Regulatory Impact Assessment: Methodology and Best Practices

1. Regulatory Impact Assessment: Methodology and Best Practices David Shortall INMETRO International Workshop on Conformity Assessment Rio de Janeiro, Brazil December 11-12, 2006

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

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

10. Components of the RIAS • Consultation: shows who was conferred with and the results • Compliance and enforcement: explains the policy on conformity to the regulations and tools to ensure it is respected

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. OECD Best Practices • 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

18. OECD Best Practices • Allocate responsibility for RIA programs carefully • Elements should be shared between ministries and central control body • Tool to improve skills

19. OECD Best Practices • 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

20. OECD Best Practices • 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

21. OECD Best Practices • Develop and Implement Data Collection Strategies • Quality of data used to evaluate a proposal determines usefulness of RIA

22. OECD Best Practices • Target RIA efforts • Target efforts at proposals which have largest impact on society and ensure that all such proposals are subject to RIA scrutiny

23. OECD Best Practices • 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

24. OECD Best Practices • 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

25. OECD Best Practices • 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

26. OECD Best Practices • 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

27. 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