Spain’s government has approved a major package of 80 emergency measures worth €5 billion to help households and businesses cope with rising energy costs linked to the war in Iran.
Prime Minister Pedro Sánchez announced the plan following an extraordinary Cabinet meeting, describing the measures as immediate support to prevent another surge in the cost of living.
The government says Spain is in a stronger position than during previous crises, thanks to investment in renewable energy and tighter fiscal planning. The new measures focus on reducing fuel and electricity costs, protecting vulnerable households and supporting industries most affected by rising energy prices.
Spain’s energy costs: Fuel VAT cut
One of the main measures is a reduction in VAT on fuel from 21% to 10%.
The government estimates this could:
- Reduce fuel prices by up to €0.30 per litre
- Save drivers around €20 per tank
- Be supported by a reduction in hydrocarbon taxes to EU minimum levels
Unlike previous fuel discounts, this time the government is using tax reductions instead of per-litre subsidies.
Lower electricity and gas bills
The package also includes a reduction in VAT on electricity from 21% to 10%.
Other measures include:
- 10% VAT on natural gas, firewood and pellets
- Extension of social electricity discounts throughout 2026
- Strengthening of the thermal social bonus
- Ban on cutting off energy supplies to vulnerable households
- Freeze on maximum prices for butane and propane
These steps aim to prevent energy bills from rising sharply.
Support for transport, farming and industry
Sectors heavily affected by fuel costs will receive targeted support, including:
- €0.20 per litre fuel aid for transport, agriculture, fishing and livestock
- Financial assistance for fertilisers
- 80% reduction in electricity grid tolls for energy-intensive industries
These measures are expected to generate around €200 million in savings for businesses.
Incentives for renewable energy
To reduce long-term dependence on fossil fuels, the government is also offering tax deductions for:
- Solar panels
- Heat pumps
- Electric vehicle charging points
The aim is to help households reduce energy use and speed up the transition to renewable energy.
Controls to prevent price increases
The plan also introduces measures to prevent companies from raising prices unfairly.
Spain’s competition authority will receive expanded powers to monitor pricing and sanction companies that take advantage of the situation.
Rental contracts extended
In a separate measure, the government has approved a two-year extension of current rental contracts. This is intended to provide housing stability during economic uncertainty.
A wide-ranging response
The €5 billion package combines tax cuts, direct support and consumer protections to limit the impact of rising energy prices.
With global energy markets remaining volatile, the government says the priority is to protect households, control inflation and maintain economic stability.
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