Understanding the Compliance Gap

The UK is proclaiming to be a leader in combating climate change; through ambitious and groundbreaking policies, public pronouncements, and interactions among its European counterparts, the UK is positioning itself as the forerunner in the fight to reduce carbon emissions and promote renewable technology. However, upon closer examination, there seems to be a discrepancy between what the UK government is saying in its regulatory policy, and the actions that energy companies are taking in response to this policy. In other words, there is an apparent gap in compliance between government policy and industry reaction. Actual records of carbon emissions and renewable energy growth show a much more grim picture of UK progress. As a comparative case, Germany has shown a much narrower gap in compliance, and I aim to expose these differences by examining the effectiveness of the two key environmental regulatory mechanisms in each country: the Renewables Obligation in the UK and the EEG in Germany. Having shown that the cases of the UK and Germany are different, there are many explanatory factors for this, including culture, political parties, history, national preferences, and many more. I have chosen governance as the factor of focus in this paper; governance is the collection of rules, norms, and institutions that oversee the creation, implementation, and enforcement of environmental regulatory policy. And, because governance is the focus, I will draw on the body of literature Varieties of Capitalism and its principle Co- Convergence Theory, which dichotomises two main types of economies: Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs). Using this theoretical underpinning, I will attempt to show that these categorisations, under which the UK and Germany fall, are helpful explanations for the creation of the RO and the EEG in each country, respectively. Once these parallels are drawn, the argument becomes clearer as to why the UK is exhibiting a wider gap in compliance between its stated policy goals and corresponding energy industry reaction.