This chapter highlights the connection between policy action on climate change and other environmental issues, the need for transformation in network sectors, and the implications for economic regulators as leading bodies in the governance of those sectors. After outlining the changing context and role for economic regulators, the chapter draws on recent survey results to describe how economic regulators are responding to emerging risks, responsibilities, and expectations. The state of play, in terms of the degree and scope of regulators’ contributions to environmental sustainability, is presented at a high-level. The chapter concludes by highlighting some of the shared perspectives of regulators, particularly those common challenges and opportunities that should be understood by regulators themselves, but also those governments and legislators responsible for the regulatory policy framework.
The Role of Economic Regulators in the Green Transition
Abstract
Climate change and other environmental challenges require urgent government action if current alarming and unsustainable trends are to be reversed. Urgent action is required to reverse current trends in biodiversity loss, water and air pollution, hazardous land-use, and the depletion of natural resources, in addition to the climate impacts associated with increasing greenhouse gas emissions. Focused and co-ordinated action is needed to address the wide-ranging impacts of these environmental issues, some of which will be felt across borders and generations, as fairly as possible. In the case of greenhouse gas emissions especially, urgent action is required to avoid tipping points being breached, beyond which the rate and severity of climate change effects and the costs of adaptation or mitigation increase significantly.
In response, most governments have made binding international commitments to reduce greenhouse gas emissions through the Paris Agreement, with the goal of limiting global warming to well below two degrees Celsius compared to pre-industrial levels (UNFCCC, 2015[1]). To be successful, these commitments require domestic reforms that touch on virtually all sectors of the economy and society. Furthermore, citizens expect their governments to take action urgently – for example, a majority (56%) of Europeans think that national governments are responsible for tackling climate change, and a higher proportion (67%) think their national government is not doing enough to tackle climate change (European Union, 2023[2]). The recent OECD Survey on Drivers of Trust in Public Institutions (henceforth “OECD Trust Survey”) found around a fifth (21%) of OECD country respondents identified climate change and other environmental threats as among the three most important policy issues facing their country. Climate change and environmental threats were identified among the top five policy issues in 14 out of 24 OECD Members. The OECD Trust Survey results suggest a link between action on climate and trust in government - the most effective drivers of trust are related to complex, global, and long-term policy issues where citizens do not always feel they have a say and policy decisions are not always viewed to be taken based on the best available evidence (OECD, 2024[3]).
Network sectors have a significant impact on the environment and will require profound transformation as part of the journey to a more sustainable state. Whether looking at the pathways to reach net-zero emissions, reduce pollutants, or address biodiversity loss, achieving environmental targets depends to some extent on the green transition of network sectors, which are typically highly resource intensive. In 2019, approximately 34% of total greenhouse gas (GHG) emissions came from the energy supply sector and 15% from transport (IPCC, 2022[4]). In Europe, transport is the only major sector where GHG emissions have increased since 1990 and remains the largest contributor to nitrogen oxide emissions (EEA, 2024[5]). The ICT sector consumed around 4% of global electricity production and contributed around 1.4% of global GHG emissions, as well as generating significant amounts of e-waste1 (Malmodin et al., 2024[6]) (UNITAR, 2024[7]) (GSMA, 2024[8]). The improper handling of e-waste poses significant environmental hazards, with substances such as lead commonly released into the environment through open burning practices. In the water services sector, treating and pumping water uses large amounts of energy, and poorly maintained infrastructure can lead to the discharge of raw sewage into rivers. Around 42% of household wastewater globally is estimated to be not treated properly, damaging ecosystems and human health (UN-Water, 2023[9]), though this rate is much lower amongst OECD countries2. Looking across sectors, infrastructure-based emissions are a significant driver of overall GHG emissions, for example contributing 37% of emissions in the energy sector and 16% in the transport sector (UNOPS, 2021[10]).
Regulating can be one of the most appropriate and effective methods to drive the green transition. Whilst governments have various tools available to address these challenges – through setting taxes and subsidies, investing in technology and innovation, and participating in international trading schemes – an appropriate and effective method for achieving change can be regulation. When well-designed and implemented, regulation can address environmental challenges and encourage the “green transition” whilst also targeting innovation and growth (OECD, 2021[11]). Governments may draw on known regulatory principles and practices to better regulate for the green transition but face several gaps and challenges in implementation, as discussed in detail in the OECD paper Better Regulation for the Green Transition (OECD, 2023[12]).
The significant environmental impact of network sectors and the need for transformation brings into question regulatory approaches and the role of the institutions that oversee these sectors. The regulation of network sectors has traditionally been concerned with addressing overtly economic issues and achieving the efficient and effective functioning of competitive markets, alongside assuring public health and safety. Efficiency and effectiveness in this context are defined from an economic perspective (i.e. allocative efficiency) and regulation typically deals with problems of industry structure, pricing, investment and so forth from a narrowly defined “market failure” perspective, which does not always integrate environmental externalities, or not to the extent required to achieve current environmental sustainability goals. Conscious of the limitations and challenges associated with traditional economic tools, regulators have developed alternative approaches and governance tools (see Chapter 2; Chapter 3), though these are not systematically implemented across sectors.
Fundamentally, the regulation of network sectors, and the independent or governmental agencies (“economic regulators”) tasked with its design and delivery, can affect environmental outcomes. Alongside other measures to exploit the potential of better regulation for the green transition (OECD, 2023[12]) – adopting a green lens to regulatory design and evaluation, prioritising risk-based approaches, and connecting regulatory regimes internationally - governments may consider the merits of prioritising the better regulation of network sectors for the green transition, by reviewing the role of economic regulation and economic regulators in supporting its design, delivery and implementation.
Economic regulators may represent an under-utilised resource considering recent surveying on green governance and economic regulators’ contribution to environmental sustainability. Based on results for 184 regulatory authorities from 42 countries, a third of regulators (36%) have no objectives relating to the environmental sustainability of their sector defined, whilst a further 22% only need to adhere to certain overarching objectives for public institutions defined in legislation or the constitution. Around 42% of regulators have objectives defined in their establishing legislation and/or another piece of legislation relating to the environmental sustainability of the sector(s) they oversee. Looking by sector, the opportunity to define objectives for regulators is highest in the e-communications and rail transport sectors - 66% and 58% of regulators report no objectives have been defined, respectively (see How are economic regulators responding?).
The French Energy Regulatory Commission (CRE) regulates the electricity and gas markets in France, as provided for by the French Energy Code, contributing to the smooth functioning of those markets for the benefit of end consumers and in line with the objectives of the energy policy. CRE’s missions can therefore be divided into three areas:
A mission to regulate the networks, aimed at ensuring the performance of the network operators: cost control, quality of service, access conditions, investments, innovation, construction of the internal market.
A mission to regulate the markets to allow the opening of the markets and innovation for the benefit of the consumer: setting the tariffs, regulation of nuclear power, capacity mechanism, monitoring of the wholesale and retail markets, consultation on market rules.
A mission to serve the energy transition: support for renewable energy (examination of calls for tenders), calculation of public service energy charges, electricity mix in the non-interconnected areas.
In addition, in order to set out a vision and objectives for the actions of its Board and departments for the years 2023 and 2024, CRE published its roadmap in February 2023, with a focus on the ecological transition and carbon neutrality. Its first axis focuses on making grid regulation and energy system transformation a lever for accelerating the ecological transition.
Note: Roadmap available at: https://www.cre.fr/actualites/toute-lactualite/la-cre-publie-sa-feuille-de-route-pour-2023-et-2024.html. Please refer for Annex A for the full case study submission.
Source: Information submitted by CRE, 2024.
Questions about the appropriate role of economic regulators in environmental sustainability are not new, but the growing political attention to environmental issues in recent years is bringing the issue back to the fore. As leading public bodies in the governance of sectors with a significant environmental impact, economic regulators’ role and responsibilities in relation to environmental issues have been part of the policy debate for many years. Institutional questions arose in the context of the sustainable development agenda that emerged out of the United Nations Earth Summit in Rio in 1992 (for example (Owen, 2006[13])). More recently jurisdictions have published policy papers setting out the expectations for regulators’ to contribute to national environmental sustainability goals (e.g. (BEIS, 2022[14]). Reviews investigating regulatory policy reform and the capacity of regulators to meet specific challenges, such as the stimulation of green technologies and innovation to support the wider green transition, are ongoing in some countries (HM Treasury, 2023[15]). Whilst in other countries, economic regulators’ mandates have already been adjusted or expanded, recognising the value of existing institutional capacity and capability (Box 1.1; Box 1.2).
Furthermore, the growing expectation for urgent action on issues like climate change is associated with an expectation for whole-of-government action and a vision for “green governance”. In some jurisdictions, economic regulators may be part of a broader movement for a more responsive regulatory state. The case for a whole-of-government approach is set-out in the OECD’s Building Trust and Reinforcing Democracy: Preparing the Ground for Government Action (OECD, 2022[16]) and strengthened by the view that, at times, the focus of regulators on predominantly economic concerns may compromise the attainment of environmental goals (Owen, 2006[13]). Complex challenges like climate change are pushing public institutions – including independent or arms-length agencies – out of their silos to ensure a coherent and co-ordinated approach. (Bartle and Vass, 2007[17]) argue in favour of this more integrated regulatory state, “in which regulators are more clearly a part of a greater whole”. This coherence and co-ordination should however respect the individual roles of institutions, including the need for independent economic regulators to support trust in impartial decision making.
Recent investigations by the French government revealed that digital technologies and their enabling infrastructure currently contribute to 3-4% of global greenhouse gas emissions and 2% of the national carbon footprint. Without intervention, it could rise to 6.7% of France’s carbon footprint by 2040. In response, France enacted the law on the fight against waste and the circular economy (Loi anti-gaspillage pour une économie circulaire) in February 2020, leveraging European regulations.
To address this, the government tasked Arcep, the French communication regulator, and ADEME, the French Environment and Energy Management Agency, with an 18-month mission to assess France's digital environmental footprint and recommend actions to mitigate it. The study, presented in three parts, included a forward-looking assessment projecting the digital environmental footprint in France up to 2030 and 2050. It concluded that without intervention, the carbon footprint from digital technology could triple and its energy consumption nearly double between 2020 and 2050.
Since 2020, Arcep has been actively engaged in developing the annual survey “Achieving Digital Sustainability”, focused on gathering environmental data from digital entities. The aim of the survey is to track the environmental footprint of digital players over time. In support of these efforts, the government strengthened Arcep's authority to collect environmental data from electronic communications operators, online communications service providers, data centre operators, consumer device manufacturers, network equipment suppliers and operating system providers through the “Chaize Act” in 2021.
Note: Arcep surveys and data publications are available on their website: Maps & Data - Page 1 - 50 results per page | Arcep. Law 2020-105 (Anti-Waste Law).
Source: Information provided by Arcep, 2024.
For economic regulators, the prevalence of environmental issues and their interaction with regulators’ traditional areas of activity create new challenges. This is particularly noticeable in the realms of consumer protection and market transparency. Issues such as “greenwashing”3 have arisen since companies and service providers have become aware of customer concerns around environmental impact and their preferences (and potential increased willingness to pay) for “green” and “sustainable” products. As companies exploit the marketing opportunity of “green”, regulators must ensure consumers are protected from unfair practices. Therefore, regardless of whether regulators’ mandates integrate environmental sustainability, the deep, horizontal impact of environmental issues demands attention from economic regulators, even if solutions are sought within traditional remits and areas of intervention. Regulators are experiencing pressure from government and legislature, as well as regulated entities, environmental stakeholders, and citizens, to address emerging risks and new priorities, all while maintaining a focus on the regulator’s core statutory duties.
Economic regulators with responsibilities during the infrastructure lifecycle, relating to infrastructure planning, use and operation, are dealing with pressing questions relating to resilience and environmental sustainability. The regulation of infrastructure in the water, energy, e-communications, and transport sectors, due to increased environmental risks, must increasingly ensure resilience to external shocks and better preparedness. Related questions have been brought to the fore following the COVID-19 crisis and periods of extreme weather in many countries, including flooding and wildfires (Box 1.3). Furthermore, resilience and environmental sustainability objectives are not always compatible and may present trade-offs.
The regulatory policy landscape is always adapting and changing, though traditionally the importance of stability for market actors, producers and consumers, has meant change has occurred at a steady pace. Stability is still held as an important principle in regulatory policy, however, the urgency with which governments are starting to respond to the climate crisis and other environmental challenges has meant that economic regulators can experience an accelerated pace of change and be faced with choices that hold substantial implications for the regulators’ institution and organisation.
Economic regulators can make a positive contribution to the green transition of network sectors. As discussed in more detail in Chapter 2, economic regulators can, through their actions and decisions, have a strong impact on how operators and consumers consider environmental sustainability and the choices they make (Bartle and Vass, 2007[17]). At the same time, integrating environmental considerations into regulatory decision-making alongside more traditional social and economic objectives, can lead to more coherent and environmentally beneficial outcomes (OECD, 2023[12]). Finally, regulatory institutions provide a pool of civil servants with specialist knowledge, who through collaboration and co-operation can be a positive force for change and learnings for the public sector as a whole (OECD, 2022[18]).
However, the potential contribution of economic regulators to environmental goals, including improving sustainability and supporting the green transition in network sectors, rests on several important considerations around governance. As discussed in more detail in Chapter 3, first and foremost, economic regulators require clarity on their role in relation to meeting environmental goals. This is ultimately a question for governments to address when considering the regulatory and institutional framework needed to deliver on environmental goals. Where this question remains uncertainly or insufficiently answered, the risk is that the institutions best placed to support and deliver on change will remain on the sidelines, unengaged.
The Australian Energy Regulator (AER) is part of the Australian Competition & Consumer Commission (ACCC), supervising the wholesale electricity and gas markets in Australia.
Australia's energy sector faces significant challenges in managing the impacts of wildfires and extreme weather events. The transmission network plays a crucial role in mitigating the effects of fires by implementing measures such as derating interconnectors to manage heat and smoke. While this reduces the risk of damage, it can lead to reduced electricity flows, potentially impacting customers.
The recent wildfires across the east coast have severely affected the electricity network, causing power outages for tens of thousands of homes, particularly in rural towns and areas on the edge of the grid lacking backup or contingency plans.
The National Electricity Rules (RER) establish the functions for the AER, enabling it to set the maximum revenues that electricity network business can obtain. The AER revises the proposals received by network business operators based on different factors (projected demand for electricity, operating and financial costs, network reliability and safety stands) and establishes the revenue caps for periods of usually five years.
Recently the AER has approved a $26.7 million cost pass through application to reimburse Endeavour Energy for replacing and repairing power lines and infrastructure damaged by bushfires in the Blue Mountains, Southern Highlands, and South Coast. AER Chair Clare Savage emphasised that while the regulator does not propose the spending for these repairs, it ensures consumers do not overpay for necessary works. This decision, based on the principle of consumers paying only what is necessary for safe and reliable energy, will increase average annual bills by approximately $5 for households and AUD 19 for small businesses from July 2021 to June 2024, totalling an additional AUD 15 for households and AUD 57 for small businesses over the period. The AER’s role, under the National Electricity Rules, involves assessing such cost pass through applications to allow network businesses to recover costs from natural disasters like bushfires that were not covered in their existing revenue determinations.
It has not always been easy to establish, especially at an aggregate level, how far economic regulators are responding to these growing demands for action and how far they are contributing to environmental sustainability and the green transition within the sectors they oversee. This publication leverages new data on the “green governance” of economic regulators (the “green governance survey”) collected as part of the 2023 edition of the Governance of Sector Regulators (GSR) indicators survey, to address this knowledge gap and shed light on the state of play across 42 countries. For more information on the data sources used in this publication, please refer to the Reader’s Guide and Annex B.
Survey data reveals large variation in the degree and scope of regulators’ contributions to environmental sustainability. Economic regulators are already starting to respond and contribute to environmental policy objectives, for example by collecting data on the sustainability of the sectors they oversee or assessing environmental impacts as part of regulatory management processes, though there is currently no standard approach to what the role of economic regulators should be. The variation observed between sectors and countries is closely related to the variation seen in regulators’ mandate and powers to intervene, which provide both confidence and legitimacy, but may also define the mechanisms through which regulators can contribute.
Close to half of regulators report objectives relating to environmental sustainability have been set in legislation. Around 20% of regulators surveyed responded they have statutory objectives defined in the regulator’s establishing legislation (37 of 184), a further 10% responded they have objectives defined in a piece of legislation other than establishing legislation, and 12% responded they have objectives defined in both establishing and other legislation (Figure 1.1). In total, 78 of 184 regulators (42%) therefore have been set explicit objectives relating to environmental sustainability. There is significant variation across sectors: the proportion of regulators that have environmental objectives is lowest in the e-communications sector (10% of e-communications regulators4) and highest in the energy and air sector (67% and 62%, respectively) (Figure 1.2). Regulators have already noted that these results can be partly explained by the distinction made between economic regulators and environmental agencies in certain sectors and countries, with a clearer mandate prescribed for environmental agencies in some cases.
Note: A total 184 regulatory authorities provided an answer to the survey question, based on their country and sector context.
A third of regulators surveyed do not have objectives relating to environmental sustainability defined. One third (36%), or 66 of 184 regulators surveyed, do not have any objectives defined explicitly in legislation. This proportion is higher for regulators in the e-communications (66%) and rail transport (58%) sectors.
Note: A total 184 regulatory authorities provided an answer to the survey question.
Nevertheless, an additional share of regulators adhere to certain overarching objectives for public institutions defined in legislation or the constitution. Around 22% of regulators, or 40 of 184 responded they need to adhere to certain overarching objectives for public institutions relating to the environmental sustainability of the sector, which have been defined in legislation or the constitution (Figure 1.1) (Box 1.4). Overall, it is more common for ministerial regulators to adhere to overarching objectives for public institutions or have defined objectives. Whereas 23% of ministerial regulators, or 10 of 44, report having no objectives defined in legislation, 40% of independent regulators, or 56 of 140, report the same. Furthermore, 25% of ministerial regulators state they need to adhere to overarching objectives for public institutions (versus 21% for independent regulators), and a similar proportion again (20%) report their objectives are defined in a piece of legislation other than their establishing legislation (versus 7% for independent regulators) (Figure 1.3).
Ministerial versus independent regulators
Note: A total 184 regulatory authorities provided an answer to the survey question.
Ofwat, the economic regulator of the water sector in England and Wales, has a crucial role in promoting environmental sustainability. Though not the primary environmental regulator, Ofwat follows the UK and Welsh Governments’ Strategic Policy Statements (SPSs) to address resilience, biodiversity, net zero, and climate change adaptation. Ofwat’s strategy commits to meeting long-term challenges while delivering benefits for customers, society, and the environment. Key objectives include climate change mitigation, demand management, nature-based solutions, natural capital accounting, and river water quality improvement.
Ofwat collaborates with environmental regulators, the UK government, and Welsh Government to ensure water sector plans deliver strategic benefits for both customers and the environment. Ofwat’s focus on climate change involves setting expectations for water companies to align with national governments’ net zero targets and prioritise greenhouse gas reductions. Standardised annual reporting of operational and embedded emissions was introduced, and operational emission reductions will be incentivised in the next price review (2025-30). Additionally, Ofwat plays a role in the Water Industry National Environment Programme (WINEP), a programme outlining actions water companies in England must take to meet most of their environmental obligations. The current WINEP accounts for approximately GBP 5.2 billion of asset improvements, investigations, monitoring and catchment interventions between 2020 and 2025.
Source: Information provided by Ofwat, 2023.
More than half of regulators report holding the legal power to consider environmental sustainability in their regulatory decision making, though a significant proportion still lacks this power. Regardless of the existence of statutory objectives, around 58% of regulators report they hold the legal power necessary to consider elements relating to environmental sustainability in regulatory decision making. However, 42% lack these powers.
Economic regulators differ further in terms of where their legal powers to consider environmental sustainability apply when making decisions, considering both areas of regulatory activity and aspects of environmental sustainability.
For those regulators that hold the power to consider environmental sustainability, powers tend to apply to specific issues, such as decarbonisation, rather than across the full array of environmental challenges. Most regulators report their ability to consider environmental sustainability only applies in specific issue areas, with regulators specifying three distinct issue areas on average. Nineteen regulators have powers that apply across all the seven environmental issue areas listed. More regulators report their powers apply to issues of greenhouse gas reduction (64%), decarbonisation (63%) and water and air pollution (54%) (Figure 1.4). This may relate to the fact that a higher proportion of air transport (70%), water (78%), and energy (84%) regulators report “powers to consider”, relative to e-communications (27%) and rail (33%), and how issues of decarbonisation, GHG reduction, and pollution of air and water have been closely linked to outcomes for these sectors and identified as clearer priorities. Most regulators (83%) specified holding powers to consider environmental sustainability in relation to at least one of the defined issue areas, the remaining 17% specified only “other” issues.
By issue area
Note: Only regulators who responded they have the legal power to consider environmental sustainability in their decisions are included in this analysis – the relevant sample consists 106 regulatory authorities.
For those regulators that specified only “other” issues, some clarified their decisions may have to consider “sustainable development”, which was interpreted to combine multiple issue areas and other economic considerations beyond those listed. Noise pollution is one additional issue area noted by multiple air transport regulators, including the Swedish Transport Agency (Transportsyrelsen), ANAC in Portugal, and the Civil Aviation Authority of Israel. Further issues relating to energy were mentioned by regulators across sectors, such as the energy regulators of Poland (URE) and Czechia (ERU), and Finland’s transport regulator (Traficom), for who decisions can relate to energy efficiency and the uptake of clean and renewable energy sources. Portugal’s e-communications regulator, ANACOM, raised the issue of protection and resilience of the environment to wildfires, considered in relation to infrastructure planning, development, and maintenance.
Some regulators hold a very narrowly defined set of powers to tackle specific issues. Regulators specifying their powers to consider environmental sustainability apply to “other” decision situations, or “other” issues areas, tend to face a specific and limited scope of powers, vaguely defined issue areas, or both. For example, in the case of Austria’s e-communications regulator (TKK & RTR), the regulator noted it has obligations only when considering decisions on the co-location and sharing of network elements. In the case of Switzerland’s energy regulator (EICom), limited environmental objectives apply for when the regulator is consulted on transmission network development – to assess whether, for example, overhead or underground cables would be most beneficial considering environmental and economic costs and benefits.
Other regulators may be presented with vague definitions of what constitutes environmental sustainability and a broad set of objectives for their sector which require further interpretation and planning. For example, Austria’s TKK and RTR have obligations to “protect the environment”, not defined further in legislation, in relation to network decisions. For the rail transport regulators in Latvia (VDA) and New Zealand (NZTA) too, powers may refer to “environmental sustainability” as a consideration but are not defined further regarding the aspects of environmental sustainability. Other regulators, such as e-communications regulators in Japan (MIAC) and Ireland (ComReg) (Box 1.5) and the water regulator for England and Wales (Ofwat) are required to translate long-term environmental policy goals into action, for example through their strategic planning process.
At present, some communication regulators in OECD countries have an explicit mandate related to the environment, while others are co-ordinating the efforts of the environmental sustainability of networks as part of a whole-of-government approach. In some countries, communication regulators are contributing to a green transition by general national targets guiding also the national regulatory work.
In Costa Rica, Law No. 7593 establishes the obligation for the Superintendency of Telecommunications (Superintendencia de Telecomunicaciones, SUTEL) to ensure environmental sustainability in relation to the deployment of communication networks.
In France, the Minister for electronic communication and the communication regulator, Arcep (Autorité de Régulation des Communications Électroniques, des Postes et de la Distribution de la Presse), have had environmental protection as a general objective since the 2010 Law on National Commitment for the Environment.
In Hungary, the general objectives of the 2003 Act C on Electronic Communications include the enforcement of environmental protection requirements concerning communication networks and services. Among others, the Act stipulates that NMHH may order provisional protective measures for the protection of the environment (Section 37), and that radio equipment shall be installed in accordance with environmental and nature protection regulations (Section 80).
In New Zealand, the Resource Management Regulations (National Environmental Standards for Telecommunication Facilities) from 2016 are standards that provide national consistency in the rules surrounding the deployment of communication infrastructure across New Zealand, while ensuring the effects on the environment are minimised and managed appropriately.
In Ireland, the Climate Action and Low Carbon Development (Amendment) Act, enacted on 2 February 2021, establishes a legally binding framework with clear targets and commitments, whereby relevant public bodies are obliged to perform their functions in a manner consistent with national climate policies, including the annual climate action plans. The Irish electronic communications regulator, ComReg, is one such relevant body, requiring a climate action roadmap for the organisation. These roadmaps call for public sector bodies to reduce GHG emissions by 51% by 2030 (Government of Ireland, 2021[19]). ComReg contributes to the annual Adaptation Scorecard questionnaire for the Communications Sector, which is issued yearly by the Climate Change Advisory Council (CCAC) to the Department of Environment, Climate Change and Communication (DECC). The CCAC secretariat is staffed by the Irish Environmental Protection Agency (EPA), which is conducting a National Climate Change Risk Assessment (NCCRA) (due for publication Q4, 2024), and for which ComReg sits on the Expert Group.
Many regulators that at present do not have direct mandates on environmental sustainability issues, may still share the opinion that the impacts of the communication sector are increasingly relevant. This has led to own initiatives by communication regulators, such as in Belgium, Spain, and the United Kingdom. In Belgium, sustainability competencies are not within the remit of the authority on the national level, as environmental protection is a regional competence in which the federal Institute for Postal services and Telecommunications (BIPT) cannot interfere directly. Nevertheless, in BIPT’s strategic plan 2020-22, the regulator has engaged itself to support any innovative initiatives which stimulate the sustainability of communications networks such as the sharing of network elements between operators (BIPT, 2019[20]).
Source: (OECD, 2022[21]) “Communication regulators of the future”; OECD (forthcoming) “Environmental sustainability of communication networks”.
Despite a mix of starting points, economic regulators are aware of the challenge and have individually and collectively begun work to map how they may contribute to a green transition. This may involve strategic planning and proactive engagement at different levels and with a variety of stakeholders. For example, the Body of European Regulators for Economic Communication (BEREC) released its first report on the topic in 2022 (BEREC, 2022[22]). Similarly, the Council of European Energy Regulators (CEER) strategy 2022-2025 sets out how European energy regulators can promote the energy transition and contribute to a carbon-neutral society and economy (CEER, 2021[23]). The Association of European Public Authorities for drinking water and wastewater (WAREG) also holds a regular forum (EFRWS) focused on the EU Green Deal targets and has focused on tools to encourage innovation and environmental sustainability in its outputs (WAREG, 2023[24]).
Regardless of the regulatory and governance frameworks set out by government, economic regulators will face common challenges, emerging risks, and will remain accountable as key state actors. Whilst it is important to acknowledge economic regulators differing operating environments and highlight the variation shown by survey responses regarding the state of play, it is also clear that regulators share some common perspectives and challenges. It is with consideration for these common challenges and risks that the consolidated experience and analysis of the tools with which economic regulators can directly contribute to environmental sustainability (Chapter 2) and the governance arrangements that may enable their contribution (Chapter 3), becomes most valuable.
Whether regulators have a direct and active role in delivering environmental sustainability via their regulatory activities, or not, regulators will be impacted by a period of transition in network sectors. A variety of risks and issues can arise for all economic regulators. From an organisational perspective transition brings the challenge of managing change and its impact on people, political and social pressure can create institutional risks, including legal risks, and new duties and external threats may require new ways of thinking and working, incorporating new tools and techniques (Figure 1.5):
Regulators will face organisational challenges associated with change, which may be further understood as economic in nature, or related to organisational leadership and culture. For some regulators, volatility in network sectors can impact current funding arrangements, whilst new duties and objectives require revised strategies, leadership and buy-in from the organisation. Efficient and effective delivery will be essential based on the urgency with which governments are seeking action from institutional partners.
Regulators will face political and social pressures that bring institutional and legal risks. As noted above, stakeholders of all institutions involved in the governance of network sectors, given the dependency on the transformation of these sectors for achieving environmental sustainability goals, will be expected to explain their role and responsibilities. Regulators may increasingly find themselves pressured to act “ahead of the curve”, in situations where guidance is lacking, roles are not yet clearly defined, and yet action is urgently required.
Regulators may need to overcome technical or operational barriers which involve the review, restructuring and development of capacity and capability within the organisation to deal with changes in the sectors they oversee (e.g., new data collection methods, adjusted approaches to valuation, increase use of risk assessment, accompanying development of new systems, and so forth).
There will always be certain complicating and disruptive factors at play. Regulators face the challenge of simultaneously managing disruption in the short-term and anticipating and adapting to emerging risks in the longer term, even if, for some, remits relate only to a set of narrowly defined functions in economic regulation, i.e., focused on issues of competition, cost effectiveness, and safety.
In conclusion, economic regulators are operating within a changing and challenging context, considering the urgent need for green transition in the sectors they oversee, the increased scrutiny of stakeholders and growing expectations of citizens, and the complicating and disruptive impact of emerging trends on traditional remits relating to economic regulation. Across countries and sectors, recent surveying suggests economic regulators may represent an under-utilised resource given the large variation in the degree and scope of their contributions to the green transition and environmental sustainability. Evidence shows that economic regulators can make a positive contribution to the green transition of utility sectors (Chapter 2). However, whilst many economic regulators are already responding to the challenge and expectation to contribute to environmental goals, their potential contribution rests on the ability to effectively manage the risks listed above as well as several important considerations around governance (Chapter 3).
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← 1. Electronic waste (e-waste or WEEE) describes all types of old, end-of-life or discarded electrical and electronic equipment. E-waste contains a complex mixture of materials, some of which are hazardous.
← 2. Data on wastewater treatment for OECD countries is available here: Wastewater treatment | OECD.
← 3. Defined as self-declared environmental claims used as a corporate marketing tool (OECD, 2011[25]).
← 4. For supplementary data on e-communications regulators please refer to Box 3.3.