Functional stakes and EU regulatory governance: Temporal patterns of regulatory integration in energy and telecommunications

Mathieu E. (2020), Functional stakes and EU regulatory governance: temporal patterns of regulatory integration in energy and telecommunicationsWest European Politics, 43(4): 991-1010.

Research Note by Emmanuelle Mathieu, Université de Lausanne

The last few decades have seen a boom in the development of EU regulatory governance. Numbers of EU regulatory networks (ERNs) and EU regulatory agencies (ERAs) have been set up, and an important amount of regulatory decision-making authority has been uploaded to the EU level, by delegation to these bodies or to the European Commission. The literature explains this process with the need to expand the EU regulatory capacity in the face of the single market objective. When it comes to explaining the design of EU regulatory governance, the literature has rather emphasized political explanations. ERNs and ERAs are generally portrayed as weak agents lacking formal power, which is explained by the interest of pre-existing actors, especially the member states, to withhold regulatory power and keep EU regulatory agents under control. In short, whereas functional considerations are deemed relevant to explain the rise of EU regulatory governance, they are denied any explanatory power regarding its institutional design, which is instead generally seen as resulting from political dynamics exclusively. While I agree with the important role of political explanations, I argue that functional considerations too, contribute to the design of EU regulatory governance. When member states perceive the delegation of regulatory power to the EU as yielding significant functional gains, they value – and sometimes even actively push for – the delegation of regulatory powers to the EU.

In the article ‘Functional Stakes and EU Regulatory Governance: Temporal Patterns of Regulatory Integration in Energy and Telecommunications’ (published in West European Politics), I develop this functional argument based on two conceptual innovations. First, I redefine the explanandum as ‘regulatory integration’, which refers to the extent of regulatory power delegated to the EU, independently from the identity of the agent. This allows to encompass those regulatory competences delegated to the Commission that are overlooked in studies focusing on ERNs or ERAs only. Second, I conceive and evaluate the functional factor from the vantage point of member states’ policy priorities. Accordingly, functional stakes are considered as high when regulatory integration is perceived, by the member states, as a solution to their most urgent policy problems of the moment. Political agenda, the reference point from which the value of regulatory integration is assessed, evolve quickly. Connecting the assessment of functional stakes to member states’ political agenda allows to perceive empirical variations that are not visible otherwise. By contrast, studies considering market integration as a functional pull for regulatory integration are unable to grasp the varying nature and intensity of functional gains expected by member states from regulatory integration.

Photo by Oleg Gamulinskiy on Pixabay

The research strategy consists in studying temporal patterns of regulatory integration, i.e. comparing the levels of regulatory integration over time within a given policy field. This comparison is done for two distinct case studies, energy and telecommunications. This case selection allows to neutralize other potential explanatory factors and to isolate the empirical variation of functional stakes. Within-time comparisons are particularly suited to the focus on member states’ political agenda, which has the particularity to vary quickly over time. This methodological approach thus allows to see, within each policy field, how changes in member states’ policy priorities are reflected in their changing perception on the need for regulatory integration over time. For each sector, the analysis distinguishes three periods, corresponding to three reforms of the sectoral regulatory framework.

In the energy sector, regulatory integration was low in the first two periods (1990s and early 2000s), characterized by the creation of stakeholder platforms and ERNs deprived of any binding power, and the lack of significant delegation of powers to the Commission. However, in the third phase (late 2000s), the member states agreed to establish a relatively powerful EU agency, the Agency for the Cooperation of Energy Regulators (ACER), and to set up a decision-making procedure allowing the adoption of binding regulation at the EU level on a wide range of issues previously regulated exclusively at the national level. This constitutes a revolutionary move in terms of regulatory integration for a sector like energy. How can we explain it?

Several developments concurred to make the mid 2000s a turning point regarding the importance of energy security for member states. As a consequence of unrest in the Middle East and the growing mistrust in Russia following the 2006 energy crisis (due to a gas shortage operated by Gazprom), member states’ felt increasingly vulnerable and uncertain about their capacity to rely on a continuous supply of affordable energy. 2004 also marks the integration of Eastern and Central European countries (particularly suspicious of Russia’s foreign policy) and a shift in the United Kingdom’s position about the importance of securing energy sources at the EU level (as a consequence of turning from net exporter to net importer of oil and gas in 2004). Taking advantage of member states’ rising concern about energy security, the European Commission elaborated an ambitious reform proposal supported by a convincing frame about the integration of energy markets and regulatory integration as a key factors of Europe’s energy security. Addressing one of member states’ most urgent policy concern of the moment, the proposal was received favorably by them and led to an major move in terms of regulatory integration.

In telecommunications, the peak of regulatory integration is observed in the second period. In the first period (1990s), little regulatory decision-making power was delegated to the EU level and the member states systematically opposed a firm resistance to the creation of a significant regulatory agent. Yet in the second reform (early 2000s) they accepted to set up of an innovative and far-reaching decision-making procedure allowing the European Commission to veto most of NRAs’ decisions related to the regulation of telecommunications markets. Such a direct hierarchical connection between the Commission and NRAs on a wide range of key regulatory issues represents an exceptional level of regulatory integration, which is all the more striking if we consider member states’ strong resistance to regulatory integration in the 1990s. How can we explain this shift?

In 2000, determinated to stimulate growth, member states adopted the Lisbon agenda for growth and jobs. In terms of timing, this coincided with the boom of the internet and of the e-economy. These years were marked by a huge buzz around the concept of information society, which generated much – even unrealistic – hopes among the member states. Extremely confident in the capacity of the information society to revolutionize the European economy, the member states were exceptionally well predisposed to important moves in the telecommunications sector, which explains their readiness to delegate so much power to the Commission in 2002. However, member states’ enthusiasm for the information society then faded away throughout the following years. When, in 2007, the Commission presented an extremely ambitious reform proposal, their receptiveness was low. They adopted a defensive posture which only allowed the adoption of a modest reform, in sharp contrast with the high ambitions of the Commission.

Both case studies show how momentums in terms of regulatory integration are related to member states’ time-specific perceptions of high functional gains. Using member states’ policy priorities as a reference point to assess functional stakes reveals useful to grasp empirical variations of the functional factor and to carry a refined assessment of its explanatory power. Based on this conceptual innovation, this piece of work lends support to the determinant role of functional considerations in the design of EU regulatory governance. The interaction between political and functional considerations in member states’ preference formation about the design of EU regulatory governance would be an promising follow-up question to this research.