This report presents MCC Economics's evidence submission to the UK Climate Change Committee (CCC) on the role of carbon offsetting within national decarbonisation pathways. Drawing on our experience in regulatory economics and market design, the report evaluates the effectiveness, credibility, and governance of offsetting mechanisms in supporting net zero delivery. It considers both voluntary and compliance markets, highlighting the risks of overreliance on offsets and proposing frameworks to ensure integrity, transparency, and additionality in emission reduction claims.

The Climate Change Committee launched a call for evidence to assess the contribution of carbon offsetting to the UK’s net zero strategy. MCC Economics’ submission responds with a critical economic assessment of current offsetting practices, identifying where market and policy interventions can improve outcomes. The report outlines key challenges in monitoring, verification, and permanence of offsets; economic incentives that drive offset demand and supply; principles for integrating offsetting within credible transition plans; and recommendations for regulatory consistency, data disclosure, and international coordination. Our evidence supports a balanced approach that recognises offsetting’s potential while reinforcing the primacy of direct emission reductions.

About

Abstract

Abu Dhabi faces a strategic choice in scaling up solar energy: centralised mega-projects or decentralsed rooftop systems. This paper by our Director PJ McCloskey and analyst Rodrigo Remor analyses why distributed solar uptake remains low in Abu Dhabi and evaluates its economic viability under current conditions. Abu Dhabi has so far favored large solar parks (e.g. the 1.17 GW Noor Abu Dhabi plant) while rooftop solar adoption is minimal (~2.94 MW on government buildings by 2020, <1% of Noor’s capacity). Given the UAE’s net-zero commitment and Energy Strategy 2050 targets (44% renewable electricity by 2050), the study explores whether decentralised solar could play a larger role and what policy shifts might be required.

This paper evaluates the economic viability of decentralised solar systems in Abu Dhabi. By analysing levelised cost of electricity (LCOE), net present value (NPV), and internal rate of return (IRR) across customer groups, it finds that while rooftop solar generation is not yet cost-effective for heavily subsidised sectors, it remains viable for industrial and commercial users. The study suggests that subsidy reform could significantly improve the financial appeal of decentralised systems, aligning with Abu Dhabi’s decarbonisation targets under the UAE Energy Strategy 2050.

About

Abstract

MCC Economics, on behalf of the Consumer Council for Water (CCW), has reviewed Ofwat’s PR24 final WACC determination to assess whether it fairly balances customer and investor interests. The report questions Ofwat’s decision to include costs stemming from companies with high financial gearing, arguing this may shift undue risk to customers. By applying a market-based, notional-efficient approach, MCC finds the WACC could have been set 1.08% lower — potentially saving customers £5.4 billion, or £41 per household, over five years. The review also highlights how new risk-reduction mechanisms in PR24 could justify a lower return, offering critical insight for both policymakers and the Competition and Markets Authority.

MCC Economics was commissioned by the Consumer Council for Water (CCW) to review Ofwat’s PR24 final WACC determination. The report examines whether Ofwat’s approach appropriately balances customer interests against investor requirements. It identifies potential upward bias in key components — including the cost of equity and debt — largely influenced by financial behaviours of highly geared companies. MCC proposes a market-led recalibration of the WACC that aligns with the notional efficient company and regulatory best practice. This would reduce the WACC by 1.08%, potentially saving customers £5.4 billion over five years. The report also assesses risk protection measures introduced in PR24 and offers recommendations for future regulatory frameworks and CMA deliberations.

About

Abstract

Regulatory frameworks are evolving to place consumers at the heart of decision-making. "Excellence in Consumer Engagement: 10 Fundamentals" explores the shift from traditional regulatory processes—where decisions were imposed on consumers—to a model where consumers actively influence outcomes. The paper identifies 10 key principles that drive successful engagement, including the importance of social license, leadership commitment, and setting the right incentives. Through case studies and real-world examples, it highlights both the risks of poor engagement and the benefits of genuine collaboration. This guide serves as a resource for regulators, businesses, and policymakers looking to enhance consumer participation in regulatory decision-making.

The landscape of consumer engagement in regulation has undergone a significant transformation, moving from a model where consumers had little influence to one where they play a central role in shaping decisions. This paper presents 10 fundamental principles that underpin effective consumer engagement, including commitment from leadership, social license, and consumer empowerment. It examines both successful and failed approaches to engagement, drawing lessons from key case studies such as the Powerlink Queensland electricity transmission decision and Australia’s banking and energy sector reforms. The study also explores the regulatory incentives that encourage engagement, from reputational benefits to financial rewards. By implementing these principles, businesses and regulators can foster trust, improve regulatory outcomes, and create a more balanced and consumer-centric decision-making process.

About

Abstract

The cost of capital is a fundamental consideration in regulated industries, influencing investment decisions, regulatory outcomes, and financial stability. This publication explores 10 hot topics that are currently shaping cost of capital discussions, including climate change objectives, stability and predictability of regulatory approaches, diminishing comparator firms, and competition for the right to supply. It also examines emerging trends, such as the impact of large-scale investments in renewable energy and the challenges of estimating market risk premiums. Backed by extensive research and regulatory case studies from Australia, New Zealand, and the UK, this paper offers valuable insights for policymakers, industry professionals, and investors.

Cost of capital plays a crucial role in determining regulated revenues, investment attractiveness, and financial resilience in capital-intensive industries. This paper identifies and examines 10 key topics currently influencing regulatory cost of capital decisions, including climate change considerations, evolving methodologies for estimating the market risk premium, and the impact of diminishing publicly listed comparator firms. The study provides a comparative analysis of regulatory approaches from key jurisdictions such as Australia, New Zealand, and the UK, offering insights into best practices and emerging challenges. Additional areas of interest include the role of reasonableness checks, financeability testing, and competition in infrastructure investment. By addressing these pressing issues, this publication serves as a resource for regulators, businesses, and investors seeking to understand and navigate the complexities of cost of capital determinations.

About

Abstract

Electricity North West Limited (ENWL), a regulated monopoly distributing electricity to 5 million customers across North West England, was acquired by Iberdrola in 2024 for €5 billion. MCC Economics’ publication examines the intricacies of this deal, including a significant 44% premium over ENWL’s Regulatory Asset Value (RAV). The analysis delves into ENWL’s financial inefficiencies, high cost of embedded debt, and regulatory challenges under Ofgem’s framework, juxtaposed with its strong equity performance and potential synergies with Iberdrola’s existing networks. This publication provides a comprehensive exploration of the value drivers, risks, and opportunities associated with the acquisition, offering valuable insights for investors and stakeholders in regulated utility markets.

This publication investigates the 2024 acquisition of Electricity North West Limited (ENWL) by Iberdrola, a transaction valued at €5 billion, including debt, and reflecting a substantial 44% premium over ENWL’s Regulatory Asset Value (RAV). ENWL serves as a regulated monopoly responsible for electricity distribution across North West England, supporting the UK’s decarbonisation goals. Key themes explored include ENWL’s financial challenges, regulatory constraints, and Iberdrola’s strategic motivations, including synergies with adjacent networks and growth potential in the transition to electrification. This case study offers critical insights into the valuation of utility assets, regulatory impacts, and the evolving energy landscape.

About

Abstract