Regulation used to be all about consumer protection. Regulators wanted to ensure that critical services were affordable, that access was secure and that assets were being replaced appropriately. Now things have become a lot more complex. Regulator scope has expanded to include risks like cyber security, resilience, decarbonization and innovation. And more is on the horizon.

The big question is whether regulators should be taking on these new roles and areas of focus. Many would argue that these topics are actually the remit of politicians and policymakers, not regulators. Regulation is best used in slow-changing, highly- concentrated sectors where risks are known and controllable. New and emerging areas like Generative AI and decarbonization challenge the model.

It is not surprising that regulators are struggling to cope. While there are some regulators that move quickly to get their arms around key issues (particularly in Asia), there are also many that are reluctant to intervene on a topic unless they have a clear political remit to do so, meaning they often aren’t tasked to the job until it is too late. Regulators sometimes lack the technical skills, particularly when it comes to emerging issues and technologies. This means that, even when they have a clear policy steer, they don’t always have the capabilities or capacity to manage it appropriately.

Current regulatory models are also limiting regulators’ ability to deal with the increasingly difficult trade-offs that are being expected to be made. The traditional ‘RPI-X’ model might keep customer bills low, but it does not incentivize the scale and pace of investment that is required for challenges like the energy transition and building climate resilience.

This year, expect this debate to come to a head in many markets. It will start with continued challenges that force politicians and regulators to have a more sober and collaborative conversation about what regulation can and can’t do. That will require politicians to take more responsibility for many of these issues.

That should lead to a level of regulatory reform, supported by a concerted effort on the part of regulators and governments to develop new models that incentivize more investment and innovation. This will require not only an infusion of new skills and talent capable of managing emerging technologies and creating innovative mechanisms. It will also require regulators to be given greater breadth of responsibility within clearer political parameters.

At the same time, investors and capital markets will need to recognize that different flavors of regulation can work in different markets. Expecting developing nations to adopt the regulations of the developed nations — or withholding funding until they do — will not empower emerging market regulators but rather undercut them.

While it may not be as immediately noticeable, this should be expected to be a strong trend in 2024. Demand for robust and effective regulation across a range of fast-moving trends will force the issue up the agenda. Regulators will take the opportunity to adapt and upskill. Also, regulatory activism should be expected to increase (similar to what happened with antitrust regulations) with a focus on driving growth across sectors while balancing consumer, investors and environmental stakeholder expectations.

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