- The draft sets targets for 2030 and 2050: lower emissions, more renewables and greater energy efficiency.
- It affects energy, transport, buildings, public procurement and the financial sector, not just power companies.
- It is a draft in progress: it will go through public consultation and the Council of State before returning to the government.
On Friday 22 February the Council of Ministers took note of the draft Climate Change and Energy Transition Law, which will be the framework for decarbonising the Spanish economy by 2050, in line with the commitment under the Paris Agreement. The Council also received reports on the draft National Integrated Energy and Climate Plan and on the Just Transition Strategy.
The text is not yet law: before returning to the Council of Ministers it will go to public consultation and receive reports from the ministries and the Council of State, and it will then have to pass through Parliament. Even so, it marks fairly precisely where regulation wants to go, which already matters to companies with long-term investments, contracts or assets.
Targets and energy
For 2030, the draft proposes cutting greenhouse gas emissions by at least 20% compared with 1990, generating 70% of electricity from renewables, having at least 35% of final energy consumption come from renewables and improving energy efficiency by at least 35%. For 2050, emissions would fall by at least 90% and the electricity system would have to be 100% renewable.
It also provides for renewable auctions of at least 3,000 megawatts a year and would not allow new exploration permits or production concessions for hydrocarbons, nor hydraulic fracturing. Existing extensions could not run beyond 31 December 2042, and any new tax benefit for fossil-based energy products would have to be expressly justified.
Transport, buildings and public purchasing
On mobility, the draft aims at a fleet of cars and vans with no direct CO2 emissions by 2050, with new zero-emission cars no later than 2040, and asks municipalities of more than 50,000 inhabitants to create low-emission zones before 2023. Large fuel-supply sites, those selling five million litres or more a year, would have to offer at least one electric charging point of 22 kW or more.
The central government administration will have to include carbon-footprint criteria in its contracts and may only lease buildings with nearly zero energy consumption, so existing leases that do not comply could not be extended beyond 2030. At least 20% of the General State Budget would have to have a positive impact on the transition to a low-carbon economy.
What a company should watch
The draft contains an obligation worth attention: listed companies, credit institutions, insurers and large companies would have to prepare each year a report on the financial impact of the risks climate change poses to their business. The Bank of Spain, the CNMV and the Directorate-General for Insurance would also produce a two-yearly report on risks to the financial system.
For a small or mid-sized company, the effect will be mostly indirect: through large customers, energy and transport costs, public tender requirements or financing conditions. It is worth following the text through its passage, assessing in good time which efficiency or own-energy investments make sense and reviewing long-term contracts that depend on energy. While the text moves forward, it can be useful to measure your own carbon footprint and energy consumption, even in a simple way, because that information will become more and more common in dealings with large customers, financial institutions and public bodies.
A law not yet approved already works as a compass for planning long-term investment.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
