Law 7/2021: What novelties does the Climate Change and Energy Transition Law bring?

Law 7/2021, of 20 May, aims to facilitate the decarbonisation of the Spanish economy and its transition to a circular model that guarantees the rational use of resources, as well as adaptation to climate change and the implementation of a sustainable development model that generates decent employment and contributes to the reduction of inequalities

Tomorrow comes into force the new Law 7/2021, of May 20, on climate change and energy transition (B.O.E. of May 21, 2021) that aims to ensure compliance with the objectives of the Paris Agreement of 2015,

Sustainable development and rational use of resources

The declared objectives of Law 7/2021, of May 20, on climate change and energy transition, are to ensure compliance by Spain with the objectives of the Paris Agreement, adopted on December 12, 2015 and to facilitate the decarbonization of the Spanish economy and its transition to a circular model that guarantees the rational and solidary use of resources, as well as promoting adaptation to the impacts of climate change and the implementation of a sustainable development model that generates decent employment and contributes to the reduction of inequalities.

Emission reduction, use of renewable energies and energy efficiency

The text includes the minimum national objectives for reducing greenhouse gas emissions, renewable energies and energy efficiency of the Spanish economy for the years 2030 and 2050: the emissions of the Spanish economy as a whole in 2030 must be reduced by at least 23% compared to 1990 and climate neutrality must be achieved by 2050 at the latest.

In addition, by 2030 a penetration of renewable energies in the final energy consumption of at least 42% must be achieved, an electricity system with at least 74% generation from renewable energies and improve energy efficiency by reducing primary energy consumption by at least, 39.5% compared to the baseline according to Community regulations.

Integrated National Energy and Climate Plan and Decarbonization Strategy to 2050

The law includes as planning instruments to address the energy transition the Integrated National Energy and Climate Plan (PNIEC) and the Decarbonization Strategy to 2050 of the Spanish Economy. The first should include sectoral objectives and policies and measures to achieve them from the sectors participating in the emissions trading system, large industries and the electricity sector and the diffuse sectors (agriculture, forestry, transport, residential, institutional, commercial and fluorinated gases).

Renewable energy sources and energy efficiency

The law establishes that the use of the non-flowing hydraulic public domain for the generation of electricity in the new concessions that are granted will have as a priority the support for the integration of non-manageable renewable technologies in the electricity system, promoting in particular reversible hydroelectric power plants.

The text also seeks to combat the high indebtedness of regulated activities such as transport, the distribution of natural gas and electricity. Thus, it introduces this principle of financial prudence in the remuneration methodologies of these regulated activities that the competent body for its approval will develop.

Law 15/2012, of December 27, on fiscal measures for energy sustainability, is modified to establish that in the General State Budget Laws of each year will be used to finance the costs of the electricity system provided for in the Law of the Electricity Sector, referring to the promotion of renewable energies, an amount equivalent to the sum of the estimate of the annual collection derived from the taxes included in the Law of measures fiscal for energy sustainability.

The ninth additional provision of Law 3/2013, of June 4, on the creation of the National Commission of Markets and Competition, regarding the communication on the taking of shares of groups of companies designated as operator of the electricity and natural gas transmission network, is also modified, due to its possible impact on the security of supply of the gas and electricity systems.

In order to achieve more efficient buildings, the use of materials with the lowest possible carbon footprint, improvements in the accessibility of buildings, and incentives for the introduction of renewable energies in the rehabilitation of homes is encouraged, facilitating photovoltaic installations for self-consumption in the communities of owners – or communities of horizontal property, as the new law calls them—and zero-emission heating and cooling systems.

Energy and fuel transition

The text provides that no new exploration authorizations, 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. This measure excludes applications for an exploitation concession associated with a current research permit that are being processed before the entry into force of this law, which will be governed by the regulations applicable at the time the research permit is granted, except for the possibility of extension, which is expressly excluded.

Due to their prejudices and their cost, new permits for exploration, research or concessions for the exploitation of radioactive minerals will not be granted, nor will new applications for authorization of radioactive facilities be accepted.

On the other hand, it is established that the application of new tax benefits to energy products of fossil origin must be duly justified for reasons of social or economic interest or taking into account the absence of technological alternatives.

Provisions are also introduced to promote renewable gases, including biogas, biomethane, hydrogen and other alternative fuels. It also envisages the reduction of specific emissions in the air, sea and heavy road transport sector through the integration of renewable energies and the setting of supply targets for biofuels and other renewable fuels of non-biological origin.

Emission-free mobility and transport

In terms of zero-emission mobility, it is established that measures will be adopted to achieve by 2050 a fleet of light passenger cars and commercial vehicles without direct _CO2 emissions. Municipalities with more than 50,000 inhabitants and island territories will adopt sustainable urban mobility plans consistent with air quality plans. The insular Autonomous Communities, more vulnerable to climate change, may urge the State to establish measures to promote clean mobility, through restrictions on the movement of cars and vans.

To guarantee the existence of sufficient electric charging infrastructure, the law introduces obligations to install electric charging infrastructures in service stations whose annual sales of gasoline and diesel exceed 5 million liters, reaching 10% of the network. This charging infrastructure must have a power equal to or greater than 150 kW or 50 kW depending on the volume of sales. In the case of concessions in state road networks, the obligations indicated will be satisfied by the concessionaires.

It is also foreseen that the Technical Building Code establishes obligations regarding the installation of electric vehicle charging points in new buildings and in interventions in existing buildings. These measures will be accompanied by public aid.

The text also includes the need to adopt measures to reduce emissions generated by the consumption of fossil fuels in maritime transport and in ports, so that the ports of State competence in the year 2050 are of zero direct emissions.

Adaptation to climate change

The law establishes that the National Plan for Adaptation to Climate Change (PNACC) is the planning instrument to promote coordinated action against the effects of climate change. Strategic objectives and the definition of a system of indicators of impacts and adaptation to climate change, as well as the preparation of risk reports, will be established within the framework of the PNACC.

The law contemplates the integration of the risks derived from climate change in the planning and management of sectoral policies, such as hydrological, coastal, territorial and urban development, urban development, building and transport infrastructures, food safety and diet, as well as public health.

The text also provides for measures for the protection of biodiversity and its habitats against climate change and the development of basic guidelines for the adaptation to climate change of natural ecosystems and wild species in Spain. It also provides that the Government should incorporate measures to reduce the vulnerability of agricultural, forest and forest soils to climate change, including the development of a vulnerability map.

It includes the need to encourage the participation of public and private owners and managers in increasing the _CO2 capture capacity of terrestrial and marine carbon sinks, especially those in the agricultural and forestry sector.

Transition to a decarbonised economy

The text states that the transition to a decarbonized economy also requires measures that facilitate a just transition for the most vulnerable groups and geographical areas, including rural areas, and that this transition to a greener production model must be an engine for the creation of quality employment.

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The law creates the Just Transition Strategy, as a state-level instrument aimed at optimizing opportunities in the activity and employment of the transition to an economy low in greenhouse gas emissions, and regulates the Just Transition Agreements as instruments to materialize the actions.

It also regulates the cessation of domestic coal production. Thus, the text provides that the granting of operating authorizations, permits, concessions, extensions or assignments of coal resources of the production units registered in the Closure Plan of the Kingdom of Spain for Non-Competitive Coal Mining within the framework of Decision 2010/787/EU, will be subject to the repayment of the aid granted under that rule and corresponding to the entire period covered by the plan of closure, which will be applicable to applications for exploitation authorizations, permits or concessions regulated by mining legislation, as well as to extensions or assignments in process at the time of entry into force of the new law.

Resource mobilisation, public procurement and green finance

The law provides, with the exceptions established therein, that at least a percentage of the General State Budget, equivalent to that agreed in the Multiannual Financial Framework of the European Union, must have a positive impact on the fight against climate change and that the Government will revise upwards, before 2025, this percentage. It also defines the use of revenues from auctions of greenhouse gas emission allowances.

In the field of public procurement, it provides for the inclusion in the procurement documents of award criteria linked to the fight against climate change and of particular technical prescriptions that establish the necessary reduction of emissions and the carbon footprint.

It also establishes a framework to facilitate sustainable investments. The reporting obligations of the financial sector and companies are collected. The obligation to submit an annual report is introduced in which an assessment of the financial impact of the risks associated with climate change generated by the exposure of its activity is made. From 2023, banks must publish specific decarbonisation targets for their loan and investment portfolio.

It also includes the obligation for the electricity system operator, the Technical Manager of the gas system and the Hydrocarbons Logistics Company (CLH) to submit a report in which an assessment of the risks and opportunities associated with a decarbonized energy system is made on the activities of the entity, its strategy and its financial planning.

The text states that all this responds to the growing interest of the financial sector in green finance.

Education, research and innovation

The Law addresses two issues that it considers important for the involvement of Spanish society in responses to climate change and the promotion of the energy transition, such as education and training for sustainable development and climate care, and research, development and innovation.

In this sense, the Government will review the treatment of climate change and sustainability in the basic curriculum of the education system in a transversal manner; promote that universities review the treatment of climate change in their curricula and will keep permanently updated the National Catalogue of Professional Qualifications, as well as the catalogue of training offers in the field of Vocational Training that train in professional profiles of environmental sustainability and climate change and the energy transition.

Governance and public participation

The text regulates the governance of climate change and energy transition in Spain. Thus, it creates the Committee of Experts on Climate Change and Energy Transition as the body responsible for evaluating and making recommendations on energy and climate change policies and measures, including regulations. To this end, it shall prepare an annual report which shall be submitted and submitted for debate in the Congress of Deputies, with the participation of the Government.

The Autonomous Communities must report to the Climate Change Policy Coordination Commission on energy and climate plans as of December 31, 2021. Plans, programmes, strategies, instruments and general provisions adopted in the fight against climate change and the energy transition towards a low-carbon economy shall be carried out under open formulas that ensure the participation of the social and economic actors concerned and the public.

An article on greenhouse gas policies, measures, inventories and projections is also contemplated, so as to strengthen coordination when responding to the information obligations assumed in national, Community and international regulations.

Green taxation

The text provides that within six months of its approval as a law, the Government will constitute a group of experts to evaluate a tax reform that will also assess green taxation. In any case, the modifications that are introduced in this area will be in line with the economic situation.

Transposition of Community law

The Law transposes Directive 2018/844 of 30 May 2018 amending Directive 2010/31/EU on the energy performance of buildings and Directive 2012/27/EU on energy efficiency. This transposition is carried out through article 15 of the law, which provides that before January 1, 2023, all buildings for use other than private residential that have a parking area with more than twenty spaces, either inside or in an attached outdoor space, must comply with the requirement regarding the minimum endowments for the electric vehicle charging infrastructure established in the Technical Building Code.

Legislative amendments and regulatory development

In relation to the level of indebtedness and remuneration of regulated activities in the electricity and natural gas sectors, the following rules are modified:

—Law 34/1998 of 7 October 1998 on the hydrocarbons sector: a new paragraph 6 is added to Article 62

—Law 24/2013, of 26 December, on the Electricity Sector: a new section 8.bis is added in Article 14 and Article 20.9 is amended

—Law 18/2014, of 15 October, approving urgent measures for growth, competitiveness and efficiency: Article 60(1) is amended

Also modified:

—The second additional provision of Law 15/2012, of December 27, on fiscal measures for energy sustainability

—Section 2 of the ninth additional provision of Law 3/2013, of 4 June, on the creation of the National Commission for Markets and Competition, in relation to the communication on the taking of shares in groups of companies designated as operator of the electricity and natural gas transmission system

—Article 20.1 (c) of the Consolidated Text of the Land and Urban Rehabilitation Law, approved by Royal Legislative Decree 7/2015, of 30 October

—Law 50/1997, of 27 November, of the Government: a new letter h) is introduced in article 26.3

—Law 25/1964, of 29 April, on Nuclear Energy: a new paragraph is added to Article 38a(1)

The text also provides for the development of Law 43/2003, of November 21, on Montes, in relation to the incentive of the positive externalities of the ordered mountains, as well as the presentation to the Courts by the Government of a bill on sustainable mobility and financing of transport.

The Government will also propose the modification of the Horizontal Property Law to facilitate and make flexible the photovoltaic installations of self-consumption in the communities of horizontal property within a maximum period of one year and, in the same period, will present a proposal for reform of the regulatory framework in the field of energy.

Entry into force

Law 7/2021, of May 20, enters into force on May 22, 2021, the day after its publication in the Official State Gazette. However, for concession contracts in execution at the entry into force of the text, Article 15(11) — concerning the installation of electric recharging points in the case of concessions on State road networks — shall not enter into force until such time as the regulatory provision determining the obligations on the installation of electric recharging points in order to ensure sufficient conditions of supply to the traffic of electric vehicles that circulate on the aforementioned roads.

Source : Notícias Jurídicas