cost benefit analysis method
DESCRIPTION
TRANSCRIPT
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