Spain's Climate Change Act 7/2021: Key points

The Spanish government has outlined its new regulatory framework for reducing carbon emissions and promoting the development of renewable energy.

On 22 May 2021, Spain's Act 7/2021 on Climate Change and Energy Transition came into force.

Its main provisions are as follows:

1. Energy targets: The minimum national targets for 2030 and 2050, previously set out in Spain's National Integrated Energy and Climate Plan (PNIEC by its acronym in Spanish) for the reduction of greenhouse gas emissions, renewable energy and energy efficiency, have been incorporated into the new act.

These targets may be subject to upward adjustment by the Council of Ministers from 2023 onwards.

2. New instruments: The number of planning instruments set out in the act is noteworthy. In addition to (i) the PNIEC, the act outlines:

• The Decarbonisation Strategy by 2050 of the Spanish Economy, to be approved by a Royal Decree, which will establish a path for reducing emissions and increasing the number of carbon sinks, every five years;
• The National Adaptation to Climate Change Plan (PNACC), which is the planning instrument to promote coordinated action against the effects of climate change (strategic objectives, impact indicators and risk reports); and
• The Housing Rehabilitation and Urban Renewal Plan, with the objective of improving existing building stock, regardless of ownership, following the indicators set out in the –
• Long-term strategy for energy rehabilitation in the building sector in Spain (ERESEE);
• The approval of specific plans for the promotion of renewable gases, which contain obligations for parties involved in the sale or consumption of natural gas with an industrial focus; 
• A timeline for the review of support measures favouring the use of energy products of fossil origin;
• Basic guidelines for the adaptation to climate change of Spanish natural ecosystems and wild species; and
• A vulnerability map for agricultural, mountain and forest soils is envisaged.  

3. Hydroelectricity: Hydroelectric projects with reversible plants will have priority, without prejudice to the efficient management of water resources and environmental protection, which are at present provided for in water legislation (and already guaranteed by corresponding regulations).

Technical regulation is foreseen for pumping, storage and turbine use. It is yet to be considered how this regulation will affect the exploitation of water resources in operation.

4. Hydrocarbons and radioactive minerals: Act 7/2021 establishes that no new exploration authorisations, research permits and hydrocarbon exploitation concessions will be granted throughout the national territory, including the territorial sea, the exclusive economic zone and the continental shelf.

With regard to existing concessions, permit holders must submit a report, five years prior to the end of the term of the exploitation concession, that reflects the potential for reconversion of the facility/location for alternative uses of the subsoil (in particular, the establishment of renewable energy and geothermal energy), including consideration of maintaining employment levels.

No new exploitation or research permits, or concessions for the exploitation of radioactive minerals will be granted, nor will new requests for authorisation of radioactive facilities be accepted.

On the other hand, it is stipulated that the application of new tax benefits to energy products of fossil origin must be justified on the basis of social and economic interest, given the non-existence of technological alternatives.

5. Service and electrical recharging stations: To guarantee the existence of sufficient electric recharging infrastructure for electric vehicles, Act 7/2021 introduces obligations to install electric recharging infrastructure for the following service station owners:

A ministerial ordinance will identify the service stations involved, as well as exceptions and technical barriers to compliance.

The commencement date for implementation is 22 May 2021.

In 2023, and every two years thereafter, a Resolution of the Secretary of State of Energy will establish the list of new fuel and combustible supply facilities obligated to comply with the new rules, according to the sales turnover indicated in the table above (as well as exceptions and technical barriers to compliance).

The deadline for the operation of recharging infrastructure will commence from the publication of the relevant resolution.

Regarding concessions on state road networks, the above obligations shall be met by the concessionaries, with no reference to the need for rebalancing or leasing of developments.

All electric recharging service providers must electronically submit to the Ministry of Ecological Transition and Demographic Challenge updated information on the location, characteristics and availability of these facilities, as well as the retail price of the electricity or recharging service.

6. Building: The use of materials with the lowest possible carbon footprint, improvements in the accessibility of building and incentives for the introduction of renewable energy in the renovation of housing, facilitation photovoltaic installations for self-consumption in property owner’s communities – or horizontal property communities, as the new act refers to them – and zero-emission heating and cooling systems are encouraged.

Obligations are imposed with regard to recharging points: Before 1 January 2023, all buildings for use other than privative residential use that have a parking area with more than 20 parking spaces must provide at least the minimum electric vehicle recharging infrastructure, as established by the Technical Building Code (the Code is to be amended in this sense).

7. Ports and maritime transport, water and coasts: Act 7/2021 establishes measures to promote the incorporation of renewables, sustainable logistics chains and rail intermodality in ports and maritime transports.

In coastal and waterfront areas, the implementation of a Strategy for the Adaptation of the Coast to the Effects of Climate Change and a Strategy for the Water Ecological Transition are foreseen.

8. Regulated activities: The principle of financial caution is included regarding remuneration methodologies for these regulated activities, such as the transportation and distribution of natural gas and electricity, to reduce debt.

Act 7/2021 amends the regime concerning the communication of the taking of shares in groups of companies designated as electricity and natural gas transmission network managers, due to their possible impact on the security on the supply of gas and electricity systems.

9. Urban mobility plans: Measures will be taken to achieve a fleet of cars and light commercial vehicles without direct CO₂ emissions by 2050.

New passenger cars and light commercial vehicles, excluding those registered as historic vehicles not intended for commercial use, will gradually reduce their emissions, so that by 2040 at the latest, they will be vehicles with emissions of 0g CO₂/km on the roads. This seems to give scope for all categories of alternative energy vehicles (VEAs), not just pure electric vehicles.

Municipalities with more than 50,000 inhabitants (and those with more than 20,000 exceeding the emissions set out in RD 102/2011) and islands will adopt urban mobility plans consistent with air quality plans, establishing, among other provisions, “Madrid Central” type low emission zones.

The islands considered as autonomous regions, which are more vulnerable to climate change, may urge the state to establish measures to promote clean mobility, by means of restricting the circulation of cars and vans.

10. Fair transition: Act 7/2021 provides for the Fair Transition Strategy, a nationwide instrument aimed at optimising opportunities in activity and employment in the transition to a low greenhouse gas-emission economy, and regulated the Fair Transition Agreements as instruments to deliver these actions.

11. Ceasing domestic coal production: The granting of operating authorisations, permits, concessions, extensions or transfers of coal resources included in Spanish Closure Plan for Non-Competitive Coal Mining, will be subject to repayment of the aid granted under that regulation and corresponding to the entire period covered by the Closure Plan.

This will be applicable to requests for operating authorisations, permits or concessions regulated by mining legislation, as well as to extensions or transfers already being processed.

12. Public procurement: Act 7/2021 provides for the inclusion in tender specifications of award criteria linked to the fight against climate change and specific technical specifications that establish the necessary reduction of emissions and carbon footprint.

13. Financial sector: Act 7/2021 establishes a framework to facilitate sustainable investments. Reporting obligations for the financial sector and companies are included.

The act introduces the obligation to submit an annual report assessing the financial impact of the risks associated with climate change generated by their activities. From 2023, credit institutions must publish specific decarbonisation targets for their lending and investment portfolio.

14. Governance and public participation: The Committee of Experts on Climate Change and Energy Transition (CCAA) is the body responsible for evaluating and making recommendations on energy and climate change policies and measures, including regulations.

The CCAA must report to the Climate Change Policy Coordination Commission on the energy and climate plans from 31 December 2021.

Likewise, within six months of Act 7/2021's approval, the Spanish government will set up a group of experts to evaluate a tax reform that will also assess green taxation.