Meeting of the High Level Group on Administrative Burdens Dr. Johannes Ludewig Chairman of the Nationaler Normenkontrollrat Brussels, 23 July 2013

Brussels, 23 July Background: End of 2012, NKR commissioned Prognos to conduct the study. In the German RIA system, the expected costs are quantified, the benefits of the regulatory proposal are described in a qualitative way. Thus, the focus is on the cost side in the RIA process. This makes it more difficult to appraise whether the regulatory proposal shows an appropriate cost-benefit ratio.

Brussels, 23 July Objectives: Analysis of the international practice of quantifying and monetising the benefits of regulatory proposals (special focus on non-market impacts) Four RIA systems were selected as basis for the study: - Australia - European Commission - United Kingdom - United States Stock-taking of different existing methods Lessons learnt for the German RIA system

Brussels, 23 July Approach: Review of relevant documents and academic literature Assessment of a sample of RIAs A sample of 21 good practice RIAs were selected and reviewed. Research interviews with country experts 10 interviews had been conducted in order to validate previous findings and to gather assessments of the actual practice.

Brussels, 23 July Example 1: Americans with Disabilities Act Objective: Adopting accessibility standards which aim at non- discrimination on the basis of disability by public and commercial facilities. RIA considered two main benefits: 1) The time saved – monetisation by using average hourly wages 2)More independence and safety as well as avoided stigma and humiliation – cannot be directly quantified Solution: - Costs are well-known; they outweigh the benefits calculated from the time saved by 19 mio. USD per year - IA asked if the value disabled people put on benefit 2) at least equals this difference in monetary values.

Brussels, 23 July Example 2: Tobacco Control Act Objective: Introduction of pictorial warning labels on cigarette packages and cigarette advertisements RIA considered a number of benefits, e.g. smoker‘s life-years saved, health status improvements, medical expenditure reduction Exemplary calculation: increased life expectancy - Estimates of „Value of a Statistical Life Year“ from literature and previous analysis (100,000 – 300,000 USD) were used for calculating the WTP for a year of life saved; - this value is multiplied by the expected amount of people who will stop smoking; - estimated benefits between 1.45 and billion USD.

Brussels, 23 July Main results (1): There is a wide variety of methods for quantification and monetisation of non-market impacts. Different forms of „Willingness to Pay“ is most common approach: A market price is simulated by identifying the maximum amount of money a person is likely to pay to receive a certain good. Further used forms/methods are: Willingness to Accept, Value of Statistical Life, Value of a Statistical Life Year, …

Brussels, 23 July Main results (2): In practice, the extent and level of quantification and monetisation is far lower than the guidelines and other documents would suggest. Between less than a quarter and just about half of the RIAs contained substantive monetisation and quantification of impacts. Reasons for the lack of quantification often refer to problems in data availability and methodological difficulties in assessing and monetising social impacts. Costs and economic impacts were more frequently quantified.

Brussels, 23 July Main results (3): There are no reliable estimates available for the costs of conducting RIAs in general and quantifying and monetising benefits in particular. There is only patchy and anecdotal evidence that RIAs have a positive impact on the policy making process. But: Impact on the administrative part of the policy formulation process through a more systematic approach, transparency and openness.

Brussels, 23 July Lessons learnt for Germany (1): There is no easy to apply, standardised methodology available. One option could be the development of sector specific instruments and tools which could cover aspects of benefits partially and serve as indicator for the overall impact. Another, more feasible, option would be the strengthening of benefit assessment within an integrated approach by - using potentials for standardisation - increasing the degree of monetisation - consistent application of methods within specific policy areas

Brussels, 23 July Lessons learnt for Germany (2): Preconditions: - sufficient political commitment - specific analytical capacities and competences - integration of RIA into the policy making process - independent quality assurance and oversight - acceptance both within and outside government

Brussels, 23 July Next steps: Establishment of a Task Force composed of representatives of interested ministries, Better Regulation Unit and NKR Mandate of the Task Force would be to develop the basis for decision if and how benefits should be quantified in regulatory proposals. Organisation of a national as well as an international workshop in August

Brussels, 23 July Contact Nationaler Normenkontrollrat Willy-Brandt-Straße Berlin Internet: