The climate transition of Spain’s economic sectors

In the Spanish economy, greenhouse gas emissions are highly concentrated in just a handful of sectors: according to data for 2022, manufacturing, the energy sector, transport and the agriculture, forestry and fishing sector accounted for 92.2% of the total emissions generated by the production sectors. This figures is far higher than their contribution to the GVA of the economy as a whole (21.6%). Specifically, manufacturing contributed 11.1% of the economy’s GVA and 31.6% of all emissions. The energy sector contributed 4.2% of GVA, but generated 23.5% of total emissions. The agriculture, forestry and fishing sector, for its part, represented 2.3% of GVA, but 18.9% of emissions, while transport was 4.1% of GVA and 18.3% of emissions. These energy-intensive sectors contrast with those that are less so, highlighting the fact that the sectors which are less dependent on energy-intensive processes have a much lower environmental impact. A prime example is services, which (excluding transport) contributes more than 52% of the economy’s GVA, while it is responsible for just 3.8% of greenhouse gas emissions.

These emission-intensive sectors are key to the Spanish economy and produce inputs that are necessary for production in all sectors of the economy. However, in view of their high contribution to greenhouse gas emissions, monitoring and facilitating their climate transition is essential in order to achieve the country’s decarbonisation goals set for 2030 and 2050. Key to achieving this transition in these energy-intensive sectors is the electrification of their processes, together with the promotion of energy efficiency and the integration of renewable energies. In addition, decarbonising these sectors will require greater adoption of clean technologies, such as green hydrogen in heavy industry and electrification in the case of transport. Below, we will examine where these sectors stand in their emissions reduction process, and we will assess the degree to which public policies designed to accelerate the climate transition are being executed. 

When analysing the trend in emissions, there is a clear difference between the sectors that have managed to reduce their emissions and those that have made less progress. Below, we classify sectors according to their success in reducing their greenhouse gas emissions:

Sectors that are cutting emissions: the energy sector in particular has managed to significantly reduce its emissions. According to the National Statistics Institute (INE), between 2008 and 2022 the energy sector’s greenhouse gas emissions fell by 49.5%. This is primarily due to the growing role of renewable energies in electricity production. According to data from the Spanish national grid (Red Eléctrica), in 2023 renewables generated 50.3% of electricity in Spain, while nuclear produced 20.3%. Therefore, over 70% of all electricity generation was carbon neutral, significantly reducing the sector’s emissions. Although the energy sector remains one of the biggest emitters, investments in clean energy and the phasing-out of coal-fired power stations have contributed to a reduction in emissions. The manufacturing sector has also reduced its greenhouse gas emissions by 30.5% between 2008 and 2022. However, this decline was concentrated in the period 2008-2013, during which the sector experienced a significant contraction. Since 2014, the reduction in emissions has slowed substantially. Given the sector’s significant relative weight in the economy’s total emissions, and its importance for the economy as a whole, decarbonising Spain’s industry while remaining competitive will be key for both the energy transition and the country’s economy.

Sectors that are not cutting emissions: among the sectors that have not significantly reduced their greenhouse gas emissions, the transport sector stands out, having only done so by 6.8% between 2008 and 2022. This highlights its high dependence on fossil fuels and the slow progress in electrifying the vehicle fleet, which are the main factors behind this lack of progress in the sector. The primary sector (agriculture, livestock, forestry and fishing) increased its emissions by 0.4% between 2008 and 2022. However, this was a period in which the sector also increased its production volumes, and therefore the intensity of its emissions was reduced. Nevertheless, since the primary sector accounts for 18.9% of all the primary sector, which accounts for 18.9% of all the greenhouse gas emissions generated by Spain’s productive sectors, is key to the country’s climate transition.

For these sectors, technological modernisation and the adoption of more sustainable practices will be key. In the case of transport, the electrification of the vehicle fleet is a priority, as is the development of charging infrastructure. For the primary sector, regenerative farming practices and a reduction in the use of fertilisers and pesticides that generate methane and nitrous oxide emissions are required. It is crucial that public policies support the transition of these sectors through economic incentives and investment.

The NGEU and RePowerEU funds present an opportunity to make the necessary investments in order to accelerate the decarbonisation of Spain’s economic sectors, and to achieve the emission reduction targets set for 2030 and 2050 (a 37.7% reduction of greenhouse gas emissions by 2030 relative to 2005 levels, before achieving carbon neutrality by 2050). Unfortunately, the current state of the implementation/execution of these funds, according to data from the Independent Authority for Fiscal Responsibility (AIReF), paints a mixed picture. 

In the categories related to the decarbonisation of the transport sector, we see a significant gap between the implementation/execution of the components related to rail transport and those related to vehicles. On the one hand, the investments aimed at promoting rail transport show a high degree of implementation/execution. The transformation of metro lines has reached 73% implementation/execution, while the same figure for investments in sustainable mobility in commuter and long-distance rail networks exceeds 95%. Promoting rail transport, which is very low in emissions, will help to decarbonise the transport sector. On the other hand, the MOVES programme, which is key for the roll-out of charging infrastructure, shows an implementation/execution of 39%. Improving the charging infrastructure will be key to electrifying the vehicle fleet – especially considering that just 1.1% of all vehicles in 2023 were electric, as we explain in the previous article.

The components of the recovery plan linked to reducing emissions in the manufacturing industry show a limited degree of implementation/execution. Investment in renewable hydrogen, which is key to reducing emissions in heavy industry, is only 19% executed, while in the case of the items related to industrial policy, the percentage is 29%. Accelerating the execution of these components will be key in helping to decarbonise manufacturing, which is the sector with the highest greenhouse gas emissions, and in helping to ensure it remains competitive in the coming decades.

Another essential factor is the need to accelerate the execution of projects under the precision agriculture category, which currently stands at 44%. Supporting agriculture in its decarbonisation process will be key to reducing its emissions, particularly at a time when the sector is facing major challenges such as the impact of climate change, the lack of generational succession, new trends in consumption and fierce international competition.