Climate change and other environmental threats require urgent government action. One of the priorities for governments looking to mitigate risks associated with such threats is the transformation of utilities, or “network” sectors. Achieving the “green transition” will require the profound transformation of the water, energy, e-communications, and transportation sectors, which are typically highly resource intensive and have a significant environmental impact. Furthermore, biodiversity protection, greenhouse gas emissions reduction, and resource efficiency all depend to some extent on achieving the green transition in utility sectors. Governments will need to find the appropriate tools and institutional frameworks to enable this transition.
Regulation is one of the main instruments governments can use to enable and encourage progress toward environmental goals. As leading public bodies in the governance of utility sectors, the activities of economic regulators can significantly affect environmental outcomes. Through their actions and decisions, economic regulators can influence how operators and consumers consider environmental sustainability in their decisions and choices. This raises questions about the appropriate role of economic regulators in supporting the green transition and contributing to environmental goals.
This publication surveys economic regulators’ contribution to the green transition in the sectors they oversee, considering the changing responsibilities and context economic regulators need to navigate. Analysis of newly available survey data shows economic regulators are already responding to demands to contribute to environmental goals. However, there is significant variation in the degree and scope of regulators’ contributions, with several common challenges and barriers observed. After highlighting the numerous ways in which economic regulators may contribute by describing the tools that connect regulators’ functions to environmental outcomes, the publication focuses on issues relating to governance.
The impact that regulators can have on environmental goals will depend on governance arrangements. Changes to these arrangements may help overcome observed challenges and barriers. Today, not all economic regulators have been set objectives relating to environmental sustainability, or hold the legal powers to consider environmental sustainability in decision making. Ultimately, this will be a matter for government or legislature to consider. However, for those regulators that are empowered to contribute, challenges still emerge, such as competing objectives and role clarity. In addition, more could be done to co-ordinate efforts amongst institutions, adapt regulatory tools and processes, and meet the demand for resources to deliver on expectations.
This report is part of the OECD work programme on the governance of regulators and regulatory policy, led by the OECD Network of Economic Regulators and the OECD Regulatory Policy Committee, with the support of the Regulatory Policy Division, OECD Public Governance Directorate.