cost benefit analysis method

Cost-Benefit Analysis Method(CBAM)

Dr. Himanshu HoraSRMS College of Engg. & Tech., Bareilly

INDIA

Outline

What is CBAM? Why Need to know about it? Why is CBAM useful? When should you use it? How can the CBAM Unit help?

What is Cost Benefit Analysis Method?

• CBAM is an analytical framework used to assess the benefits and costs of policy proposals

• CBAM focuses on economic efficiency• It calculates the net benefits for each policy

proposal• Takes a long-term view and incorporates all

relevant costs and benefits

Why we need to know about CBAM?

Recent government decisions give renewed focus to CBAM

Agencies need to build their capacity to use CBAM to improve the quality of regulatory analysis

Greater use of CBAM expected by government for regulatory proposals

Why is CBAM useful? Forces stakeholder to make scenario clear in

advance Allows the consideration of a range of policy

options Determines which policy maximizes net

benefits to the community Allows benefits and costs to be compared over

time Can show the costs and benefits accruing to

different groups within the community

When do you need to use CBAM?

Using CBA techniques to quantify impacts is not “new” it has always been part of the regulatory assessment process

However there is now a greater focus on quantification for regulatory proposals, particularly those with important impacts

Agencies should devote resources to quantification to where stakes are greater

What are the basic steps in a CBAM?

Specify the set of options Decide whose benefits and costs count

(standing) Identify the costs and benefits and select

measurement indicators Predict the impacts over the life of the

regulation

Basic steps in a CBAM (continued…)

Attach dollar values to impacts Discount future benefits and costs to obtain

present values Compute the net present value of each policy

alternative Perform sensitivity analysis Make a recommendation

Context for CBAM

Process flow diagram for the CBAM

Qualitative impacts present a challenge

Qualitative factors should be adequately considered but not overplayed

If a proposal shows large quantified net costs there should be a clear explanation of why qualitative net benefits justify proceeding with a policy option

Different techniques can be used

Different impacts may call for different estimation techniques

Will depend on the nature and complexity of issue and availability of information

High quality analysis may require expertise consultants can be useful

Steps to ensuring a good CBAM outcome

Proper resourcing Getting the right skills Collecting high quality information Consulting with stakeholders Consulting ‘early’ with the OBPR

How can the CBAM Unit help?

Assistance on technical issues Advice on how to improve CBAM done in-

house or undertaken by a consultant Training/Workshops on CBAM Developing CBAM guidance material on a

‘needs basis’ Provide examples of CBAM reports

THANK YOU

Dr. Himanshu HoraSRMS College of Engg. & Tech., Bareilly

INDIA