The changes brought by innovation hold great potential to enhance prosperity and well-being, but they also entail significant risks and potential adverse effects. Innovation also fundamentally challenges the way governments regulate. Policy makers and regulators must strive to maintain a balance between fostering innovation, protecting consumers, and addressing the potential unintended consequences of disruption. Several factors combine to create unprecedented challenges in the way governments and regulators operate:
Difficulties for regulatory frameworks to keep pace with the dynamics of technological transformation;
Difficulties in designing fit-for-purpose regulatory frameworks given that innovation frequently cuts across administrative and sectoral boundaries;
Challenges to regulatory enforcement due, for example, to the difficulties in attributing liability when artificial intelligence in involved;
Institutional challenges raised by the inherently transboundary nature of a number of innovations.
The report presents a series of case studies to document these regulatory challenges and the range of regulatory responses implemented or contemplated by governments.
Main findings:
Governments can take a variety of regulatory approaches to address the challenges raised by innovation. These can range from explicitly preventing the development and adoption of a technological development, to adopting a “wait and see” approach to ascertain which perceived risks materialise, to developing regulatory guidance or piloting innovative approaches such as the adoption of fixed-term regulatory exemptions (e.g. regulatory sandboxes).
Given the dynamics of technological advances, it is likely that the appropriate regulatory approach (or mix of approaches) will require periodic adaptation to ensure regulations are fit for purpose. A continuous monitoring of the impact of regulations, coupled with timely and proportionate revaluations of existing regulatory frameworks, appears critical to achieving this. The cross-cutting nature and sheer pace of innovation may also require a combination of different types of regulatory approaches.
Traditional regulatory policy tools provide important opportunities to pause, consult, question and test the approaches that may help achieve general policy objectives. Yet, the disruptive changes brought by innovation create a strong need to strengthen and systematise the use of regulatory policy tools. As highlighted in the OECD Recommendation on Agile Regulatory Governance to Harness Innovation, this could involve, in particular:
Developing more flexible, iterative and adaptive ex ante and ex post assessments;
Fostering coherence and joined-up approaches through effective co-operation between the supra national, national and sub-national levels of government;
Developing governance frameworks to enable the development of agile and future-proof regulation such as outcome-based regulations (e.g. data-driven regulation and rules as code, co-regulation and non-regulatory approaches such as voluntary codes or standards;
Developing new enforcement strategies to promote compliance: governments should prioritise responsive and compliance-promoting approaches to regulatory delivery focusing on outcomes and based on risk-proportionality rather than focusing primarily on the letter of the rules.
