A high quality regulatory environment is an essential foundation for all nations to be an enjoyable and prosperous place to live, work, and do business, while protecting the environment and all parts of society. High performing regulators play a key role in achieving these outcomes while also encouraging innovation and fostering productivity and growth.

Can the energy market guarantee safe, secure and affordable energy to citizens and industry? Is the financial sector effectively supervised? Are our natural resources managed in a sustainable fashion? Governments are responsible for the delivery of public policies, but the achievement of many key social, economic and environmental goals is the task of regulatory agencies. These regulators play a crucial role in ensuring that markets function properly and that the public interest is safeguarded.

Regulation is a key tool for achieving the social, economic and environmental policy objectives of governments. Governments have a broad range of regulatory schemes reflecting the complex and diverse needs of their citizens, communities and economy.

Strengthening governance can contribute to improved regulatory outcomes (Meloni, 2010). In particular, better administration, more effective compliance programmes and targeted enforcement of regulation can help to achieve the desired outcomes most efficiently, while minimising the burden on regulated entities. This can also allow more focus on enforcement and other efforts to curb those who deliberately operate at the expense of the community’s interests.

An effective regulator must have clear objectives, with clear and linked functions and the mechanisms to co-ordinate with other relevant bodies to achieve the desired regulatory outcomes. This chapter describes how regulators can have a well-defined mission and distinct responsibilities within regulatory schemes.

It is important that regulatory decisions and functions are conducted with the upmost integrity to ensure that there is confidence in the regulatory regime. This is even more important for ensuring the rule of law, encouraging investment and having an enabling environment for inclusive growth built on trust. This chapter explores the ways of protecting regulators from undue influence, including through establishing independent regulators, and the considerations for assuring certainty in the regulatory system.

Regulators require governance arrangements that ensure their effective functioning, preserve its regulatory integrity and deliver the regulatory objectives of its mandate. This chapter details the structures of governing bodies, the decision making model and their memberships for independent regulators.

Businesses and citizens expect the delivery of regulatory outcomes from government and regulatory agencies, and the proper use of public authority and resources to achieve them. Regulators are generally accountable to three groups of stakeholders: i) ministers and the legislature; ii) regulated entities; and iii) the public. This chapter provides guidance on the accountability structures and transparency mechanisms that should be in place for effective regulators.

Good regulators have established mechanisms for engagement with stakeholders as part of achieving their objectives. The knowledge of regulated sectors and the businesses and citizens affected by regulatory schemes assists to regulate effectively. This chapter addresses how regulators should interact with stakeholders and the measures to avoid regulatory capture and conflicts of interest.

The amount and source of funding for a regulator will determine its organisation and operations. It should not influence the regulatory decisions and the regulator should be enabled to be impartial and efficient to achieve its objectives. This chapter raises the key issues for the funding structure of regulators to be effective and efficient.

It is important that regulators are aware of the impacts of their regulatory actions and decisions. This helps drive improvements and enhance systems and processes internally. It also demonstrates the effectiveness of the regulator to whom it is accountable and helps to build confidence in the regulatory system. This chapter lays out some of the key considerations in measuring and evaluating the performance of regulators.