4. Luis Cabra Dueñas, director general de Transición Energética, Tecnología, Institucional de Repsol

Well, I think we have to be satisfied on one hand with what has been done, but also critical of how far we have advanced. I would say that decarbonization has been done halfway. If we think about emission reduction, Europe is the world leader: more than 30% reduction this century. No other region has advanced so much. However, this has been achieved mainly through emission reductions in electricity generation—first coal replaced by natural gas, then renewables penetration—but another part has been at the cost of closing industry. Also, we are moving to a service society. But consider Europe's weight in the world: 15 years ago, Europe and the US each accounted for 22% of global GDP; today Europe is 17% and the US 27%. We have left competitiveness and industry behind. Some say, perhaps unfairly, that Europe has outsourced production to China, cheap energy to Russia, and defense to the US. In the new political context, this cannot continue. What we need to do, as the Draghi report proposes, is unite competitiveness, industry, and decarbonization. I think we can do this. Regulation can be adjusted without dismantling the complex legislative framework we have created. The Fit for 55 package is there; we need to execute it. Certain surgical changes in that legislative package can make a difference so that many European industries compete better while continuing to decarbonize. We are seeing a change in mindset. We see the far-right gaining strength in the European Parliament, and in the US the Trump administration returns. Do I believe there is a change in mindset regarding how and at what pace decarbonization should be done? I think this should not be about ideologies. It's not progressivism versus conservatism. It's about making an energy transition that we all need, and doing it intelligently and efficiently. That said, there is a clear recognition that we can do things better. We need to recover competitiveness and industry in Europe. 2024 seems to be the year of diagnoses and declarations. We've had the Antwerp Declaration in February, a call for help from over 1,000 European companies across 27 sectors, recognizing the problem and proposing ideas. Then came the Draghi and Letta reports, and recently the Budapest Declaration from the European Council, which also addresses the same issues and points to solutions. The problem is recognized; now we need to move from declarations and reports to action. Business sectors are always willing to contribute ideas. One of our obsessions at Repsol is to convince that regulation should not dictate which decarbonization solutions each energy sector must apply. Regulation should facilitate private investment and be demanding on decarbonization goals, then let technological solutions complement and compete. It's not about banning some and promoting others; it's about keeping the playing field open so we can risk our capital on the decarbonization solutions we think are most appropriate and that best serve citizens and consumers. Consumers need options. Not all solutions are equally good for all consumers. The more decarbonization options we offer, the better we will do.

A very clear question and a very clear answer. This is not a matter of stomach; it's a matter of economic reality. Repsol has billion-euro energy transition plans for its refineries, renewable electricity generation, etc. If part of the cash resources we generate goes to a tax we consider excessive and unfair, we will have less money to invest in Spain. There is no other solution; it's mathematics. Our commitment to investment in the energy transition is unequivocal, but we have to wait and see how this tax story ends to know what resources we have available and what investments we can make. In the meantime, investments in Tarragona, Cartagena, Bilbao, Puertollano have to be on hold until, presumably in one or two months, we have more clarity on this matter.

This is one of the topics where we are most vocal. Coming from the oil and gas sector, we have decisively entered renewable electricity generation and electricity marketing, but we still believe that decarbonization solutions involve both electrons and molecules. In transport and mobility, what is the starting point? Today in Europe, more than 95% of movement of people and goods, except walking, is done through liquid fuels—gasoline and diesel—because they are very convenient energy solutions: high energy density, easy transport, existing infrastructure. But they emit CO2. Now we have the challenge of decarbonizing transport. The electric vehicle is definitely a solution, especially for light road transport, but not all vehicle users can conveniently recharge. We have heavy transport, airplanes, ships. We need to facilitate a European strategy that allows investment in these new renewable molecules and the establishment of a new value chain. Currently, we are fragmenting it: saying no to cars, better electric cars, then hydrogen for heavy transport, sustainable aviation fuel for planes. That way we won't advance enough. We are already producing renewable fuels. Repsol is in electric charging: over 2,000 fast charging points installed at service stations and public points, plus another 2,500 through digital solutions. But very few cars recharge at these stations—no more than one or two per day. So we need to promote electric vehicles, but meanwhile, and even in the long term, renewable liquid fuels can be a solution for existing cars and distribution infrastructure. We have a pending task on regulatory improvement. It is not good that from 2035 the combustion engine is declared dead. What sense does that make? There is a part of the electric vehicle lobby that is very sensible, and another part that not only promotes electric vehicles but also tries to ban the combustion engine, with considerable success so far. The arguments are that renewable fuels are very expensive and that there will be few raw materials. If they are expensive and scarce, why ban them? It seems there is a desire to avoid competition or complementary solutions to the electric vehicle. We need open regulation, technological neutrality, and let consumers have options to decide.

Almost with the fingers of one or two hands we can point out the regulatory improvements needed to make the investment case for renewable fuels a success. First, allow the combustion engine to be used with renewable fuels after 2035. Second, expand the list of sustainable raw materials in the relevant directive—there are sustainable raw materials not yet on that list. Third, promote innovation incentives and fiscal incentives for renewable fuels on equal footing with other decarbonization solutions. With half a dozen such measures, we could have a transformation in Europe and Spain that we are currently hindering. Europe is a leader in combustion engines and components, and has very competitive refineries. Spain has the most competitive refineries in Europe. We have an automotive and components industry that is also transforming for electric vehicles, but if it still has the possibility to continue investing in combustion engines, we will have much better companies and more wealth creation. We cannot lose that.

They are progressing well. What we want is to grow. In December 2019, Repsol set the goal that by 2050 its energy production portfolio must be net zero emissions. We cannot do that without renewable electricity generation. We have to progressively reduce fossil fuel production and create the new value chain for renewable molecules and fuels. But we also need to generate electricity and integrate downstream with our multi-energy offering: selling electricity for homes, electric charging, and increasingly renewable molecules. We started in 2018 with 0 GW of renewable generation. Now we have 3,200 MW of wind, solar, and hydro. By the end of next year, it will be 6,000 MW, and we aim for 9,000 to 10,000 MW by 2027. We are capturing electricity customers: we already have 2.5 million electricity and gas customers. The asset rotation process is the other leg of growth: growth must be profitable. With our cost of capital, a typical renewable energy project yielding 7-8% return is not enough. So we start projects from scratch, and when the project is practically operational, with a PPA signed and capital invested, financial investors want to enter, taking a percentage of our capital with a lower return expectation because the project is nearly risk-free. That allows us to achieve the returns our investors demand.