Ambition 7: Creating appropriate institutional and governance frameworks to reach net zero

Achieving net zero is a significant policy challenge that requires a transformative governance approach. As we move toward net zero regulation, its impacts will face increased scrutiny. The current regulatory landscape is fragmented, with some regions adopting innovative low-carbon technologies while others struggle to break free from fossil fuel dependency. Issues such as integrating renewable energy into grids, energy market volatility, and the socio-economic effects of decarbonisation remain challenges for regulators.

Current governance structures often rely on traditional regulatory approaches, such as ex post regulation, which may lack the agility to address the rapid changes in energy technologies and markets. Additionally, regional disparities in network planning demand more localised management. Existing asset ownership models do not always incentivise the necessary investments in new technologies and infrastructure. Moving forward, policymakers must ensure momentum toward net zero while maintaining energy reliability and affordability. This will require the integration of renewable energy sources, infrastructure upgrades, innovation, and attention to the socio-economic impacts of the energy transition.

Audit and incentivise National Energy and Climate Plans (NECPs)

The 2021-2023 energy crisis highlighted Europe’s shared energy security and the importance of monitoring National Energy and Climate Plans (NECPs). Germany’s failure to hedge its Russian gas supply risk exposed the need for better coordination across Europe. Stress testing NECPs against potential pan-European shocks and closely monitoring their implementation are critical. EU institutions should have new powers to audit NECPs and create incentives to ensure timely execution. A granular monitoring process would help identify best practices and challenges across Member States, enabling proactive solutions before issues become systemic.

Establish the European Energy Transition Observatory

European citizens need confidence in the monitoring of energy and climate policy costs. A European Energy Transition Observatory could independently track the financial and social impacts of the energy transition, ensuring that support measures reach vulnerable groups promptly. This would help mitigate negative effects and ensure that policy objectives are met.

Energy regulation needs to become more dynamic

A CERRE study suggests that energy regulation should be more dynamic, responsive, and adaptive. Dynamic regulation focuses on future needs, incentivising investment and innovation. Responsive regulation balances traditional regulatory approaches with self-regulation, while adaptive regulation establishes long-term plans with indicators for adjusting policies as needed. A “learning” regulator is essential to adapt to evolving challenges while anticipating future trends.

Social and technological equities

Policymakers must ensure equitable access to green technologies across all sectors and regions. The transition to a net zero economy should consider both household and industrial vulnerabilities. In the context of potential EU enlargement, it is crucial to account for varying starting points when developing decarbonisation strategies.

Openness to adjusting targets

Recent crises, including the Covid-19 pandemic and the Russia-Ukraine war, have derailed the European Commission’s initial plans for energy transition. While these challenges provided opportunities to accelerate the energy transition, some 2030 targets now seem increasingly unrealistic. Policymakers must remain flexible and open to adjusting targets to maintain progress toward net zero goals.