Cost Benefit Analysis Method

1. Cost-Benefit Analysis Method ( CBAM) Dr. Himanshu Hora SRMS College of Engg . & Tech., Bareilly INDIA

2. 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?

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. Context for CBAM

10. Process flow diagram for the CBAM

11. 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

12. 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

13. 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

14. 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

15. THANK YOU Dr. Himanshu Hora SRMS College of Engg . & Tech., Bareilly INDIA