Chapter 3. Regulatory impact assessment systems in OECD countries

This chapter addresses the regulatory practices of Australia, Canada, Mexico, and the European Union. In the case of countries such as Australia and Canada, the law does not require preparing a Regulatory Impact Assessment, but it is laid down in specific guidelines that oblige public entities to carry it out. In addition, it explains the criteria employed to define when it has to be performed and its level of analysis. Finally, it outlines the steps that are followed in different countries to prepare the RIA, as well as the cases in which the public consultation is used and how it is conducted.

    

RIA Obligation and entity in charge

The quality of a country’s regulatory policy is an issue that affects both citizens and business and is related to the design, assessment, and compliance with legislation. The obligation of conducting a Regulatory Impact Assessment varies by country and region and is primarily ruled by the law of each place, either Anglo Saxon (common law) or Roman law. Irrespective of the law governing, the OECD Recommendations (OECD, 2012[1]) refer to the need of committing at the highest political level to the development of quality public policies. For this reason, assessing the regulation is an issue that is incumbent upon the entire government and it usually involves the creation of an oversight body or the appointment of an official in charge of that task.

This chapter documents the experience of the RIA system in Australia, Canada, Mexico, and the European Union. As indicated in Table ‎3.1, the countries considered in this section have provisions that establish the obligation of assessing regulations before issued. Furthermore, most of them have a specialised entity in charge of ensuring compliance with the best practices of regulatory policy.

Table ‎3.1. RIA obligation, entity in charge, and implementation guidelines

Country/region

Obligation to apply the RIA

Entity in charge of the RIA

Australia

A RIA is mandatory for all regulations submitted before the Cabinet, even if there are no obvious regulatory impacts.

The Office of Best Practice Regulation (OBPR) is a body that works exclusively as a gatekeeper and advisor for the preparation of assessments.

Canada

It is mandatory to submit a RIA based on the Cabinet Directive for rulemaking, from which it arises the Guide to Prepare Laws and Regulations.

There is no body in charge of the regulatory policy, it is a responsibility shared by the Prime Minister and the ministry, the Leader of Government in the House of Commons, the Cabinet and its members, and the Minister of Justice

Mexico

It is mandatory for the creation or modification of primary and subordinate regulations from the Executive Branch, with the exception of the Ministries of National Defense and of Navy.

The public governing body in charge is the Federal Commission for Regulatory Improvement, an administrative body sectored to the Ministry of Economy.

European Union

The RIA is mandatory for initiatives (legislative and non-legislative) with important economic, environmental or social effects.

The Impact Assessment Board (IAB), it is the technical arm of the European Commission that analyses the RIA process.

Source: Prepared by the OECD, based on: (Government of Australia, 2016[2]), “User Guide to the Australian Government Guide to Regulation”, https://www.pmc.gov.au/resource-centre/regulation/user-guide-australian-government-guide-regulation; (Government of Canada, 2014[3]), “Guide to the Federal Regulatory Development Process” in “Guidelines and Tools”, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/guide-federal-regulatory-development-process.html#t1; (CONAMER, 2017[4]), Government portal, www.conamer.gob.mx (accessed 28 June 2017); (European Commission, 2009[5]), “Impact Assessment Guidelines”, http://ec.europa.eu/smart-regulation/impact/commission_guidelines/docs/iag_2009_en.pdf.

The existence of a manual or guide to prepare the regulatory impact assessment is a key point OECD countries converge. According to (OECD, 2015[6]), 34 of the OECD countries have some type of document stating the requirements and guidelines that must be observed when issuing regulation. In the case studies covered in this section, all the countries or regions have, at least, a manual specifying the criteria for the conduction of the RIA. The following are the most important documents for each country:

  • Australia: The Australian Government Guide to Regulation

  • Canada: Guide for the editor of the Regulatory Impact Assessment Statements (RIA-S)

  • Mexico: Manual for the Development of the Regulatory Impact Expression (MIR, by its initials in Spanish)

  • European Union: Impact Assessment Guidelines of the European Commission

These documents can be the basis to develop a RIA manual that meets the highest international standards.

Moreover, the entity in charge of supervising the regulatory impact assessment tends to be external to the agency issuing the regulation, and close to the central government. This agency must ensure the quality of the regulatory policy, identify the opportunity areas where regulation can be more efficient, as well as deliver training and clear up the doubts of the parties involved (OECD, 2012[1]).

Evaluation criteria to determine the RIA and its classification

As the thorough analysis of all the regulations issued may be an expensive and inefficient exercise, countries have established criteria to determine which proposals to assess and the scope of such assessment. Some countries, such as Australia and from the European Union, have a proportionality analysis, which allows them to use more efficiently the available resources by focusing on assessing only the regulation with a high impact on citizens or business, or proposals that may be controversial.

Australia employs three types of RIA based on the characteristics of the regulatory proposal (Table ‎3.2). As mentioned in the next section, the requirements that must be met for each of the three types are different, those related to the long RIA are the most difficult and strict ones.

Table ‎3.2. RIA Categories in Australia

Short

Standard

Long

Characteristics of the regulatory proposal

1. The topic of public policy is simple, well defined or the alternatives are limited.

2. The policy addresses issues of national security, public safety, natural disasters or a high-pressure event.

3. The regulatory impact of the policy is of low priority.

4. Recently, a RIA was completed and only minor modifications have been made to the public policy options under consideration.

5. The proposal is not regulatory, or is small.

1. The policy proposal has an impact on the economy that is measurable, but contained.

2. The proposed changes affect a number relatively small of companies, civil organisations, and individuals.

3. The administrative and compliance costs are measurable, but not high.

4. Strong opposition between the relevant actors or the public is unlikely.

5. The subject matter is not controversial and it is unlikely that it calls the attention of the media.

1. The policy proposal has considerable or broad effects on the economy.

2. The proposed changes affect a large number of companies, civil organisations, or individuals.

3. Administrative or compliance costs are high.

4. There may be a firm opposition from the relevant actors or the public.

5. The subject matter is sensitive, controversial, or it may call the attention of the media.

Source: Prepared by the OECD, based on (Government of Australia, 2016[2]), “User Guide to the Australian Government Guide to Regulation”, https://www.pmc.gov.au/resource-centre/regulation/user-guide-australian-government-guide-regulation (accessed 28 June 2017).

In the case of Canada, the process to determine the type of Regulatory Impact Assessment (RIA) to be carried out depends primarily on the cost of the regulation. Based on the answers to items 2 and 3 of the triage statement (Figure ‎3.1), it is decided whether a low-impact or medium-high impact RIA is prepared. The office in charge of regulatory matters within the Treasury Board must approve the triage statement to prepare the assessment.

Figure ‎3.1. Triage statement in Canada
Figure ‎3.1. Triage statement in Canada

Source: Prepared by the OECD with information from (Government of Canada, 2014[7]), “Triage Statement Form” in “Guidelines and Tools”, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/triage-statement-form.html (accessed 28 June 2017).

In Mexico, all regulations must go through an assessment process whenever the compliance costs are greater than zero. If they are equal to zero, it is not necessary to submit a RIA. The Regulatory Impact Calculator determines the potential impact of a regulatory proposal. This is a software tool consisting of ten questions to determine the type of RIA to be conducted. Furthermore, the Calculator indicates if it is necessary that the National Commission for Regulatory Improvement (CONAMER)1 prepares a competition analysis, and/or a risk analysis. Table ‎3.3 shows the four types of RIA for regulatory proposals in Mexico.

Table ‎3.3. Types of RIA in Mexico

Moderate impact

High impact

Periodic updating

Emergency

The result of the potential impact from the Regulatory Impact Calculator is moderate

The result of the potential impact from the Regulatory Impact Calculator is high or the COFEMER so requires

For draft regulations that modify provisions on a regular basis and do not imply additional costs

If the proposal is classified as emergency regulation

Source: Prepared by the OECD, based on (CONAMER, 2017[4]), Government portal, www.cofemer.gob.mx (accessed 28 June 2017).

In the European Union, RIA must be carried out when there are important economic, environmental or social impacts of the regulation, and they are analysed on a case-by-case basis. There are initiatives that do not require any RIA at all, for example, administrative decisions, reports and statements from the European Union, as well as budgetary procedures and decisions related to the administration of programs. Should a RIA must be prepared, the proportionality criteria help determining its level and thoroughness. Some of the factors that can influence such thoroughness are the political importance of the initiative, at what stage is the policy, the scale and complexity of the problem under analysis, the importance of the expected impacts, the complexity of the necessary requirements to observe the regulation, and the risk of unforeseen negative consequences.

RIA analysis process

OECD member countries increasingly use the RIA process when they issue legislation, but the way it is incorporated into the regulatory policy cycle varies upon the country. This section highlights best practices followed by leading countries in terms of regulatory impact.

As mentioned above, Australia has three types of RIA: short, standard and long. Table ‎3.4 shows the requirements for each type. The standard and long RIA are both similar and require the regulator to answer seven basic questions (see Box ‎3.1). The long type RIA however includes a formal analysis of the costs and benefits of the regulatory proposal.

Table ‎3.4. Requirements for the RIA in Australia

Requirements for each type of RIA

Short

Standard

Long

1. Summary both of the proposed policy and the alternatives considered

2. An overview of the possible impacts

3. An outline of regulatory costs and cost offsets

1. Answer the seven questions from the RIA

2. Analysis of genuine and practical alternatives

3. Analysis of the potential regulatory impacts

4. Evidence of an appropriate public consultation

5. A detailed presentation of regulatory costings and offsets

1. Answer the seven questions from the RIA

2. Analysis of genuine and practical alternatives

3. Analysis of the potential regulatory impacts

4. Evidence of an adequate public consultation

5. A formal costs-benefit analysis

6. A detailed presentation of regulatory costings and offsets

Source: Prepared by the OECD, based on (Government of Australia, 2016[2]), “User Guide to the Australian Government Guide to Regulation”, https://www.pmc.gov.au/resource-centre/regulation/user-guide-australian-government-guide-regulation (accessed 28 June 2017).

Table ‎3.5. Regulatory impact assessments in Canada

Low impact

Medium-high impact

1. Brief description of the problem

2. Information about the context (if applicable)

3. Objectives

4. Description of the proposed regulation

5. Compliance with the “one-for-one” rule

6. Small business lens (if applicable)

7. Public consultation (if applicable)

8. Rationale for the proposed regulation

9. Implementation, enforcement and oversight (if applicable)

1. Executive summary

2. Information about the context (if applicable)

3. Description of the problem

4. Alternatives considered (including, not regulating)

5. Costs and benefits

6. Compliance with the “one-for-one” rule

7. Small business lens

8. Public consultation

9. Regulatory co-operation

10. Rationale for the proposed regulation

11. Implementation, enforcement and monitoring

12. Measurement of the accomplishment of goals and assessment (if applicable)

Notes: The “one-for-one” rule controls the administrative burden on business by requiring that all administrative burdens imposed by new regulation be accompanied by an equivalent reduction of administrative burdens.

Source: (Government of Canada, 2014[3]), “Guide to the Federal Regulatory Development Process” in “Guidelines and Tools”, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/guide-federal-regulatory-development-process.html#t1 (accessed 28 June 2017); (Government of Canada, 2014[8]), “Regulatory Impact Analysis Statement: Low-Impact Template”, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/regulatory-impact-analysis-statement-low-impact-template.html (accessed 28 June 2017); (Government of Canada, 2014[9]), “Regulatory Impact Analysis Statement (RIAS): Medium-and High-Impact Template”, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/regulatory-impact-analysis-statement-medium-high-impact-template.html (accessed 28 June 2017).

Box ‎3.1. Basic questionnaire of the analysis to define the preparation or expansion of RIA in Australia

1. What is the policy problem you are trying to solve?

  • Clearly state why the issue being addressed is a problem, emphasising the risks and dangers that can be mitigated by regulation.

  • Describe the business, communities and civil organisations being affected by the problem.

  • Explain what the government is doing about it (if there is already a policy for this problem) and establish why these measures do not work.

2. Why is government action needed?

  • Prove that the government has the capacity to step in and solve the public policy problem.

  • Detail the objectives and goals that are set out, including the limitations and barriers to achieve them. The project must be SMART (Specific, Measurable, Achievable, Realistic, Timely).

3. What policy options are you considering?

  • Determine feasible and genuine policy options that should be placed in the appropriate political and economic contexts.

4. What is the likely net benefit of each option?

  • Quantify the costs and benefits of the policy proposed that has a bearing on affected actors.

  • Assess the costs and benefits of all the policy options presented as alternatives and analyse the qualitative impacts.

  • Establish the international standards that are carried out in this type of draft proposals.

5. Who will you consult about these options and how will you consult them?

  • The consultation should explain both its purpose and its objectives.

  • Present a plan to carry out the consultation and explain who, and who does not, must participate in it.

  • Build a strategy to ensure that the consultation is as efficient as possible and summarise the main issues that will be addressed.

6. What is the best option among those you have considered?

  • Choose the best option by presenting the exceptions the proposal considers, the assumptions that have been made during the process, the unsolved problems and specific factors in the evidence.

7. How will you implement and assess your chosen option?

  • Present the implementation plan.

  • Assess the risks of the execution and describe how the performance of the regulatory programme will be evaluated during and after its implementation.

Source: Prepared by the OECD, based on (Government of Australia, 2016[2]), “User Guide to the Australian Government Guide to Regulation”, https://www.pmc.gov.au/resource-centre/regulation/user-guide-australian-government-guide-regulation (accessed 28 June 2017).

Canada has two types of RIA, low impact and medium-high impact (see Table ‎3.5). Once the Treasury Board approves the Triage Statement, the regulator should complete the RIA accordingly. The next step in the process to issue regulation is the approval from the Department of Justice and the Regulator in charge. The approval from both agencies allows preparing the first draft of the regulation.

Mexico has two types of RIA for regulations that involve a cost for those subject to regulation, moderate impact and high impact RIAs. In both cases, the assessment is ruled by international best practices. Therefore, it contains six sections: 1) Definition of the problem and general objectives of the regulation; 2) Identification of possible alternatives to the regulation; 3) Impact of the regulation (cost-benefit evaluation); 4) Mechanisms for compliance and enforcement of the proposal; 5) Methodology for the assessment of the proposal (once it is applied); 6) Public consultation. The thoroughness of the analysis, as well as the level of detail in each section, varies according to the type of impact of the regulation.

As in Australia, the European Union has a series of key questions that serve as basis to prepare a RIA (see Table ‎3.6). The answer to each question is an iterative process that allows identifying the most outstanding and objective information (European Commission, 2009[5]). Moreover, the annexes must include information on the preparation of the impact assessment, a description of the public consultation, as well as a model on the implications of the regulation both in a representative company and in the public administration.

Table ‎3.6. RIA process in the European Union

Key questions for RIA in the European Union

What is the problem and why is it a problem?

Why must the European Union take action?

What is the expected result?

What options were considered for the accomplishment of the objectives?

What are the economic, social and environmental impacts, and who would be affected?

How do the different options compare in terms of effectiveness and efficiency (costs and benefits)?

How are supervision and ex post evaluation going to be carried out?

Source: (European Commission, 2009[5]), “Impact Assessment Guidelines”, http://ec.europa.eu/smart-regulation/impact/commission_guidelines/docs/iag_2009_en.pdf (accessed 28 June 2017).

Public consultation

The inclusion of a public consultation on the draft of regulation is a key step of the regulatory governance cycle. OECD countries have included this step into their processes of issuing and reviewing regulation; however, there are still areas of opportunity. In particular, it is necessary to continue working on a mind-set shift, both of the regulators and of those subject to the regulation, so that the parties involved understand the value of the public consultation. In some cases, it is clear that the value of taking this type of measures may be more evident; nevertheless, officials must systematically include citizens, industry and the public sector into the process. The latter not only allows to improve the quality of the regulatory policy but also to increase government transparency and public confidence. The consultation can be carried out through different means and during several periods; it depends, among other things, on the country, the budget and the relevance of the regulation.

The RIA process in Australia involves conducting a public consultation among the individuals, business and organisations affected by the regulation (Government of Australia, 2016[10]). Most of the consultations are open for everyone, except when there are explicit reasons for limiting them, which implies a consultation addressed to a specific audience or a confidential consultation. The Office of Best Practice Regulation establishes that public consultations must be continuous and start as soon as possible in the process to issue regulations. Moreover, they should be addressed to the broadest possible audience and must be easily accessible; it should not impose additional burdens on participants. Finally, consultation should be conducted – but not done hastily –whenever it is necessary to prepare a RIA, in order to make it easier the participation of regulated parties.

In Canada, all subordinate laws require a public consultation before they are passed. Authorities must ensure that the information they provide in the consultations is objective, well-founded, and sets out the steps to be followed. Lastly, the consultation process is open to the largest number of Canadians possible, who should receive feedback from the agency sponsoring the regulation.

In Mexico, once CONAMER approves the RIA, it is mandatory that all regulations be subject to public consultation for a minimum of 30 business days. Calls for consultation should be posted on the websites of the regulators, on the website www.cofemersimir.gob.mx, and social media of CONAMER; and in the federal official gazette (Diario Oficial de la Federación, DOF), in the case of technical standards. During the consultation process, public at large and stakeholders are invited to express their opinions, provide information and challenge the analysis. Regulators are obliged to take into account all the comments, which are public, and reply to them.

In the European Union, the public consultation process consists of four key steps:

  1. 1. Determining the purpose of the consultation

  2. 2. Selecting the interested parties and/or affected ones

  3. 3. Choosing the methods and tools to be used (to ensure accessibility), and

  4. 4. Creating a webpage linked to the consultation.

The draft regulation has to be available for consultation for four weeks. In particular, the selection of the target audience is determined by a matrix that considers both the influence and the interest of the stakeholders (European Commission, n.d.[11]). According to the quadrant where the highlighted parties are located, it is assigned the priority in the consultation process.

References

[4] CONAMER (2017), Portal Gubernamental, https://www.gob.mx/cofemer (accessed on 28 June 2017).

[12] European Commission (2009), Impact Assessment Guidelines, http://ec.europa.eu/smart-regulation/impact/commission_guidelines/docs/iag_2009_en.pdf.

[5] European Commission (2009), Impact Assessment Guidelines, http://ec.europa.eu/smart-regulation/impact/commission_guidelines/docs/iag_2009_en.pdf.

[11] European Commission (n.d.), Tool #50: Stakholder Consultation Tools, http://ec.europa.eu/smart-regulation/guidelines/tool_50_en.htm.

[10] Government of Australia (2016), Guidance Note, https://www.pmc.gov.au/sites/default/files/publications/best-practice-consultation.pdf.

[2] Government of Australia (2016), User Guide to the Australian Government Guide to Regulation, https://www.pmc.gov.au/resource-centre/regulation/user-guide-australian-government-guide-regulation (accessed on 26 April 2018).

[3] Government of Canada (2014), Guide to the Federal Regulatory Development Process, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/guide-federal-regulatory-development-process.html#t1 (accessed on 25 April 2018).

[8] Government of Canada (2014), Regulatory Impact Analysis Statement (RIAS): Low-Impact Template, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/regulatory-impact-analysis-statement-low-impact-template.html (accessed on 26 April 2018).

[9] Government of Canada (2014), Regulatory Impact Analysis Statement (RIAS): Medium- and High-Impact Template, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/regulatory-impact-analysis-statement-medium-high-impact-template.html (accessed on 26 April 2018).

[7] Government of Canada (2014), Triage Statement Form, https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/guidelines-tools/triage-statement-form.html (accessed on 26 April 2018).

[6] OECD (2015), OECD Regulatory Policy Outlook 2015, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264238770-en.

[1] OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264209022-en.

Note

← 1. With the publication of the General Law on Regulatory Improvement in May 2018, the former Federal Commission for Regulatory Improvement (COFEMER) converted into the CONAMER.

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