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Is Your Business Ready for Spain's Green Revolution?

Updated on
March 1, 2024

The Spanish Ecological Transition Law came into effect in May 2021 with the aim of promoting the transition towards a more sustainable economy and reducing the environmental impact of human activities.

This law establishes a series of measures to encourage the use of renewable energies, improve energy efficiency, reduce greenhouse gas emissions, and promote the circular economy.

In this article, we will analyse in detail what the law says, how it affects companies, and the actions that can be taken to comply with the law.

What does the law establish?

The objective of this law is to address the challenges of climate change and the transition towards clean and renewable energy in Spain. If you want to read the complete law, you can do so at this link.

The law seeks to achieve the following objectives by 2030:

  • A reduction of at least 23% in greenhouse gas emissions compared to 1990 levels.
  • A penetration of at least 42% of renewable energy in final energy consumption.
  • At least 74% of electricity generation to come from renewable sources in the electricity system.
  • A decrease of at least 39.5% in primary energy consumption with respect to the baseline according to community regulations.

The Law lays the foundations for the achievement of its objectives and compliance with commitments acquired through strategic planning, which at the national level is materialized first in the Integrated National Energy and Climate Plan (PNIEC), a tool that will serve to integrate the objectives and quantitative contributions to be achieved by all economic sectors in different areas, as well as the policies and measures to be adopted to achieve these objectives.

The first of these plans covers the period 2021-2030 and outlines an ambitious horizon, including the objectives set out in Article 3 of the Law.

The second major climate action instrument envisaged is the Decarbonisation Strategy by 2050, which will establish a path for reducing emissions and increasing absorptions by sinks in all economic sectors with a long-term horizon. This strategy will be reviewed every five years and will be essential for the fulfilment of the objectives set by the European Union.

Likewise, the approval of (i) National Plans for Adaptation to Climate Change, aimed at mitigating and predicting the risks derived from climate change; and (ii) Just Transition Strategies and Conventions is foreseen, in order to ensure equality and solidarity among territories and people.

Which companies are affected by the climate change and energy transition law?

The Spanish Ecological Transition Law establishes that companies that carry out economic activities that have a significant environmental impact are obliged to comply with it. Specifically, those who carry out activities included in section C (divisions 10 to 32) of the National Classification of Economic Activities (CNAE 2009) are defined as obligated to comply with the law. These activities refer to the production and supply of energy, extraction and transformation of minerals, manufacture of chemical products, rubber and plastic products, glass products, metallurgical products, computer, electronic and optical products, among other activities.

Additionally, the law also establishes that large energy consumers, i.e., those who consume more than 500 tonnes of oil equivalent per year, must comply with the energy efficiency measures established by the regulation.

In summary, the law has a broad focus and includes all companies and economic activities that generate a significant environmental impact, regardless of their size or sector.

If your company meets any of these requirements, it is obliged to comply with the legislation.

What are the main objectives of the Climate Change and Energy Transition law?

We can summarize the law's main objectives into 10 and what they mean for companies and citizens of Spain:

Reduction of greenhouse gas emissions:

Objective: To reduce greenhouse gas emissions by at least 23% by 2030 compared to 1990 levels.

Action to take: Evaluate and implement measures to reduce your company's greenhouse gas emissions.

Renewable energy:

Objective: To achieve that 42% of the total energy consumption comes from renewable sources by 2030.

Action to take: Evaluate the feasibility of incorporating renewable energy sources into your company's operations.

Energy efficiency:

Objective: The law establishes a target of improving energy efficiency by 39.5% by 2030.

Action to take: Conduct an energy audit to identify areas for improvement and implement energy-saving measures.

Carbon pricing:

Objective: Establishes a carbon pricing mechanism for sectors not covered by the EU Emissions Trading System (ETS).

Action to take: Monitor the development of the carbon pricing mechanism and prepare for its potential impact on your company.

Just transition:

Objective: The law aims to ensure a just transition to a low-carbon economy, minimizing the negative impact on employment and promoting social dialogue.

Action to take: Participate in social dialogue and support initiatives to promote a just transition within your industry.

Climate change adaptation:

Objective: Requires public administrations to develop and implement adaptation plans to reduce climate risks and vulnerabilities.

Action to take: Evaluate the potential impact of climate change on your company and develop an adaptation plan.

Climate governance:

Objective: Establishes the National Climate Change Commission and the Climate Policy Coordination Council to oversee climate policies.

Action to take: Stay informed of regulatory updates and collaborate with relevant authorities and stakeholders to ensure compliance.

Climate and energy planning:

Objective: Develop Integrated National Energy and Climate Plans (PNIEC) with ten-year horizons.

Action to take: Monitor the development of the PNIEC and align your company's strategies with national objectives.

Sustainable mobility:

Objective: Transition to sustainable mobility, including the implementation of infrastructure for electric vehicle charging.

Action to take: Evaluate the feasibility of integrating sustainable mobility solutions into your company's operations.

Public sector leadership:

Objective: Requires public administrations to lead by example, implementing energy efficiency measures and acquiring clean and low-emission vehicles.

Action to take: If you are part of the public sector or work with public entities, ensure that your organisation complies with these requirements.

What are the consequences of breaking the law?

Companies that do not comply with the provisions of Law 7/2021, of May 20, on climate change and energy transition, may face several consequences, such as:

Fines:

Non-compliant companies may be subject to fines, depending on the severity of the violation. The law establishes a range of sanctions, including minor, serious and very serious infringements, with corresponding penalties. Fines can range from a few thousand euros for minor infringements to millions of euros for very serious infringements.

Loss of subsidies or public financing:

Companies that do not comply with the law may risk losing access to government subsidies, grants, or other public financing programs designed to promote sustainability and climate action.

Reputational damage:

Non-compliant companies could suffer reputational damage, which could lead to a loss of consumer trust and potential negative impacts on the organisations market value or stock price.

Legal actions:

Companies that do not comply with the law may also face legal actions, such as lawsuits or compliance actions by competent authorities, leading to additional legal costs, potential damages, or injunctions.

Operational restrictions:

In certain cases, non-compliant companies may be subject to operational restrictions, such as temporary or permanent suspension of permits or licenses, which could significantly impact their business operations.

Increased regulatory scrutiny:

Non-compliance with the law may result in increased regulatory scrutiny and supervision, leading to additional administrative burden and the need for more frequent reporting and inspections.

To avoid these consequences, it is important for companies to familiarize themselves with the requirements of the Climate Change and Energy Transition Law, assess their current compliance status, and take appropriate measures to ensure that they are in line with the provisions of the law.

In conclusion, Law 7/2021, of May 20, on climate change and energy transition, represents a significant milestone in Spain's efforts to combat climate change and transition to a more sustainable, low-carbon economy. This innovative legislation presents a unique opportunity for businesses to proactively adapt to the emerging regulatory landscape and adopt environmental management principles.

By aligning with the objectives of the law, companies can not only ensure compliance, but also gain multiple benefits such as increased energy efficiency, reduced operating costs, and access to new markets driven by the growing demand for sustainable products and services. Additionally, companies that demonstrate a strong commitment to environmental responsibility are more likely to improve their brand reputation, attract environmentally conscious customers, and foster employee pride in their organization.

Embracing the Law on Climate Change and Energy Transition is a strategic decision that can position companies at the forefront of the green economy, driving long-term innovation and competitiveness. By seizing the opportunities presented by this legislation, companies can turn the challenges of climate change into a catalyst for growth, resilience, and long-term success.

How does Dcycle help you comply with Law 7/2021, of May 20, on climate change and energy transition?

Dcycle.io is an essential tool for companies looking to meet the objectives of the Law on climate change and energy transition. Thanks to its carbon footprint tracking and measurement system, companies can assess and reduce their greenhouse gas emissions. Additionally, Dcycle.io also allows for the assessment of the feasibility of implementing renewable energy sources in business operations, which can contribute to achieving the Law's goal of achieving a 42% renewable energy consumption in Spain by 2030.

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Jacobo Umbert
CRO and Co-Founder