Business Environment in the Southern Mediterranean A project - - PowerPoint PPT Presentation

Enhancement of the Business Environment in the Southern Mediterranean

A project funded by the European Union

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Measuring the Impact of Reform... ...a practical approach and some methodological approaches

Cairo, December 17 – 18th 2014

RIA : Regulatory Impact Analysis

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REGULATORY IMPACT ASSESSMENT RIA : « Analysis » or « Assessment » ?

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RIA : History and development

The first RIA : "Inflation Impact Assessments" in USA (Carter) in 1978 and Reagan administration, using Cost- Benefit Analysis (BCA). Other early RIA adopters : Australia, Canada, Singapore. By 1996 about 50% of OECD countries use some form of RIA. Today, all OECD countries use RIA and it is strongly promoted by World Bank. Most developing countries are now adopting RIA requirements.

OECD Countries (34) and Candidates

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RIA : Generalisation in OECD

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RIA : Context and Origin

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RIA : Context and Origin

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RIA : Definition

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Regulatory Impact Assessment (also known as Regulatory Impact Analysis) is used to assess : _ potential impact of proposed new regulatory measures _ actual impact of existing regulations. _ Ex post RIA : the actual impacts of an existing regulatory measure

• r

_ Ex ante RIA : measuring the likely impacts of a regulatory proposal

RIA : Definition Ex–Ante & Ex–Post Assessment

RIA is a legal requirement in numerous Countries, including many outside the OECD (ex : Korea, the Philippines, Algeria, Botswana, Tanzania, Jamaica, Mexico, Albania, Lithuania, Romania). Moreover, in a larger number of countries, RIA is used in some form even though it is not a legal requirement. Coverage and formal status

• f regulatory assessment varies

considerably between countries.

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RIA : Generalisation of the Instrument

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“Regulatory Impact Assessment in Developing and Transition Economies: A Survey of Current practice” : Colin Kirkpatrick a , David Parker b & Yin-Fang Zhang University of Manchester,: 15 Mar 2010.

RIA : Adoption in non-OECD & Transition Economies

Where RIA is being applied, it is mostly for ex ante appraisal, rather than for monitoring or ex post evaluation. This may reflect : _ a lack of resources within governments to undertake such appraisal _ reluctance on the part of governments to dwell on whether previously introduced regulatory measures have achieved their desired results. In OECD countries there is a similar relative lack of interest in publishing ex post assessments, probably on the grounds of ‘letting sleeping dogs lie’ !

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RIA : Ex - Ante or Ex – Post ?

RIA is applied mostly to regulation proposals

• f three types :

_ Economic _ Social _ Environmental

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RIA : Three major areas of application

Application of RIA across the three main forms of regulation shows a heavy concentration in terms of monitoring economic regulation. Results suggests that no country is applying RIA consistently to all major economic, social and environmental regulation proposals

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RIA : Economic regulation is a major area of application

RIA contributes to ‘good governance’. In most countries where RIA is applied to new regulations, public consultation does occur with emphasis on public notices and invitations to comment on proposals.

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RIA : Political and Governance dimension

Consultation involves outside experts, government bodies and the private sector. Consumer groups and other bodies representing civil society are less commonly included. Consultation occurs either / both before or after the government prepares detailed regulations. However, few countries make public the views of participants in the consultation exercise, suggesting room for improved transparency.

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RIA : Political and Governance dimension

The value of RIA is enhanced when it is adopted as part of an overall strategy for regulatory governance reform and institutional capacity building RIA is frequently applied as part of a broader programme of regulatory governance reform. RIA is a policy reform that has the potential to improve government regulatory practices and outcomes.

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RIA : Strategic use for Capacity Building

_ Ex ante RIA : available data, suitable models or disagreement on method. _ Reactions of target groups are not easily predictable, especially for innovative policies _ Identification of impact areas likely to be affected and considered relevant in IA studies _ Uncertainty in forecasting indirect effects and possible side-effects of policies. _ Some changes in behaviour may trigger

• ther indirect impacts.

_ Aggregation of impacts is difficult as impacts are measured by different indicators and scales.

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RIA : Technical & Methodological Difficulties of Implementation

_ Policy proposals are not only based on evidence, but also on agreement among conflicting interests, bargain for compromise and look for legitimacy and support for proposal. _ Impact areas that are more difficult to assess (for example: involving intangible values and long- term benefits) may not be taken into consideration. _ Because RIA studies analyse the pros and cons

• f legislative proposals they may limit the room for

manoeuvre for political actors to pursue their goals. _ Using RIA to challenge pre-commitment of politicians is difficult, so the results of IA studies an be ignored in political negotiations, which does not provide incentives to conduct the analysis.

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RIA : Lack of institutional demand difficulty of Implementation

_ Complete and holistic impact assessment requires time, trained staff and budgets for the collection of data, and the setup and running of models. _ Commissioning of studies can often be in conflict with the timing of particular policy processes that may depend on the utilisation of narrow windows of opportunities.

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RIA : Lack of resources difficulties of Implementation

_ In some cases, monetisation of different impact areas is possible for aggregating impacts. _ In practice, monetisation is difficult in assessing non tradable goods for which no market exists. In such cases, monetisation is only possible using expensive supporting studies. _ In particular, the non-economic benefits of legislation are difficult to assess. _ Cost saving innovation cannot be predicted and economic costs as well as benefits are frequently

• verestimated.

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RIA : Monetisation a partial solution to methodological issues

_ Because of such methodological limitations, assumptions & judgements are inevitably part of the assessment. _ The nature and importance of assumptions, and associated areas of risk and uncertainty, must be described in the assessment. _ The RIA is still be of real assistance to decision- makers by clarifying the “certain” and “likely” consequences of regulatory proposals and by making underlying assumptions transparent.

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RIA : Relativity of difficulties : the need for clear assumptions

_ Quality control: Several countries have mechanisms and institutions to review IA reports. In some jurisdictions, the IA systems have been reviewed through evaluation studies, others have set up expert bodies and councils responsible for the review of individual IAs. _ Methodological rigidity: Considerable efforts have been undertaken to develop methods that are applicable to a wide range of policies and that facilitate the IA

• process. The most prominent examples are the Standard Cost Model for the

assessment of information requirements or the use of Cost Benefit Analysis for the aggregation of different impacts. Beyond this, there is a range of checklists, toolboxes and models that have been developed and applied in IA studies

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RIA : Mechanisms to mitigate implementation difficulties

_ Resource requirements: Ready-to-use budgets and tools reduce the resource requirements for IA studies. _ RIA can build on data & experience from previous applications. Support units

• r consultants provide specialised knowledge and experiences.

_ Improved relevance: multi-purpose RIA tools for broad political priorities, beyond the policy relevance of the individual piece of regulation. This increases relevance of the assessment, making it more tailored to political demands. _ Quality control: The use (or non-use) of standardised analytical methods is an indicator of the quality of a RIA. This is politically less sensitive than assessment

• f the overall quality of the IA or scrutiny of the policy relevance of the proposed

regulation.

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RIA : Advantages of Standardisation of methods

_ Factors meaningfully assessed by multi-purpose tools are necessarily narrow and focused. _ Risk that standardised procedures will descend into just box checking while excluding other, more relevant aspects of the policy from the analysis.

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RIA : Dis-advantages of Standardisation of methods

If RIA is to contribute to economic development and poverty reduction, it is important that it is operated properly, with due consultation and without ‘capture’

• f the process by special interests.

RIAs simply to impress outsiders, such as donor agencies, and to rubber stamp decisions made by the executive are not worth the effort. Where RIA is used, consultation is incorporated as part of the process, but this consultation tends to be limited to government and the business sector, with consumer interests and other civil society interest groups being under-represented in the consultation process.

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RIA : Importance of Public Consultation in the Process

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Outcome oriented impact assessment (OOIA) * Impact assessments are a key instrument in the implementation of Better Regulation. The impact assessment includes a problem analysis, objectives and measures including indicators as well as an assessment of a range of impacts. Impact dimensions :

Public budgets Gender equality Social affairs Children and youth Consumer politics Administrative burden for citizens Administrative burden for businesses Businesses Economy Environment * http://www.wfa.gv.at/English/_start.htm

RIA : OOIA Approach (Austria)

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RIA : WRAPS Approach (USA)

Watershed Restoration and Protection Strategy (WRAPS)* is a planning and management framework that engages stakeholders within a particular watershed in a process to : _ Identify needs and opportunities _ Establish management goals _ Create a cost-effective action plan to achieve goals _ Implement the action plan WRAPS represents a shift from "top-down" government intervention to a more citizen-stakeholder approach. Funds, guidance and technical assistance are provided for stakeholders to reach consensus

• n issues of relevance to them,

and then design and execute a plan to address those issues. * http://www.kswraps.org/assessment

RIA can take many forms, from simple financial cost estimates to comprehensive economic and social cost-benefit analysis. Assessments can include potential benefits and /or costs of the regulatory proposal. A variety of practices exist for the quantification of costs and benefits. Only a minority of countries quantify the estimated Impacts in both physical and value (i.e. : social justice, income distribution, well-being etc…) terms. This is not surprising given the difficulties associated with the economic and social valuation of benefits and costs in the practice of impact assessment.

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RIA : Scope of application may include non-quantifiable values

Originally, RIA focused on identifying direct economic costs and benefits of different regulatory alternatives on a wide range of actors. In recent years, RIA has experienced a high degree of diversification of approaches regarding orientation, ambition, institutionalisation and transparency of the procedures. Nowadays, in several countries, RIA requires assessment of all types

• f possible impacts.

It varies among countries, however, to what extent these assessments comprise a consideration of environmental issues.

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RIA : Breadth of Analysis

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Environmental concerns—and the need to cut emissions of Greenhouse Gases (GHG) in particular—are high on the political agenda (OECD*). The framework conditions for preserving the environment are not only provided by environmental policies. All policy domains should allow for the Integration of environmental protection and the transformation towards a low carbon economy.

* INTEGRATING THE ENVIRONMENT IN REGULATORY IMPACT ASSESSMENTS By Klaus Jacob, Sabine Weiland, Johanna Ferretti, Dirk Wascher, Daniela Chodorowska April 2011

RIA : Specific Environmental Approach

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RIA is a powerful tool in ensuring policy coherence and the integration of environmental concerns in different policy areas. Some countries have requirements in their RIA systems for an assessment of environmental impacts and sustainability. A number of countries have recently introduced methods for a focused assessment of the impacts of regulation

• n the emission of carbon.

RIA : Specific Environmental Approach

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Different approaches in assessing the impacts of carbon emissions : some countries have procedures for monetising (carbon market) changes in emissions, and others prefer a more qualitative approach. By providing established values, a carbon impact assessment can be easily integrated in RIA systems and can directly relate to achievement of the general carbon reduction targets established by many governments (Kyoto)

RIA : The Carbon – Emission case

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Introduction of carbon impact assessments in RIA can increase the importance & effectiveness

• f RIA as a policy tool.

Including environmental aspects in the analysis increases the legitimacy and acceptability of RIA. Linking regulatory policy to government priorities means RIA methodology, transparency, and quality control also receive support in government.

RIA : The Carbon – Emission case

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Thank you for your attention

Name : Oliver Clark Email: onhclark@aol.com

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GLOSSARY CIA : Climate Impact Assessment, policy impact assessments which analyse the changes of GHG emissions caused by a policy proposal EIA : Environmental Impact Assessment, impact assessments of projects (e.g. infrastructure, buildings, etc.) which analyse the possible impacts of a regulation on the environment GHG : Greenhouse gases, mainly carbon dioxide, but also methane, nitrous oxide, CFCs, water vapor, and ozone that influence radiation and contributing to the greenhouse effect and hence climate change MAC : Marginal Abatement Costs, the extra cost of reducing an extra unit of emissions RIA : Regulatory Impact Assessment, a formalised, knowledge based and ex ante analysis of the positive and negative effects of proposed regulations SCC : Social Cost of Carbon, monetary value for the economic costs (social costs) of climate change. The SCC can be applied to assess the benefits of reducing carbon emissions and is usually estimated as the present value of the stream of future economic damages of increased GHG emissions (by convention one tonne). It represents the global marginal damage costs of carbon emissions SEA : Strategic Environmental Assessment, analysis of environmental impacts of plans and strategies SIA : Sustainability Impact Assessment, systematic assessment of the possible positive and negative effect of a regulation or measure on sustainable development, i.e.

• n the economic, environmental and social dimension

Standard Cost Model : A methodology for measuring and monetising the administrative burden from regulation. The measurement focuses only on the requirements to provide information to comply with the regulation Shadow Price : A price which is assumed as the true marginal value of a good or opportunity cost of a resource and which may differ from the market price

RIA : Glossary

• http://www.oxfordhandbooks.com/view/10.1093/oxfordhb/9780199560219.001.0001/oxfordhb-9780199560219-e-13
• Blake, S. (2002), Setting up a regulatory impact unit—The UK experience. Second Workshop of the APEC-OECD Co-Operative Initiative
• n Regulatory Reform (Merida, Mexico).
• DFID (2000), Making Markets Work Better for the Poor: A Framework Paper (London).
• http://publish.ucc.ie/ijpp/2009/01/ferris/04/en
• George, C. and Kirkpatrick, C.(2003a), Strategic Impact Assessment: Methods and Tools (www.enterprise-impact.org.uk).
• George, C. and Kirkpatrick, C. (2003b), Assessing the impact of the WTO agenda on developing countries. In Stange, R. and Katrak, H.

(Eds), The WTO and Developing Countries (Palgrave, London).

• Kirkpatrick, C. and Parker, D. (2004), Regulatory impact assessment and regulatory governance in developing countries. Public

Administration and Development, 24, pp. 1–12.

• Morrall, J. F. III (2001), Regulatory Impact Analysis: Efficiency, Accountability and Transparency (Office of Management and Budget,

Washington, D.C.).

• OECD (1995), Recommendation on Improving the Quality of Government Regulation (Paris).
• Pargal, S. (2003), Regulation and Private Sector Investment in Infrastructure: Evidence from Latin America (World Bank, Washington,

D.C.).

• Parker, D. and Kirkpatrick, C. (2004), Economic regulation in developing countries: A Framework for Critical Analysis. In Cook, P.,

Kirkpatrick, C., Minogue, M. and Parker, D. (Eds), Leading Issues in Competition, Regulation and Development (Edward Elgar, Cheltenham).

• World Bank (2002), Global Economic Prospects and the Developing Countries (World Bank, Washington, D.C.).
• Jacopo Torriti, Ragnar E. Löfstedt: The first five years of the EU Impact Assessment system: a risk economics perspective on gaps

between rationale and practice. In: Journal of Risk Research, Vol. 15 No 2, (2012), pp. 169-186. doi:10.1080/13669877.2011.634512

• Thomas F. Ruddy, Lorenz M. Hilty: Impact assessment and policy learning in the European Commission. In: Environmental Impact

Assessment Review, Vol. 28, No. 2-3. (2007), pp. 90-105. doi:10.1016/j.eiar.2007.05.001_5

• https://www.gov.uk/government/collections/impact-assessments-guidance-for-government-departments
• http://bankablefrontier.com/wp-content/uploads/documents/Regulatory-Impact-Assessment_BFA-Concept-Note.pdf
• www.inmetro.gov.br/qualidade/eventoAC/shortall.ppt

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RIA : Bibliography and Websites