Understanding Institutional Change: The Development of Institutions for the Regulation of the Natural Gas Supply Systems in the United States and the European Union

Abstract

This article compares the development of the institutions that regulate the natural gas supply systems in the United States and the European Union. Given the technical and functional similarities of these systems, the question arises as to why regulatory institutions in the US and the EU gas markets have developed in such different ways. In this study we have adopted a historical and dynamic approach, in which institutional outcomes are explored not only by focusing on ‘historic breaks’ in structural technological and economic conditions in the US and Europe, but also by looking at the ‘politics of regulation’. We illustrate the analytical value of applying a framework of incremental change over time within regulatory institutions, identifying different modes including displacement and layering, and introducing a new mode: ‘compartmentalization.’ We show that both pre-existing and newly created actors play important strategic roles in the process of institutional change and the creation of regulation, influencing the coordination between public and private parties as well as the interaction of federal and state levels in the US and supranational and national ‘orders’ in the EU. Our exploration is based on a systematic analysis of the literature on US and EU regulation of the natural gas supply systems since their early beginnings.