Embedding Climate Resilience in Regulation

Why Climate Resilience Matters

Europe’s electricity and gas networks are under pressure – and climate change is turning up the heat. Extreme weather events are becoming more frequent and severe, exposing vulnerabilities in energy infrastructure and raising the spectre of cascading failures across interconnected systems. Despite mounting risks, EU and national regulatory frameworks are still struggling to capture the value of resilience investments, putting households, businesses, and critical services at risk of climate-driven disruptions.

The Regulatory Gaps

After providing an overview of the climate-related risks to energy infrastructure, this issue paper explains that resilience has not been systematically implemented in regulatory practice, either at the EU or the national level. Concentrating on transmission and distribution system operators (TSOs and DSOs), the analysis reveals that, although EU policy and regulation acknowledge resilience, concrete regulatory tools remain underdeveloped. Most notably, cost–benefit methodologies and performance incentives do not systematically account for climate risks, and mandatory climate risk assessments are fragmented.

Five Pathways to Embed Climate Resilience

The paper assesses and compares five policy options:

1. Increasing emphasis on climate resilience in EU-level energy legislation;
2. Strengthening EU-level project assessment through the Ten-Year Network Development Plan and cost–benefit analysis guidelines;
3. Incorporating resilience explicitly into national regulatory frameworks;
4. Enhancing EU-level coordination and stress testing;
5. Expanding the role of insurance and financial risk transfer.

The analysis concludes that no single measure will suffice. A combined approach is needed – one that ensures strong EU-level consistency while allowing flexibility to adapt to regional and national contexts.

Investment in resilience can be seen as a form of insurance: costs incurred today to reduce the likelihood of greater losses tomorrow. How these costs are recognised in regulation, how responsibilities are divided between EU and national levels, and how risks are shared between operators, consumers, and insurers will determine Europe’s ability to safeguard its energy systems in a changing climate.

The Issue Paper will be discussed at the CERRE event Virtual Roundtable on Critical Infrastructure Resilience (5 November).