Approval of Law 7/2021, of 20 May, on Climate Change and Energy Transition

Written on 22 Jun 2021

Last May, the Climate Change and Energy Transition Law was passed, which represents the starting point for meeting the objective of climate neutrality assumed by Spain at the international and European levels.

The Law 7/2021, of 20 May, on Climate Change and Energy Transition (hereinafter, the "LCCTE") is the starting point for complying with the objective of climate neutrality assumed by our country in the international and European scope, establishing a framework that facilitates the progressive adaptation of the country's reality to the demands of climate action and guarantees the coordination of sectoral policies on this matter.

One of its guiding principles that should be highlighted is that of "non-regression", which is defined as that by virtue of which the regulations, the activity of the Public Administrations and jurisdictional practice may not imply a quantitative or qualitative reduction or regression with respect to the levels of environmental protection existing at any given time, except in fully justified situations based on reasons of public interest, and once a weighing of the different legal assets that could be in contradiction with the environmental one has been carried out.

The LCCTE establishes the following minimum national targets for the year 2030: (i) to reduce greenhouse gas emissions of the Spanish economy as a whole by at least 23% compared to the emissions in 1990; (ii) to achieve a penetration of renewable energies in final energy consumption of at least 42%; (iii) to achieve an electricity system with at least 74% of generation from renewable energies; and (iv) to improve energy efficiency by reducing primary energy consumption by at least 39.5% compared to the baseline in accordance with EU regulations. These targets will be reviewed for the first time in 2023 and may then be revised upwards by the Council of Ministers. The aim is that in the shortest possible time before 2050, Spain will achieve climate neutrality and the electricity system will be based exclusively on renewable generation sources. Climate neutrality means that the greenhouse gas emissions are balanced with those that are eliminated through the planet's natural absorption (oceans, forests, etc.). This leaves a zero balance which is known as a zero carbon footprint.

Two new figures are created that will be fundamental in determining the actions to be carried out against climate change: the National Integrated Energy and Climate Plans and the Decarbonisation Strategy to 2050. Both tools will be approved by royal decree at the proposal of the Ministry for Ecological Transition and the Demographic Challenge (hereinafter, the "Ministry"). Likewise, the approval of a National Plan for Adaptation to Climate Change is foreseen, which will be approved by agreement of the Council of Ministers at the proposal of the Ministry and following a joint agreement with the Autonomous Communities, and which will be developed by means of five-year Work Programmes. On the other hand, the Committee of Experts on Climate Change and Energy Transition has been created as the organisation responsible for evaluating and making recommendations on energy and climate change policies and measures. The Government is also expected to adopt actions to promote the digitalisation of the economy that will contribute to achieving the objectives established in the framework of the Digital Spain 2025 Strategy.

The most relevant aspects of the LCCTE are outlined below. Firstly, with regard to the public water domain, it should be noted that the new concessions granted will prioritise support for the integration of renewable technologies into the electricity system. In this respect, reversible hydroelectric plants will be developed. Regulations will establish the technical conditions for pumping, storage, turbining and maximising the integration of renewable energies.

On the other hand, the following measures are foreseen in the field of urban planning:

  • Housing Rehabilitation and Urban Renewal Plan: the Government shall promote the renovation and rehabilitation of existing public and private buildings by drafting such a plan within six months.
  • Modification of the Horizontal Property Law: the Government shall propose the modification of this regulation to facilitate and make self-consumption photovoltaic installations more flexible within a maximum period of one year.

With respect to hydrocarbons and mineral deposits, no new exploration authorisations, research permits for hydrocarbons or exploitation concessions for hydrocarbons shall be granted, nor shall new applications be accepted by the granting of exploration permits, research permits, or direct exploitation concessions for mineral deposits, nor their extensions, when such resources are extracted for their radioactive, fissile or fertile properties.

With regard to sustainable mobility, the following measures are anticipated:

  • Draft law on sustainable mobility and transport financing: the Government will present it to the Spanish Parliament with the intention of reinforcing and complementing compliance with measures to promote zero-emission mobility. In this sense, the government will promote the use of passenger rail within the scope of this law.
  • Zero-emission vehicles: measures will be put in place to facilitate the penetration of vehicles with 0 g CO2/km emissions so that by 2040 all new passenger cars and light commercial vehicles will be of this type.
  • Installation of electric recharging points: the obligation to install electric recharging points are regulated for owners of facilities supplying fuel to vehicles and concessionaires on state road networks. A Ministry order will establish the list of facilities obliged to do so. Likewise, the Technical Building Code will establish obligations for the installation of recharging points in new and existing buildings.
  • Sustainable Urban Mobility Plans: municipalities with more than 50,000 inhabitants and island territories will adopt such plans by 2023 that shall introduce mitigation measures to reduce emissions from mobility.

In the field of public administration, environmental and energy sustainability criteria shall be incorporated into public procurement when they are related to the object of the contract. For these effects, the Ministry shall draw up a catalogue of services whose procurement shall take these criteria into account.

In the private sector, reporting obligations are included for entities whose securities are admitted to trading on regulated markets, credit institutions, insurance and reinsurance companies, and companies based on their size. These include the obligation to submit an annual report assessing the financial impact of the risks associated with climate change generated by the exposure of their activity. In addition, credit institutions shall have to publish decarbonisation targets for their lending and investment portfolio.

Last, but not the least relevant:

  • As a measure to promote the Circular Economy, the Government must submit to the Parliament within six months a Draft Law on Waste and Contaminated Soil.
  • In the electricity sector, the government and the National Commission for Markets and the Competition must present a proposal to reform the regulatory framework for energy within twelve months. The aim is to promote: (i) consumer participation in energy markets; (ii) investments in variable and flexible renewable energy generation, as well as distributed generation; (iii) energy storage; (iv) the use of electricity grids, the use of flexibility for their management and local energy markets; (v) consumer access to their data; and (vi) innovation in the energy field.
  • Finally, the Government will establish, within one year, the type of companies that will have to calculate and publish their carbon footprint, and draft and publish an emissions reduction plan.

The LCCTE came into effect on 22 May, except in relation to the provisions of Article 15.11 for concession contracts on road networks in execution, which will not come into effect until the regulatory provision determining the obligations regarding the installation of electric recharging points comes into force.