MAIN TYPES OF EU REGULATORY INTERVENTION

Regulation can respond to market failures and other policy problems in different ways. The practice of ex ante impact assessment of regulation in the European Commission has led, over time, to a definition of a number of “types” of regulatory intervention.

Regulation through information. This is a very ‘light-touch’ form of regulation, which aims at affecting consumer and firm behaviour by increasing the amount of information available on the marketplace.

Self-regulation. This covers a large number of practices, common rules, codes of conduct and voluntary agreements by which economic actors, social players, NGOs and organised groups establish themselves voluntarily to regulate and organise their activities. Self-regulation can provide greater speed, responsiveness and flexibility as it can be established and altered more quickly than legislation; however, it needs to be open and transparent as it may provide an opportunity for collusive arrangements.

Co-regulation is “a mechanism in which a Community legislative act entrusts the attainment of the objectives defined by the legislator to parties which are recognized in the field (such as economic operators, the social partners, non-governmental organizations, or associations)”.  Co-regulation combines the advantages of the binding nature of legislation with a flexible self-regulatory approach to implementation that encourages innovation and draws on the experience of the parties concerned. A drawback is the need to set up monitoring arrangements.

Standardisation. Another approach that can serve as an alternative to legislation, or partially replace detailed regulation, is the reference to European Standards. This, at the EU level, requires the involvement of the European Standards Organisations CEN, CELENEC and ETSI. More precisely, the Commission may give mandates to ESOs to write standards, to be officially recognised by the EU as fulfilling particular (health, safety, environmental) objectives in EU regulation. This creates much greater certainty for companies as all they have to do is comply with such (performance) standards, for having an ensured access to the entire internal market. However, such standards are invariably voluntary, leaving (other) innovative options open. ESOs should also be consulted if a proposed policy option refers to European Standards, and might require changes in any of them.

Market-based instruments influence the behaviour of market players by providing (negative/positive) monetary incentives or by guaranteeing some basic rules of the game. Possible alternative types are: i) marketable offsets, which allow producers to negotiate with each other and agents to ensure overall compliance, without this being necessarily enforced on all producers at the same level; ii) marketable permits; iii) taxes or charges; iv) property and liability rules; and iv) limits to price and/or quantity (licences, quotas, etc.).

Prescriptive regulatory actions. These entail the incorporation of mandatory requirements into legislation (regulations, directives or decisions). The European Commission Impact Assessment guidelines distinguish between: Traditional ‘command and control’ policies. These specify the use of certain practices, technologies, or designs. The advantage is relative ease of monitoring and enforcement. The disadvantages are that they are likely to be less cost-effective and they do not encourage technological innovation or to go beyond standards.

Performance-oriented requirements. They specify the required performance of the target population (for instance, certain tolerances, etc.). They do not detail the exact mechanisms by which compliance is obtained, but rather specify the criteria to be followed to achieve such compliance. They are often to be preferred to engineering or design standards, since they increase flexibility to achieve the performance desired. Such requirements should be flexible, allowing aggregation or offsetting between different plants or agents, even regionally or nationally provided this does not unacceptably affect the overall outcome.