and investments in education. The small average size of businesses also decreases investments in

12 https://chrysalisleap.com/

innovation. Indeed, R&D spending from the private sector is one of the lowest in the EU (European Commission, 2017). The geography and structure of the economy also hinders uptake of innovation (European Commission, 2017). The small size of the market and the remoteness of the island from other countries acts as a disincentive for high-tech companies to invest in the country. The only sector that benefits from this structure is the financial one which, in general, is not considered as research intensive. On the other hand, the maritime industry is triggering R&D (The Cyprus Institute). Policy and funding measures and mechanisms for promoting eco-innovation in Cyprus depend to a significant extent on co-financing through the EU structural funds. Innovative SMEs, even in the leading economic sectors of the country, lack the critical mass which would facilitate smart specialisation and the development of sectors with international competitive advantage in eco-innovation. Non-modernisation of the regulatory system Regarding the environmental reform, despite the technical assistance has been provided to Cyprus on how to reform the civil service structure to improve and simplify environmental licensing and environmental inspections, little progress has been achieved in this direction (OEB 2020)13. The monitoring of compliance with environmental laws – especially waste and recycling – has not been modernised; there is no use of IT applications and several departments are involved in environmental licensing, which leads to time consuming procedures and weak enforcement of legislation. These bottlenecks reduce investors’ interest, attraction of new business opportunities and in general lead to fragmented sectors. Besides, the licensing procedures for new projects are bureaucratic and difficult. In Cyprus there is no organisation to facilitate and attract new investments. Many enterprises until today operate without licenses (mainly planning and building permits). Stronger industrial policy regarding industrial symbiosis and construction of modern industrial areas is needed. Lack of educational hubs Cyprus has qualified young educated people, but the Cyprus economy today is lacking blue collar workers and staff in the fields of engineering, green skills and technology edge professions. The absence of technological institutes to provide good technicians in the market has been identified as a major problem. The gap created in the market after the decision to close the Cyprus Technological Institute is huge. According to an OEB survey, business executives believe that there are not enough specialised lifelong learning programs in Cyprus. The vocational training system needs to be modernised as far as green professions, mixed learning environments and inclusion of field studies are concerned. Energy sector Cyprus has entered an unstable electricity market regime. The liberalisation of the electricity market has taken too long, creating market distortions. The political decisions on how to handle the electricity market and the adoption of an emerging LNG market create uncertainties regarding future electricity prices. In order to grow, the Cyprus economy needs lower electricity prices as it is vital to increase its competitiveness (all sectors, especially secondary and tertiary).

13 Expert interview, OEB, 2020.

Banks lack capacity to evaluate renewable energy projects despite the claimed liquidity. There are RES projects in the pipeline, and it is estimated that investments are needed, but Cyprus Banks cannot evaluate those projects due to their reduced technical capacity, as well as uncertain electricity liberalisation and future electricity prices. Banks should also look for alternative lending such as climate financing or green financing (OEB, 2020)14. The absence of SME support schemes for energy efficiency has been a drawback for the competitiveness of the Cyprus economy. National strategy There is no comprehensive national strategy to promote circular economy. Public sector deficiencies hold back growth in the business environment. The so called “Green Waste Collection Points” face problems. The national waste strategy needs to be strengthened. Most municipal solid waste is landfilled. The fee on plastic bags is not collected in a fund which could support actions on waste prevention and other recycling measures. Strong investments are needed in the recycling sector as waste resources are transferred abroad. Public procurement supply contracts do not take into account environmental or LCA, but normally are awarded on lower price evaluation only. The public procurement procedures need to be reformed.

14 Expert interview, OEB, 2020.

4 | Policy landscape in Cyprus

4.1 Strategic policy framework Cyprus has put circular economy on the national agenda with the Ministry of Energy, Commerce and Industry to have commissioned a study to determine the current industry state regarding circular economy and assess potential opportunities. Furthermore, the Ministry of Agriculture, Rural Development and Environment has incorporated CE into its national strategy, aimed at reducing emissions in the non-ETS sectors and to develop a CE strategy in line with the energy and climate action plan 2030. This increasing involvement in eco-innovation is due to the new position of Cyprus as a regional hub for climate change research. The government, announced in June 2018 the creation of a government initiative to coordinate action against global warming across the Mediterranean and support the creation of a EUR 30 million climate-change research centre at the Cyprus Institute in Nicosia, the nation’s leading multidisciplinary research institution. This initiative will also create a comprehensive plan to reduce Cyprus greenhouse-gas emission in line with the 2015 Paris climate accord. Eco-innovation in Cyprus is also boosted by the Restart 2016-2020 Programme15, which is a national framework programme for the support of research, technological development and innovation. It includes 25 programmes, notably: • Integrated Projects, Research in Enterprises & Research in Startups • Excellence hubs and Didaktor (Post-Doctoral Researchers) • Eureka / Eurostars (open) • Innovation Vouchers and Industrial Property (open) • Participation in International Brokerage Events The tourism sector needs to be redefined and actions should be taken to promote a sustainable tourist sector. The Cyprus Employers and Industrialists Federation (OEB), the Institute of Greek Tourism Confederation (INSETE) and the public policy consultancy Adelphi participate in the European project Hotels4Climate16, which aims to facilitate the reduction of greenhouse gas (GHG) emissions in the hotel industry in Greece and Cyprus. The project is funded by the European Climate Initiative (EUKI). In 2019, the government created a programme for innovation in enterprises (innovative products or services for the international markets) supporting their research and development efforts: • Pre-seed17: startups at the design stage, or the product/service not yet fully developed, that explore, evaluate and develop the idea, create an original product or service, and make the first attempts to commercialise it. They will be given up to EUR 100,000 (2 February 2019) • Seed18: Startups that have already been active for a short time, or an innovative product or service at a more mature stage but not yet penetrated the market. They

15 https://www.research.org.cy/en/rifs-ri-programmes/restart-2016-2020/

16 https://www.oeb.org.cy/en/drasis/hotels4climate/ 17 file:///C:/Users/AMitsios/Downloads/PRE-SEED_0719_Call_EN.pdf 18 https://www.fundingprogrammesportal.gov.cy/easyconsole.cfm/page/programme/fsId/33/lang/en

rapidly develop the innovative idea, attract investment funds and successfully penetrate the international market. They will be given up to EUR 100,000 (14 February 2019) • Innovate: Existing companies active in the market or having innovative products/services in pilot phase. They develop and optimise the product or service of the business, start commercial production as well as promote and support the distribution of the product. Enterprises will be given up to EUR 1,000,000 (21 February 2019) Enterprise Europe Network (EEN Cyprus)19 is a national consortium, member of the Enterprise Europe Network, offering free of charge services for innovation in Cyprus in cooperation with the research and Innovation Foundation (RIF), Cyprus Chamber of Industry and Commerce (CCCI) and the European Office Cyprus (EoC). 4.2 Policy instruments, measures, programmes Policy and funding measures and mechanisms promoting eco-innovative research in Cyprus still largely depend on co-financing through the Structural Funds. Most of these measures address the development of new research infrastructure, the enhancement of collaborations among research organisations and the private sector, and the facilitation of technology transfer, as well as the strengthening and enhancement of training, career development and mobility of researchers. The Council of Ministers adopted the Smart Specialisation Strategy that allocates EUR 142 million in research in several sectors including energy and the environment. The strategy resulted in the development of the programme RESTART 2016 – 2020 (European Commission, 2017). The Business4Climate initiative20 was initiated by the Cyprus Federation of Employers & Industrialists (OEB), in collaboration with the Cyprus University of Technology (TEPAK) and the Department of Environment of Cyprus (Ministry of Agriculture, Rural development and the Environment). The aim of the initiative is to engage all non-ETS businesses voluntarily, to take action in GHG emissions reduction. The initiative was officially launched in September 2018 and provides Cypriot companies with all necessary tools and support. The Business4Climate initiative is based on the following steps: • Signing of the voluntary declaration by companies to reduce greenhouse gas emissions by more than 8% by 2030. • Development of an electronic (online) tool for businesses, which helps in the preparation of the emission baseline inventory for the reference year 2017. • Development of an action plan for each business: a GHG emissions reduction Action Plan. The Action Plan may be submitted by the company within one year from the date of signing the declaration. • Monitoring progress by the Monitoring Team. Progress Reports (or revised Action Plan) should be submitted by the company every two years. The funding from Climate-KIC for the implementation of the Business4Climate initiative was completed on 31/12/2018. Up to date, 64 Cyprus companies from various sectors of economic activity have signed the Business4Climate initiative. In 2019, it was considered

19 https://eencyprus.org.cy/en/ 20 https://www.oeb.org.cy/en/drasis/business4climate/gnoriste-to-business4climate/

that additional incentives are required for the participation of companies in the initiative in order to intensify the efforts to reduce emissions by 2030. The Support Scheme is expected to be operational by 2020. The total budget for referred to in the decision of the Council of Ministers dated 28/08/2019, amounts to EUR 13.5 million for the period 2020-2022. The Support Scheme will aim to reduce greenhouse gas emissions from commercial and industrial business activity and will target business financing (legal entities that carry out economic activity), which are proven to reduce greenhouse gas emissions. Research Programme Foundation funded over EUR 25 million worth of research projects and supporting activities, and the budget is expected to grow in the coming years according to the following five strategic categories (Invest Cyprus, 2016): • Strategic & Multi-thematic Research and Development • Growth of National Scientific & Research Human Capital • Applied Research Development and Enterprise Innovation • Research Infrastructure Development and Large-Scale Investments • International Networking and Collaboration in the field of R&D and Innovation. The National Policy Statement for the Enhancement of the Entrepreneurial Ecosystem supports the general framework conditions for research in businesses (European Commission 2017). The statement amongst others puts forward the reform of the corporate tax system, enhanced governance for the creation of university spin-offs, a stronger intellectual property legislation, and using the Structural Funds in a more targeted manner.

A knowledge Alliance in Eco-innovation Entrepreneurship to Boost SMEs Competitiveness (MSEecoMP): 2017-2019 The SMecoMP project addresses both challenges by developing a strong and resilient knowledge alliance among HEIs, vocational education training (VET) centres and SMEs, to promote eco- entrepreneurship, -management and -innovation. The overall objective is to promote eco- management and -innovation among existing SMEs and support young entrepreneurs in entering in the “green” and/or “blue” economy, creating new added value jobs, improving the area’s competitiveness, ameliorating the brain drain phenomenon, and contributing to the area’s sustainable development.

The SMecoMP’s main outputs are:

o The development of a learning-outcomes based curricula and four training modules, focusing on Eco-Innovation and Entrepreneurship (EIE) knowledge and skills, catering to the needs of SMEs’ staff and young entrepreneurs, o the establishment of the SMecoMP pre-Incubator program for individual entrepreneurs to receive training, coaching and mentoring, o the customisation of an ICT training platform to deliver blended learning courses on EIE. • Keywords: Cluster for entrepreneurship, eco-innovation • Website: http://www.energylab.ac.cy/projects/ • Funding Agency: Interreg “Balkan-Mediterranean”

Moving forward a circular economy, the CoM approved the regulatory proposals on municipal waste management by the local authorities. Economic instruments will be implemented along

with the “pay as you throw” system, which is envisaged to provide economic incentives for the separate collection and recycling of municipal waste. The proposed regulation will also provide for the mandatory preparation of local action plans for the prevention and management of municipal waste and the mandatory implementation of a separate collection system for both recyclable and organic waste. Besides, the updated National Action Plan for RES21 foresees an increased capacity of Photovoltaic Systems from 192 ΜW to 288 ΜW in 2020. The high interest for participation in support schemes that were announced in 2017 indicates that an additional 240 MW of photovoltaic systems will be operational by 2020.

21 Cyprus’ Integrated National Energy and Climate Plan, available at: https://ec.europa.eu/energy/sites/ener/files/documents/cy_final_necp_main_en.pdf

REFERENCES

Directorate General European Programmes, Coordination and Development, 2019, Europe 2020, Cyprus National reform Programme 2019. Available at https://ec.europa.eu/info/sites/info/files/2019-european-semester-national-reform- programme-cyprus-en.pdf National Board for Research and Innovation Republic of Cyprus, 2019, Innovate Cyprus. Available at https://chiefscientist.gov.cy/wp-content/uploads/CYRI_STRATEGY_ FRAMEWORK_2019V8-Pillars.pdf The Cyprus Employers and Industrialists Federation (OEB), 2018. Interview with Anthi Charalambous, Director of Energy & Environment Department The Cyprus Institute, Climate Change and Impact, Available at https://www.cyi.ac.cy/index.php/eewrc/eewrc-research-projects/climate-change-and- impact.html Nature, 2018, Cyprus Asserts Itself as Regional Hub for Climate-change Research. Available at https://www.nature.com/articles/d41586-018-05528-9 Cyprus Profile, 2019, Technology and Start-Ups: Investing in Innovation. Available at https://www.cyprusprofile.com/en/sectors/technology-start-ups/ South EU Summit, 2019, Innovation to the Fore as Cyprus Bids to Break Energy Dependency. Available at https://southeusummit.com/europe/cyprus/innovation-to-the-fore-as-cyprus- bids-to-break-energy-dependency/ In Cyprus, 2019, Three Programmes to Boost Innovation in Cyprus’ Enterprises. Available at https://in-cyprus.philenews.com/three-programmes-to-boost-innovation-in-cyprus- enterprises/ Research Promotion Foundation, 2016, RESTART 2016 – 2020 work Programme JRC, 2017, Research and Innovation Observatory country report 2016: Cyprus. Invest Cyprus, 2016 , Research and Development. Available at: http://www.investcyprus.org.cy/en/growth-sectors/cyprus-investment-sectors/research- and-technology-sector European Commission, Eco-Innovation Country Report 2016-2017. Available at https://ec.europa.eu/environment/ecoap/cyprus_en

ANNEX: Policy strategies and instruments

Table A1: National Policy strategies Name of the policy document Relevance for eco- Relevance for Circular Relevance for the Input and process Outcome and impact Relevant (strategy, action plan, roadmap) innovation Economy innovation chain targets targets implementation or governance system 1 Restart 2016-2020 Programme Support of research, Cross-cutting Cross-cutting 25 programmes All targets are interlinked Yes technological development and innovation. 2 Inclusion of circular economy in the national Determine the current Cross-cutting Cross-cutting Multi-sectoral policy Yes agenda industry state regarding target circular economy and assess potential opportunities. 3 Support Scheme Aims to reduce GHGs Cross-cutting Cross-cutting Total budget amounting Multi-sectoral policy Council of from commercial and to €13.5 million for the targets ministers industrial business period 2020-2022. activity and will target business financing. 4 National Policy Statement for the Enhancement Supports the general Reform of the corporate Cross-cutting Structural funds of the Entrepreneurial Ecosystem framework conditions for tax system, enhanced research in businesses governance for the creation of university spin-offs, intellectual property legislation

Table A2: Policy instruments and measures

Category Name of instrument Overall relevance for eco-innovation Relevance for CE Relevance for the innovation chain

Direct financial support for eco-innovation

Grant funding Programme for innovation in enterprise Supporting research and development Incentivize firms to develop circular Cross-cutting (Seed project) efforts of “Pre-seed”, “seed” and “Innovate” economy innovation. firms.

Category Name of instrument Overall relevance for eco-innovation Relevance for CE Relevance for the innovation chain

Innovation vouchers Enterprise Europe Network (EEN Cyprus) National consortium offering free of charge Cross-cutting Cross-cutting services for innovation in Cyprus

Loans and credits

Publicly co-funded Research Programme Foundation €25 million worth of research projects and Cross-cutting Strategic & Multi-thematic Research and venture capital funds (e.g. supporting activities related to eco- Development, Growth of National start-ups) innovation Scientific & Research Human Capital, Applied Research Development and Enterprise Innovation, Research Infrastructure Development and Large- Scale Investments, International Networking and Collaboration in the field of R&D and Innovation

Fellowships and postgraduate loans and scholarships

Equity financing from public banks

Other (indicate) Knowledge Alliance in eco-innovation Addresses challenges by developing a strong Promote eco-management and innovation Cross-cutting entrepreneurship to boost SMEs and resilient knowledge alliance among HEIs, among existing SMEs and support young competitiveness (SMecoMP) vocational educational training centres and entrepreneurs in entering the new SMEs. economy.

Indirect support for eco- innovation

Tax incentives/relieves for “Pay as you throw” Provide economic incentives for the separate Cross-cutting Cross-cutting eco-innovation collection and recycling of municipal waste (businesses, R&D activity)

Tax relief for consumers adopting/ purchasing green technology/products

Taxation of environmentally harmful technologies

Category Name of instrument Overall relevance for eco-innovation Relevance for CE Relevance for the innovation chain

Regulations, targets

Green public procurement

Demand subsidies (e.g. eco-vouchers/subsidies for green products) It supports the general framework Labeling, certification, The National Policy Statement for the conditions for research in businesses. The Cross-cutting Cross cutting standards Enhancement of the Entrepreneurial statement amongst others puts forward the Ecosystem reform of the corporate tax system, enhanced governance for the creation of university spin-offs, a stronger intellectual property legislation, and using the Structural Funds in a more targeted manner.

Debt guarantees and risk sharing schemes

Training, advisory, information support, awareness raising

Technology transfer and business advisory services

Business incubation/ Support Scheme Aims to reduce greenhouse gas emissions Cross-cutting Cross-cutting accelerations from commercial and industrial business activity and will target business financing (legal entities that carry out economic activity), which are proven to reduce greenhouse gas emissions.

Eco-innovation challenges, prizes, awards

Training for companies, consumers,

Public awareness campaigns, platforms, and outreach activities

Category Name of instrument Overall relevance for eco-innovation Relevance for CE Relevance for the innovation chain

other Business4Climate Initiative Engage all non ETS businesses voluntarily to Cross-cutting Cross-cutting take action in the GHG emission

Collaborative platforms and infrastructure

Clusters, networks, platforms (e.g. industrial symbiosis platforms)

Dedicated support to new research infrastructure (piloting facilities)

other

About the Eco-Innovation Observatory (EIO)

The Eco-Innovation Observatory (EIO) is the initiative financed by the European Commission’s Directorate- General for the Environment. The Observatory is developing an integrated information source and a series of analyses on eco-innovation trends and markets, targeting business, innovation service providers, policy makers as well as researchers and analysts.

Visit EIO and DG ENV EcoAP website and register to get access to more information and to access all EIO reports, briefs and databases. www.eco-innovation.eu ec.europa.eu/environment/ecoap