The International Energy Agency (IEA) is an intergovernmental organization with a mandate to provide “analysis, data, policy recommendations and real-world solutions to help countries provide secure and sustainable energy for all”. The IEA focuses on energy security, economic development, environmental protection and climate change mitigation. This month the IEA released Driving Down Methane Leaks from the Oil and Gas Industry, a ten-step roadmap for policy makers. Per IEA:

“The Roadmap focuses on the process of establishing a new regulation. It details ten key steps in developing a new regulation and provides a step-by-step guide to aid regulators in gathering the information they need to design, draft and implement an effective regulatory scheme.”

Even though the Roadmap pertains to a specific regulatory target - reducing methane emissions in industry - its steps provide an excellent guide to policymakers across the regulatory landscape. Here are the ten steps, mostly excerpts, partly paraphrased:

Step 1: Understand the legal and political context: This consists of an information-gathering exercise designed to help you gather information that will inform your selection of a regulatory approach. This includes exploring how your institutional circumstances, existing regulatory framework, market context and current [status of regulatory target] may impact your decision-making.

Step 2: Characterise the nature of your industry: consider how regulating [the target] might fit your political and regulatory context. Understanding where legal authority and political power for action on [the target] sit can help activate the most promising institutions within your government. Reviewing existing policies can suggest where to amplify [regulatory] efforts, or what to change to remove disincentives for action.

Step 3: Develop a [regulatory target] profile: Think of this step in terms of establishing a baseline that will serve as a benchmark for your regulation. Characterise your jurisdiction’s [regulatory] challenge. Understanding the nature and magnitude of your target will be critical to designing sound regulations – the inquiry will show where to focus your efforts and [what] efforts are likely to have the most impact.

Step 4: Build regulatory capacity: Capacity [is] the ability of an agency to understand the [regulatory] challenge, to write rules to address that challenge, and to implement and enforce those rules. Capacity, then, encompasses four concepts: political support, trust, expertise and resources.

Step 5: Engage stakeholders: Before any formal action [is taken] to regulate [the target], conduct outreach to the companies that will be subject to the regulation, the communities [directly affected by regulation], other regulators within your government, and other segments of civil society.

Step 6: Define regulatory objectives: Now you can begin to design your regulation. Before you begin drafting, you will need to establish a set of regulatory objectives that you would like to achieve. In essence, this involves answering the question, “What problem are we trying to solve?” From this, you can map backwards to identify the preconditions that are necessary to solve this problem.

Step 7: Select the appropriate policy design: In this step, you will bring together the information you gathered in the earlier steps and decide which regulatory approaches will be most appropriate to help you meet your regulatory objectives. Review in-depth information about the regulatory approaches that have been used around the world and select from among those options the ones that are most appropriate for your context.

There is no right answer to policy design. What is most important is that you select approaches that work with, not against, your policy context.

Step 8: Draft the policy: Once you’ve selected your policy approach, seek out examples that already exist of similar models – either from other jurisdictions or similar local laws applied to different contexts. You may also wish to work with officials from other jurisdictions or agencies to understand what has worked well for them and what can be improved.

Step 9: Enable and enforce compliance: Alongside the rule-making process, begin compliance assistance outreach while finalising rule-setting. A policy that takes regulated entities by surprise is less likely to engender compliance. Help companies anticipate regulatory expectations, to help them succeed so that your policy goal might be achieved. Your policy should include metrics that can be used to determine whether individual firms are in compliance, as well as track progress towards the big policy goal.

Step 10: Periodically review and refine your policy: Before finalising your regulation, you should also begin to think about what would be necessary to update and change it in the future. You may want to write into your policy an express plan for periodic review. Review may be tied to predefined timelines, be performed on an ongoing basis at administrative level or result from stakeholder request. You may also want to enable the concept of “adaptive regulation” in your rule [which would allow] small changes in the future, perhaps within a predetermined range, without having to undergo a formal amendment process.

You may also consider building flexibility mechanisms into your regulation in order to keep it up to date. [Technology] can move very quickly. In order to ensure that new developments can be utilised, you may consider including a flexibility mechanism that allows companies to apply to have new technologies recognised as accepted compliance methods. In adopting such a mechanism, you should take care to ensure that the process for availing it is not so onerous that no one will be willing to use it.

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Reference:

IEA (2021), Driving Down Methane Leaks from the Oil and Gas Industry, IEA, Paris https://www.iea.org/reports/driving-down-methane-leaks-from-the-oil-and-gas-industry