implementation costs), the virtual net billing scheme (which is also regulatory and will enable a faster deployment of decentralized solar power generation), the implementation of SUMPs and the subsidized loans to businesses with certificates of environmental management systems. The same measures are among the best performers in the long-term (i.e. up to 2030). Additional to these, the grant scheme utilizing unused budget of 2020-21 for energy renovations in buildings, as well as the energy efficiency upgrade of street lighting indicate the highest energy savings and GHG emission mitigation potential per unit of investment. However, some measures, such as the construction of the tram line and the tree plantation can have considerable positive effects in the longer term, which are not captured by the present analysis.

# 3.2. Economic analysis

## _3.2.1. Input-output modeling and assumptions_

Input-Output (IO) analysis is a quantitative technique for studying the interdependence of production sectors in an economy over a stated time period (Miller and Blair, 2009; Giannakis and Bruggeman, 2017). In this paper, a continuous demand-driven IO model with disequilibrium adjustment processes was applied to assess the economy-wide effects of the selected energy-related economic recovery measures. The assumptions and the application of the model for the evaluation of energy policies in Cyprus are described in detail in Taliotis et al. (2020a).

Projected annual expenditures, including capital investments and operation and maintenance costs, from the OSeMOSYS model are introduced to the IO model to reflect changes in the investment demand of economic sectors as a result of each one of the 13 measures listed in Table 1. Expenditures are classified in seven categories: industrial equipment, power generation technologies, electricity storage technologies, gas infrastructure, public transport, private transport, and buildings (including energy efficiency measures, heat pumps, solar water heaters etc.). In addition, the projected annual energy consumption expenditure of households obtained from the energy forecast model mentioned in Section 3.1 is introduced to the IO model to estimate the multiplier effect of changes in private consumption. Tables in Appendix B present the distribution of annual spending associated with investments and private consumption by sector of economic activity under the alternative energyrelated recovery measures.

The initial static equilibrium conditions of the IO model, which serve as the reference case, are based on the latest available national symmetric IO table of Cyprus for the year 2016. The national table, which includes 65 sectors of economic activity, was aggregated into 20 economic sectors, which is presented in Appendix B (Table B. 11). The demand growth rates for the economic sectors are defined based on the GDP projections for the period up to 2030, including the impact of the COVID-19 pandemic, and were obtained from the Ministry of Finance. Specifically, for 2020 we assumed a decline in the growth of the Cypriot economy (-7.4%) across all economic sectors, and for 2021 a strong economy-wide recovery (+6.1%). From 2023 onwards, growth rates return to usual levels following the official national macroeconomic outlook.

Some of the recovery measures listed in Table 1 involve energy savings and hence induce a decrease in private consumption for energy, traded products, and services. We assumed that this reduction of spending, after accounting for household savings,<sup>4</sup> will return to the economy and induce a rise in

> 4 We assumed that the household saving rate is 2.4% of disposable income in Cyprus, in line with Eurostat (2020).

13