Tackling the climate crisis: the potential of energy regulators
A new urgency is infusing the climate crisis discourse.
As COP26 nears, there is growing recognition that countries’ greenhouse gas reduction commitments are collectively insufficient. Even if we hit our modest goals, the world is heading for temperature rises exceeding 3oC, above the “well below” 2oC commitment of the Paris Agreement.
Beyond numerical targets, we need to better understand the work that must be done at scale and speed. The energy sector is currently the world’s largest source of greenhouse gas emissions and a stronghold of the fossil fuel industry. It also holds the key to decarbonising other sectors, such as through the electrification of transport, buildings and industry.
Although there are global, regional, national and subnational groupings of energy regulators, we have not yet come together at a global summit with a climate focus. With the aim of building international collaboration, Ofgem are convening such a gathering on 24 May with its ‘Regulating for a green, fair future’ event. I will be chairing a panel discussion with representatives from across the international community - including Brazil, India, Italy and Singapore - on the issues we face in enabling energy-related decarbonisation, as well as learnings we can share towards our common climate goals.
The timing is propitious: there is significant discussion about targets and goals, but relatively little about the day-to-day challenge: implementation. So what might this cover?
Role of regulation
The industrial organisation of energy industries varies widely, and with that, the role of regulators. Regulatory scope is generally defined by law; in some countries narrowly and in others with remarkable breadth.
In some jurisdictions, the regulator’s portfolio may be limited to the economics of energy services: establishing rates and overseeing energy providers’ investments and services.
While energy systems are both extremely vulnerable to climate disruption and essential for mitigating carbon emissions, relatively few jurisdictions expressly empower energy regulators to consider or to act on climate change.
However, in countries with publicly-owned energy systems, many branches of the state government may have roles in shaping its direction. And even economic regulators may find they have authority over aspects of decarbonisation. For example:
- If fossil-fueled facilities close, what is the most efficient and prudential source of replacement power?
- What considerations inform budgets for construction of new infrastructure?
- What are the relative costs and benefits of adding to or subtracting from the fossil fuel investments?
Regulating for fairness
Justice issues also importantly sit with the regulator.
The COVID-19 pandemic and calls for racial justice have highlighted issues of disparate impact, and the needs of the most vulnerable people in our communities. The UN Climate Change Nationally Determined Contributions (NDC) Synthesis Report notes that many parties referred to the COVID-19 pandemic, but few reflected its potential impacts in their NDCs.
The Paris Agreement requires countries, when taking action on climate, to “respect, promote, and consider their respective obligations on human rights, the right to health, the rights of indigenous peoples, local communities, migrants, children, persons with disabilities and people in vulnerable situations and the right to development, as well as gender equality, empowerment of women and intergenerational equity.”
As regulators allocate the costs and account for the various scenarios connected to climate action, the responsibility also falls on them to both meet the needs and enable the participation of the most vulnerable.
Regulating for greener
Achieving the needed levels of renewable-fueled electricity requires countries to vastly multiply installations of solar and wind farms in cities, rural areas and offshore, and to do this faster than has ever been imagined possible. Equally critical to meet climate targets, is to stop relying on coal and natural gas to fuel electricity generation.
Energy regulators can play an important role in supporting and, in some cases, requiring or at least encouraging renewable development. This is where the day-to-day decisions are most likely to be made about what energy resources are zero or net-zero carbon and plans to move off legacy fossil fuel resources and systems.
Both the potential and the challenge are enormous.
Countries are moving to new sources of generation, like solar and wind. These are intermittent and need flexibility on the grid. They also need integrated resources on legacy infrastructure, such as energy storage, efficiency and demand response.
The schematic of an energy system has gone from a mechanical linear drawing of a power plant serving nodes of towns and cities, to an organic spider web where customers themselves may serve as major power plants at certain times. Much of this could depend on weather conditions and even community choices.
Meanwhile, both the price of renewable resources and storage, and the technological barriers, continue to drop while government and corporate acceptance of climate goals and community engagement grows.
Regulators are used to addressing challenges of magnitude in their own national contexts. But in the process, many value cross-border conversations.
In this spirit, I look forward to welcoming you to the discussion launching this international engagement programme on 24 May. It is only through collaboration we can effect the collective change we need in energy, for our people and the planet.
Eleanor Stein teaches Law of Climate Change at Albany Law School and the State University of New York, with an emphasis on climate justice. She serves on the Advisory Board of Rocky Mountain Institute’s eLab and on the Board of EcoViva, a US-based project in solidarity with climate adaptation in rural El Salvador.
The Regulating for Green Fair Future event takes place 24 May, 12:00 BST: Book your place