Regulatory Impact Assessment: Methodology and Best Practices

David Shortall INMETRO International Workshop on Conformity Assessment Rio de Janeiro, Brazil December 11-12, 2006 1

Impact of Regulations

 At their best: – Achieve social and environmental goals – Provide consumer protection – Improve economic performance by promoting competition  At their worst: – Create unintended and often unavoidable barriers to trade – Present unnecessary burdens to business 2

What is Regulatory Impact Assessment

 Examines and measures the likely benefits, costs and effects of new and changed regulation – A key decision making tool for governments – Underpins regulatory reform – Used in most OECD countries – No single model fits all situation 3

Purpose of Regulatory Impact Assessment

 Systematically and consistently examine selected potential impacts arising from proposed government regulations  Promote balanced decisions that trade off problems against wider economic and social goals  Communicate the information to decision makers 4

Benefits of RIA (1)

 Furnishes empirical data to make appropriate regulatory decisions  Exposes impacts and linkages among policies and gives decision makers a capacity to weigh trade offs 5

Benefits of RIAS (2)

 Provides a public accounting of each regulation  Provides a clear explanation of the regulation, its purpose, the analysis substantiating it and expected impacts  Enables policy makers to understand and take personal responsibility for regulatory decisions 6

RIA in Canada

 Regulatory impact assessment statement introduced in 1999  RIAS Writers Guide , Guide to the Regulatory Process  Independent oversight  Regular audits for compliance  Systematic reduction of regulatory burden experienced 7

Regulatory Impact Analysis Statement (RIAS)

  Written at the end of the policy analysis and development process and is a summary of the analysis done Pre-published in the Canada Gazette, Part I  Where relevant notified to WTO for comment by trading partners  Pre-publication and notification offers a further opportunity for public comment and input 8

Components of the RIAS

1.

2.

3.

Description: outlines the regulations, defines the problem and shows why action is necessary Alternatives: regulation lists options beside regulation and other types of Benefits & Costs: quantifies the impact 9

Components of the RIAS

4.

Consultation:

shows who was conferred with and the results

5.

Compliance and enforcement:

explains the policy on conformity to the regulations and tools to ensure it is respected 10

1. Description

 Outlines the regulation, defines the problem and shows why action is necessary – All problems detected are defined and described – Each fully analyzed to understand nature and implications – Analysis of health, safety, environmental risks – Justification of government intervention 11

2. Alternatives

 Considers alternatives (regulatory, non-regulatory and status quo) – Demonstrate that new or revised regulations will help solve the problem – Consider solutions based on performance requirements as alternative to prescriptive standards – Use equivalent means where possible to achieve regulatory objective 12

3. Benefits and Costs

 – – – – – – Quantifies the impact of different options Address direct and indirect benefits and costs and impacts on environment, government, business, workers, consumers, etc.

Address impacts on sustainable development and balance societal and economic goals Analysis of regulatory burden required on all alternatives Specific effects on small business required through the business impact test Recommended solutions must impose least costly information and administration burden Verification system ensures that all elements have been fully considered 13

4. Compliance and Enforcement

 Explains the policy on conformity to the regulations and tools to ensure it is respected – Designed to minimize government liability – Identifies and informs those responsible for regulatory actions – Compliance objectives reflected in operational plans and budgets – Redress mechanisms established 14

5. Consultation

 Shows the results of consultation – Regulatory proposals require timely and thorough consultations with interested parties – Authorities must set out process used to obtain input and identify stakeholders consulted 15

6. Other Elements

 A regulation must be reviewed to determine any impact on obligations under an international agreement or treaty, including WTO TBT Agreement  Environmental Assessment – required where relevant 16

OECD Best Practices

1.

– –

Maximize political commitment to RIA

Support needed from highest level of government (laws, decrees)  Integrate RIA into the policy process Attach RIA to legislation  Ensure quality control 17

OECD Best Practices

2.

Allocate responsibility for RIA programs carefully

– – Elements should be shared between ministries and central control body Tool to improve skills 18

OECD Best Practices

3. Train the regulators

– – – Need to start when RIA introduced Training manuals/writers guides very useful Use simple concrete examples and case studies and practical guidance on data collection and methodologies 19

OECD Best Practices

4. Use consistent but flexible analytical methods

– – – – Quantitative cost/benefit analysis (socio/economic impact, business impact, cost effective analysis) Other methods including qualitative assessments (efficiency, fairness) Need for flexibility in selecting among analytical methods Apply standardized guidelines for each method 20

OECD Best Practices

5. Develop and Implement Data Collection Strategies

– Quality of data used to evaluate a proposal determines usefulness of RIA 21

OECD Best Practices

6. Target RIA efforts

– Target efforts at proposals which have largest impact on society and ensure that all such proposals are subject to RIA scrutiny 22

OECD Best Practices

7. Integrate RIA with the policy making process (beginning as early as possible)

– – If undertaken early in decision-making process, RIA does not slow process down Integration is long term process which leads to cultural change among regulators and legislators 23

OECD Best Practices

8. Communicate the results

– – Test assumptions and data used in RIAS through public disclosure Means to improve the quality of the data and therefore the regulations themselves 24

OECD Best Practices

9. Involve the public extensively

– Consultation can yield important information on the feasibility of proposals, range of alternatives and likelihood affected parties are to accept proposed regulation 25

OECD Best Practices

10.Apply RIA to existing as well as new regulation

– – Involves fewer data problems so quality of resulting analysis is usually higher Local government regulations as well as actions of independent regulators should also be subject to RIA 26

Conclusion

For more information:  Canada’s RIAS: http://www.pco-bcp.gc.ca/raoics-srdc  OECD Best Practices: OECD 1997: Regulatory Impact Analysis: Best Practices in OECD Countries , Paris 27