Revolution for Regulators anyone?

The National Infrastructure Commission says substantial investment will be required to reduce greenhouse gas emissions and ensure communities are resilient to the increasing risks of floods and drought. It suggests this will place unfamiliar demands on regulators who will need to respond in new and different ways. But is the NIC right to say the regulatory system needn't be fundamentally changed, just 'adapted'?

Responding in May this year to the Committee on Climate Change (CCC) report on achieving net zero emissions by 2050, NIC Chair Sir John Armitt said:

"Today's report highlights the importance of urgent, concerted action to protect the UK's economy and environment from the impacts of climate change. Future generations won't forgive us if we don't act together and with a sharp focus.... But to achieve net zero emissions by 2050, we must put in place the infrastructure we need to change how we travel and how we power and heat our homes" (emphasis added).

So, no surprise then when the NIC's Regulation Study published on October 11th concluded that the UK will fail to reach net zero greenhouse gas emissions by 2050 if energy, telecoms and water regulators aren't given new powers to stimulate investment in sustainable infrastructure. It went on to recommend new duties for regulators Ofgem, Ofcom and Ofwat to promote the achievement of net zero and improve the resilience of the UK's infrastructure.

Already, it seems, Ofgem has been caught out by the paradigm shift that climate change brings. It recently refused to allow Scottish Power to invest £42m on upgrading its networks to provide new charging points for electric cars. Yes, the National Infrastructure Assessment has already called for a national network of electric vehicle charging points, to support the ambition of nearly 100% of new car and van sales being electric by 2030. But regulators work on the basis of supporting investment to meet evident demand.

That's no longer acceptable, Scottish Power CEO Keith Anderson told the BBC R4 Today programme on October 23rd. "The regulatory mind-set needs to be flipped", he said, to anticipate rather than follow demand. Strategic planning is what is needed to create the 25m electric charging point network for the switch to EVs across our road network, he added.

Strategic planning doesn't come easily to regulatory bodies that mediate between customer demands (which include low charges) and the need for private sector suppliers to earn a return on investment. Regulators are trained to tread lightly. Their very existence depends on an essentially short-term, case-by-case, commercial balancing act.

True, we could magic into existence an effective carbon trading and charging system to bring about a quantum shift in customer and producer behaviours. 'Marketising' carbon makes it measurable to regulators. Unless and until that happens, regulation based on economics alone is defunct.

This is of course true for transport sector regulators – ORR and the CAA – too. ORR has lived comfortably in the world of five-year planning cycles with (primarily) Government funding for both road and rail. It oversees lists of candidate projects, but certainly doesn't do strategic planning. In the strategic world, objectives (not expressed in measurable economic terms alone) are set for programmes (not projects), and success depends on programmes running across departmental boundaries.

Some hope, you might think. But we are fortunate to have in existence advisory bodies – the CCC and NIC – who together could be strengthened to provide the strategic oversight needed at this critical time. I suggest that our Regulators are obligated to act in conformance with what Government through the CCC and NIC must ask them to provide: a coherent programme to get to net zero.

What will this change in practice? Should previous decisions taken on live projects, judged against the political priorities of the day, under old-school regulation that ignores the climate change imperative, be re-visited? I would say yes – and be prepared to be surprised by the outcomes.

Heathrow runway three is case in point. Popular presumption would have this thrown out for its pernicious impact on carbon emissions. But the exact same infrastructure could be viewed so differently.

Today Heathrow's two runways are 99% utilised (regulators like economic efficiency). But this is achieved only by a truly terrible reliance (in carbon terms) on aircraft queues, both on the ground when taxiing, and in the surrounding skies, when stacking. A revised solution would be to use the extra runway capacity to remove the bottleneck that magnifies aircraft carbon emissions and exacerbates air quality, rather than increase flight numbers, and so transform the airport's environmental impact.

Okay, it's an outcome the CAA currently could not plausibly approve. Nor could the airport's owners contemplate such munificence.

The path to carbon neutrality will have revolutionary ideas. They will need refocused regulators and a new approach to how Government sets its funding priorities.