Pollitt, M. G., Duma, D., Covatariu, A.
Uncertainty, Regulation and the Pathways to Net Zero
CWPE2444
Abstract: In this paper we focus on suggestions on how energy regulation needs to change in the light of the likely ongoing and possibly increasing uncertainty which the path to net zero involves. We argue that there are things that regulators can do in the circumstances (and that their governments could encourage them to do). We begin with a discussion of the uncertainty problem of regulation on the path to net zero. Next, we consider what regulation for net zero should focus on. We then move on to the role of regulation within the national governance system for the energy sector. After this we outline how best practice regulation should evolve in the light of both theory and experience. Theories of regulation suggest key roles for both learning and for trade-offs in regulation. We advocate for the development of a ‘learning regulator’ which simultaneously learns from the past (dynamic regulation), in the present (responsive regulation) and anticipates future learning points (adaptive regulation). While current best practice regulation involves the first two types of learning, the third remains a work in progress. Finally, we introduce some possible regulatory lessons from other sectors, namely water, autonomous vehicles and airports.
Keywords: Uncertainty, Energy Regulation, Net Zero
JEL Codes: L51 L94
Author links: Michael Pollitt
PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2444.pdf 
EPRG Paper Link: 2411
