11

Regulatory Impact Regulatory Impact Assessment: Assessment: Methodology and Best Methodology and Best Practices Practices

David ShortallDavid Shortall

INMETRO International Workshop on Conformity INMETRO International Workshop on Conformity Assessment Assessment

Rio de Janeiro, Brazil Rio de Janeiro, Brazil

December 11-12, 2006December 11-12, 2006

22

Impact of RegulationsImpact of Regulations

At their bestAt their best::– Achieve social and environmental goalsAchieve social and environmental goals

– Provide consumer protectionProvide consumer protection

– Improve economic performance by Improve economic performance by promoting competitionpromoting competition

At their worstAt their worst::– Create unintended and often unavoidable Create unintended and often unavoidable

barriers to tradebarriers to trade

– Present unnecessary burdens to businessPresent unnecessary burdens to business

33

What is Regulatory What is Regulatory Impact AssessmentImpact Assessment Examines and measures the likely Examines and measures the likely

benefits, costs and effects of new benefits, costs and effects of new and changed regulation and changed regulation

– A key decision making tool for A key decision making tool for governmentsgovernments

– Underpins regulatory reform Underpins regulatory reform

– Used in most OECD countriesUsed in most OECD countries

– No single model fits all situationNo single model fits all situation

44

Purpose of Regulatory Purpose of Regulatory Impact Assessment Impact Assessment

Systematically and consistently Systematically and consistently examine selected potential impacts examine selected potential impacts arising from proposed government arising from proposed government regulationsregulations

Promote balanced decisions that Promote balanced decisions that trade off problems against wider trade off problems against wider economic and social goals economic and social goals

Communicate the information to Communicate the information to decision makersdecision makers

55

Benefits of RIA (1)Benefits of RIA (1)

Furnishes empirical data to make Furnishes empirical data to make appropriate regulatory decisionsappropriate regulatory decisions

Exposes impacts and linkages among Exposes impacts and linkages among policies and gives decision makers a policies and gives decision makers a capacity to weigh trade offscapacity to weigh trade offs

66

Benefits of RIAS (2)Benefits of RIAS (2)

Provides a public accounting of Provides a public accounting of each regulationeach regulation

Provides a clear explanation of the Provides a clear explanation of the regulation, its purpose, the regulation, its purpose, the analysis substantiating it and analysis substantiating it and expected impacts expected impacts

Enables policy makers to Enables policy makers to understand and take personal understand and take personal responsibility for regulatory responsibility for regulatory decisionsdecisions

77

RIA in CanadaRIA in Canada

Regulatory impact assessment Regulatory impact assessment statement introduced in 1999statement introduced in 1999

RIAS Writers GuideRIAS Writers Guide, , Guide to the Guide to the Regulatory ProcessRegulatory Process

Independent oversightIndependent oversight

Regular audits for compliance Regular audits for compliance

Systematic reduction of Systematic reduction of regulatory burden experiencedregulatory burden experienced

88

Written at the Written at the endend of the policy of the policy analysis and development process and analysis and development process and is a summary of the analysis doneis a summary of the analysis done

Pre-published in the Pre-published in the Canada Gazette,Canada Gazette, Part I Part I

Where relevant notified to WTO for Where relevant notified to WTO for comment by trading partnerscomment by trading partners

Pre-publication and notification offers Pre-publication and notification offers a further opportunity for public a further opportunity for public comment and inputcomment and input

Regulatory Impact Regulatory Impact Analysis Statement Analysis Statement (RIAS)(RIAS)

99

Components of the Components of the RIASRIAS 1.1. DescriptionDescription: : outlines the outlines the

regulations, defines the problem regulations, defines the problem and shows why action is and shows why action is necessarynecessary

2.2. AlternativesAlternatives: : lists options lists options beside regulation and other types beside regulation and other types of regulationof regulation

3.3. Benefits & CostsBenefits & Costs: : quantifies the quantifies the impactimpact

1010

4.4. ConsultationConsultation: : shows who shows who was conferred with and the was conferred with and the resultsresults

5.5. Compliance and Compliance and enforcementenforcement: : explains the explains the policy on conformity to the policy on conformity to the regulations and tools to regulations and tools to ensure it is respectedensure it is respected

Components of the Components of the RIASRIAS

1111

1. Description1. Description

Outlines the regulation, defines the Outlines the regulation, defines the problem and shows why action is problem and shows why action is necessarynecessary– All problems detected are defined and All problems detected are defined and

describeddescribed

– Each fully analyzed to understand nature Each fully analyzed to understand nature and implicationsand implications

– Analysis of health, safety, environmental Analysis of health, safety, environmental risksrisks

– Justification of government interventionJustification of government intervention

1212

2. Alternatives2. Alternatives

Considers alternatives Considers alternatives (regulatory, non-regulatory (regulatory, non-regulatory and status quo)and status quo)– Demonstrate that new or revised Demonstrate that new or revised

regulations will help solve the problemregulations will help solve the problem

– Consider solutions based on Consider solutions based on performance requirements as performance requirements as alternative to prescriptive standards alternative to prescriptive standards

– Use equivalent means where possible to Use equivalent means where possible to achieve regulatory objectiveachieve regulatory objective

1313

3. Benefits and Costs3. Benefits and Costs

Quantifies the impact of different options Quantifies the impact of different options – Address direct and indirect benefits and costs Address direct and indirect benefits and costs

and impacts on environment, government, and impacts on environment, government, business, workers, consumers, etc.business, workers, consumers, etc.

– Address impacts on sustainable development and Address impacts on sustainable development and balance societal and economic goalsbalance societal and economic goals

– Analysis of regulatory burden required on all Analysis of regulatory burden required on all alternativesalternatives

– Specific effects on small business required Specific effects on small business required through the business impact testthrough the business impact test

– Recommended solutions must impose least Recommended solutions must impose least costly information and administration burden costly information and administration burden

– Verification system ensures that all elements Verification system ensures that all elements have been fully consideredhave been fully considered

1414

4. 4. Compliance and Compliance and EnforcementEnforcement Explains the policy on conformity Explains the policy on conformity

to the regulations and tools to to the regulations and tools to ensure it is respectedensure it is respected– Designed to minimize government liability Designed to minimize government liability

– Identifies and informs those responsible Identifies and informs those responsible for regulatory actions for regulatory actions

– Compliance objectives reflected in Compliance objectives reflected in operational plans and budgets operational plans and budgets

– Redress mechanisms established Redress mechanisms established

1515

5. Consultation5. Consultation

SShows the results of consultation hows the results of consultation

– Regulatory proposals require timely Regulatory proposals require timely and thorough consultations with and thorough consultations with interested parties interested parties

– Authorities must set out process Authorities must set out process used to obtain input and identify used to obtain input and identify stakeholders consulted stakeholders consulted

1616

6. Other Elements6. Other Elements

A regulation must be reviewed to A regulation must be reviewed to determine any impact on determine any impact on obligations under an international obligations under an international agreement or treaty, including agreement or treaty, including WTO TBT Agreement WTO TBT Agreement

Environmental Assessment – Environmental Assessment – required where relevant required where relevant

1717

OECD Best PracticesOECD Best Practices

1.1. Maximize political commitment Maximize political commitment to RIAto RIA

– Support needed from highest level of Support needed from highest level of government (laws, decrees)government (laws, decrees)

– Integrate RIA into the policy process Integrate RIA into the policy process Attach RIA to legislationAttach RIA to legislation

Ensure quality controlEnsure quality control

1818

OECD Best PracticesOECD Best Practices

2.2. Allocate responsibility for Allocate responsibility for RIA programs carefullyRIA programs carefully

– Elements should be shared Elements should be shared between ministries and central between ministries and central control bodycontrol body

– Tool to improve skillsTool to improve skills

1919

OECD Best PracticesOECD Best Practices

3.3. Train the regulatorsTrain the regulators

– Need to start when RIA Need to start when RIA introducedintroduced

– Training manuals/writers guides Training manuals/writers guides very useful very useful

– Use simple concrete examples Use simple concrete examples and case studies and practical and case studies and practical guidance on data collection and guidance on data collection and methodologiesmethodologies

2020

OECD Best PracticesOECD Best Practices

4.4. Use consistent but flexible Use consistent but flexible analytical methods analytical methods

– Quantitative cost/benefit analysis Quantitative cost/benefit analysis (socio/economic impact, business impact, (socio/economic impact, business impact, cost- effective analysis) cost- effective analysis)

– Other methods including qualitative Other methods including qualitative assessments (efficiency, fairness)assessments (efficiency, fairness)

– Need for flexibility in selecting among Need for flexibility in selecting among analytical methods analytical methods

– Apply standardized guidelines for each Apply standardized guidelines for each method method

2121

OECD Best PracticesOECD Best Practices

5.5. Develop and Implement Data Develop and Implement Data Collection StrategiesCollection Strategies

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

2222

OECD Best PracticesOECD Best Practices

6.6. Target RIA effortsTarget RIA efforts

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

2323

OECD Best PracticesOECD Best Practices

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

– If undertaken early in decision-If undertaken early in decision-making process, RIA does not slow making process, RIA does not slow process downprocess down

– Integration is long term process Integration is long term process which leads to cultural change which leads to cultural change among regulators and legislators among regulators and legislators

2424

OECD Best PracticesOECD Best Practices

8.8. Communicate the results Communicate the results

– Test assumptions and data used in Test assumptions and data used in RIAS through public disclosureRIAS through public disclosure

– Means to improve the quality of the Means to improve the quality of the data and therefore the regulations data and therefore the regulations themselvesthemselves

2525

OECD Best PracticesOECD Best Practices

9.9. Involve the public Involve the public extensivelyextensively

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

2626

OECD Best PracticesOECD Best Practices

10.10. Apply RIA to existing as well Apply RIA to existing as well as new regulationas new regulation

– Involves fewer data problems so Involves fewer data problems so quality of resulting analysis is quality of resulting analysis is usually higherusually higher

– Local government regulations as Local government regulations as well as actions of independent well as actions of independent regulators should also be subject to regulators should also be subject to RIARIA

2727

ConclusionConclusion

For more information: For more information:

Canada’s RIAS:Canada’s RIAS:

http://www.pco-bcp.gc.ca/raoics-srdchttp://www.pco-bcp.gc.ca/raoics-srdc

OECD Best Practices:OECD Best Practices:

OECD 1997: OECD 1997: Regulatory Impact Regulatory Impact Analysis: Best Practices in OECD Analysis: Best Practices in OECD CountriesCountries, Paris, Paris