The OECD’s latest Regulatory Policy Outlook shows how regulators worldwide can regulate more effectively.
The Organization for Economic Cooperation and Development (OECD) published the third edition of its Regulatory Policy Outlook during the COVID-19 pandemic—a time when global crises and complex policy problems forced governments to rethink the way they regulate.
Although regulating in “normal times” is already difficult, the COVID-19 pandemic has exposed gaps in domestic and international rulemaking that have cost lives and money. Addressing issues such as climate change, inequality, and aging populations—in a context of polarization, distrust in public institutions, and rapid technological change—requires governments to be flexible, regulate faster and better, and cooperate globally.
Moving toward “regulatory policy 2.0” means creating a smarter, more agile framework for making and delivering better regulation. It also means improving regulatory governance to ensure that a new regulatory framework serves each regulator’s strategic objectives, promotes cross-government coordination, and supports system-wide change, such as the United Nations’ Sustainable Development Goals. The processes used to design, implement, and enforce regulations need to be driven by the risks that rules are supposed to prevent and the goals that they are meant to achieve. Governments must review existing frameworks to see what still works and what could be updated. Governments also need to identify gaps and tools that are underdeveloped, underused, or applied with unsatisfactory results. In addition, governments should harness new technologies such as artificial intelligence and take into account behavioral barriers and biases.
Governments need to strengthen trust in institutions and processes, including in regulators and regulation. Most OECD member countries now use empirical evidence in designing regulations, provide stakeholders with opportunities to comment on draft regulations, and publish received comments online. A few OECD countries provide systematic feedback to stakeholders, which is essential for them to feel fairly treated by government.
OECD countries can also take more steps to invite stakeholder input on solutions to policy problems before regulators decide to step in. OECD countries should also survey stakeholders about whether rules actually work in practice, not just on paper. Currently, less than one-quarter of OECD countries systematically assess whether rules are working as intended.
Governments can also improve the evidentiary basis for rules and assess alternatives to regulation more seriously. Governments can give greater consideration to a regulation’s expected benefits and continue to strengthen the analysis of regulation’s distributional effects and likely impacts in terms of gender, innovation, and environmental quality. The OECD has developed best practice principles for regulatory impact analysis as well as guidance for ex post reviews of a country’s stock of regulations. These materials provide real-life examples on how to design a sound evidence-based regulatory system and conduct meaningful retrospective evaluations.
Regulatory oversight bodies can help make performance assessment of regulatory management tools more transparent and systematic, which can improve governments’ ability to reap the benefits from regulatory reform. Currently, all OECD member countries have at least one regulatory oversight body in charge of promoting and monitoring regulatory policy reform, and some have assumed new responsibilities recently. Oversight, however, continues to focus primarily on regulatory impact analysis, rather than on the quality of ex post evaluations and stakeholder engagement.
Governments cannot regulate in isolation. Their decisions have an impact on other countries and are ineffective to varying degrees if not coordinated with other countries. Moreover, solving many of today’s challenges—managing pandemics, countering cyberthreats, global tax evasion, and fighting climate change—requires close regulatory cooperation among countries. Countries can also learn from each other to strengthen their own regulatory frameworks. Even though there is widespread consensus that domestic rulemakers should take international considerations into account—and even though OECD countries have recently demonstrated their commitment to make better rules together to tackle global challenges—countries still do not often enough put a global perspective into practice. Less than one-fifth of OECD countries systematically reflect international dimensions in domestic rulemaking.
The governance of economic regulators affects the performance of critical network sectors—such as energy, e-communications, transport, and water—to improve sector performance and quality and affordability for consumers. Most economic regulators are independent bodies with a strong degree of autonomy in decision making. Their independence supports public trust in their decision-making objectivity, integrity, and stability, which improves the investment environment. Independence and accountability are two sides of the same coin, and with greater independence comes greater responsibility to remain accountable. Yet, although regulators commonly publish draft decisions and collect feedback from stakeholders, only half publish data on their organizational performance.
Focused, proportionate, and scientifically supported rules and procedures are more effective and less costly to all parties. Fundamentally, regulators should address risks to health and safety, the environment, the economy, and to consumers. But only seven OECD countries and the European Union report having an overall risk-and-regulation strategy that includes requirements for systematically considering risk when developing rules. As demonstrated during the pandemic, even these countries did not always effectively base their regulatory decisions on evidence-based risk analysis.
It is worth noting that profiles of OECD countries—which include comparative indicators—demonstrate that more than one third of OECD countries have partially improved their regulatory policy frameworks following recommendations from the previous Regulatory Policy Outlook. Countries, however, need to quicken the pace of reform to create better regulations for better lives.
The OECD’s Regulatory Policy Outlook provides guidance on how to strengthen the implementation of key regulatory management tools in addition to pointing to other ways that regulatory policy can be strengthened around the world. Ultimately, by applying better regulatory policy frameworks, countries can achieve better outcomes for all.
This essay is a part of a nine-part series entitled, A Global Regulatory Policy Outlook.
This contribution builds on the publication OECD (2021), OECD Regulatory Policy Outlook 2021, OECD Publishing, Paris, https://doi.org/10.1787/38b0fdb1-en. The additional opinions and arguments employed herein are those of the authors and do not necessarily reflect the official views of the OECD or of its Member countries.