- On 19 May the Council of Ministers approved the Climate Change and Energy Transition Bill and sent it to parliament.
- It sets 2030 targets of 20% lower emissions than in 1990, 35% renewables and 70% renewable electricity, and climate neutrality by 2050.
- It requires listed companies, banks and insurers to report their climate risks and financial institutions to publish decarbonisation targets from 2023.
On 19 May 2020, the Council of Ministers approved the Climate Change and Energy Transition Bill and sent it to the Cortes Generales, where it must be processed. It is the first law of its kind in Spain and sets in legislation the emission-reduction and energy-transition targets the country assumes under the European Union and the Paris Agreement. It is still a bill: it may change during parliamentary passage.
The text establishes that Spain must reach climate neutrality by 2050 at the latest, with a 100% renewable electricity system before mid-century. For 2030 it sets at least a 20% cut in greenhouse gas emissions compared with 1990, a 35% share of renewables in final energy consumption and 70% in electricity generation, and a 35% improvement in energy efficiency. The targets can only be revised upwards.
What changes in the sectors
The bill bans the granting of new permits for hydrocarbon exploration, research and concessions, and high-volume hydraulic fracturing. In mobility, new cars and vans will have to progressively reduce their emissions to zero by 2040 at the latest, and municipalities of over 50,000 inhabitants and island territories will have to put in place low-emission zones before 2023.
In buildings, energy retrofitting is promoted and the National Energy Efficiency Fund is extended to 2030. Non-residential buildings with car parks of more than twenty spaces will have to install electric charging points from 2025, and the highest-volume service stations will progressively add charging. Every five years a just transition strategy will be approved with the regional governments and the social partners.
What is required of companies
For companies, perhaps the most relevant element is transparency. Listed companies, credit institutions and insurers will have to publish each year a report on their exposure to climate risks and the measures they take. Financial institutions will have to publish, from 2023, decarbonisation targets for their loan and investment portfolios aligned with the Paris Agreement.
This will have indirect effects on unlisted companies: if a bank has to measure and reduce the climate impact of its portfolio, it will ask its clients about their emissions and strategy. In addition, public procurement will incorporate environmental criteria, and energy operators will have to draw up decarbonisation strategies for their areas.
What to review
As it is still a bill, the prudent course is not to adapt the company to a text that may change, but to understand the direction. It is worth starting to measure: energy consumption, direct and indirect emissions, vehicle fleet and the state of buildings. Those who already hold that data will find it easier to respond to requests from customers, banks and tenders.
It is also useful to look at the opportunities: aid and financing linked to efficiency, retrofitting or electric mobility, and the effect on energy costs in the medium term. Your adviser can help you calculate the impact on your sector and identify steps that make sense however the passage of the bill ends.
A law not yet approved already sets the direction in which financing and regulation are heading.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
