Climate change law comes into force

On 21 May 2021 the BOE published Law 7/2021 of 20 May on climate change and energy transition, which came into force the next day. It sets minimum targets for 2030: cutting greenhouse gas emissions by at least 23% compared with 1990, reaching 42% renewable energy in final energy consumption and 74% renewable electricity, and improving energy efficiency by 39.5%. And it provides that Spain must achieve climate neutrality before 2050, with a power system based exclusively on renewable sources.

Beyond the targets, the law contains concrete obligations for companies, administrations and citizens: reports on financial risks, charging points, low-emission zones and limits on hydrocarbon exploration. Many measures need implementing regulations, but the direction is set and it affects investment, vehicle fleet, property and financing decisions in the coming years.

Targets and roadmap

The law organises planning around two instruments: the Integrated National Energy and Climate Plan, which sets the path to 2030, and the 2050 Decarbonisation Strategy, which will be reviewed every five years and will include at least an indicative intermediate target for 2040. In addition, it stops granting new exploration authorisations, research permits and exploitation concessions for hydrocarbons across the territory, including high-volume hydraulic fracturing, and accepts no new applications for radioactive minerals.

On mobility, it provides that new cars and light commercial vehicles, not intended for commercial use, gradually reduce their emissions, so that by 2040 at the latest they are vehicles with zero direct CO2 emissions under European rules, and that by 2050 the fleet is free of direct emissions. The law speaks of adopting measures for that timetable; it does not ban driving the vehicles that already exist.

Mobility and buildings

Municipalities with more than 50,000 inhabitants and island territories must adopt, before 2023, sustainable urban mobility plans that include low-emission zones. The Barcelona area already has one, but other cities of that size will have to create them. The law also provides for aid and a public information platform on charging points, and rules for State ports to reach zero direct emissions by 2050.

Service stations with annual petrol and diesel sales above 5 million litres will have to install electric charging infrastructure of at least 50 or 150 kW, depending on sales volume, and buildings other than private residential ones with a car park of more than twenty spaces must meet, before 1 January 2023, a minimum charging provision for electric vehicles. The Technical Building Code will set obligations for new buildings and renovations.

Financial reporting and what to review

The law introduces, within the non-financial reporting obligations, an annual report assessing the financial impact of climate-related risks, including those of the transition to a sustainable economy, and the measures to address them. It reaches, among others, large companies required to publish non-financial information and credit institutions and insurers. In addition, the Bank of Spain, the CNMV and the Directorate-General for Insurance will produce every two years a report on climate risk for the financial system.

For companies not directly obliged, the effect will arrive through the value chain: their large customers, banks and insurers will ask them for data on emissions and risks. It is worth starting by measuring the carbon footprint and the exposure to physical and transition risks, reviewing the vehicle fleet and the property, and following aid for energy efficiency and mobility. This information is general in nature.

A framework law that sets targets and obligations: the implementing regulation will say how much they cost and when they are required.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.