Policies to Achieve Spain’s Climate Objectives: Spain
Selected Issues Papers, June 13, 2025
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Bibliographic details
- Authors: Damien Capelle, Divya Kirti, Ana Lariau, Nicola Pierri, Ippei Shibata, Germán Villegas-Bauer
- Published: June 13, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229015165.018
Summary of objectives and context
- Spain aims to cut greenhouse gas emissions, which implies further 30 percent cut from 2023 levels by 2030.
- Emission intensity varies widely across Spanish firms, creating potential gains by incentivizing lagging firms to match less-polluting peers.
- Spain has limited fiscal space, constraining reliance on public spending to achieve targets.
- The ongoing EU-ETS expansion is an important external development that could be complemented with domestic actions.
Key findings
- A further 30 percent cut from 2023 levels by 2030 requires new measures beyond current efforts.
- Emission heterogeneity at the firm level suggests substantial potential for emissions reductions through targeted policies that encourage lagging firms to adopt technologies or practices of cleaner peers.
- Relying mainly on public spending—such as subsidies or investments—would be costly and insufficient to meet the 2030 target.
- Carbon pricing is identified as the most effective, cost-efficient, and fiscally attractive option for achieving Spain’s climate objectives, particularly given constrained fiscal space.
- Complementing the EU-ETS expansion with domestic measures can enhance the role of carbon pricing in meeting national goals.
Policy recommendations
- Prioritize carbon pricing instruments as the central policy tool to achieve emissions reductions in a cost-effective and fiscally sustainable manner.
- Design complementary domestic actions to bolster the impact of the EU-ETS expansion, ensuring that EU-level changes translate into effective national outcomes.
- Leverage firm-level emission heterogeneity by:
- Incentivizing lagging firms to adopt technologies and practices of less-polluting peers.
- Targeting policies to sectors or firms with high emission intensity for greater cost-effectiveness.
- Limit overreliance on public spending; use fiscal resources strategically to support carbon pricing implementation and targeted transitions where market failures impede rapid adjustment.
Content in this bundle
- Policies to Achieve Spain’s Climate Objectives; IMF Selected Issues Paper No. 2025/079; May 16, 2025