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Better Economic Regulation

The Role of the Regulator

image of Better Economic Regulation

Efficient provision of transport infrastructure is critical to economic growth. The long asset lives of much transport infrastructure indicates governance through regulation, rather than through contract or public ownership. This can ensure predictability in long-term relationships whilst preserving some flexibility to deal with changes in external circumstances.

The transparency created by a fully independent regulator is invaluable for ensuring sufficient investment  is forthcoming, while maintaining reasonable conditions for user access. Discussion at the Roundtable focussed on how to achieve effective independent regulation and how to reconcile independence with the legitimate control of policy by the executive part of government.

Independent regulation is not seen as a universal default governance arrangement. Much of the discussion focused on when to regulate and when to rely on competition, even if imperfect, to drive efficiency. The discussions underscored that there are opportunities to improve performance significantly in the aviation, rail and road sectors, by learning from successful experience in improving governance structures in a range of countries.

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Transport regulation from theory to practice

general observations and a case study

International Transport Forum

The paper suggests a set of recommendations arising directly from the (negative) experience of regulating certain transport sectors in Italy. The main proposals are as follows: .. Build alliances with other regulatory agencies, as well as at a higher level (European Commission). Isolation facilitates capture. .. Use extensive and transparent quantitative evaluation methods (cost-benefit analysis). Discretionary approaches also facilitate capture. .. From the start, define a strictly efficiency-oriented scope for the regulatory agency: social and environmental issues are prone to political interference. .. A special problem is the regulation of infrastructure investment: here further research is badly needed.

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