Cost Benefit Analysis Method


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Cost Benefit Analysis Method

  1. 1. Cost-Benefit Analysis Method (CBAM) Dr. Himanshu Hora SRMS College of Engg. & Tech., Bareilly INDIA
  2. 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. 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. 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. 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. 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. 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. 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. 9. Context for CBAM
  10. 10. Process flow diagram for the CBAM
  11. 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. 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. 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. 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. 15. THANK YOU Dr. Himanshu Hora SRMS College of Engg. & Tech., Bareilly INDIA