Regulatory Impact Analysis

Cost-benefit analysis is usually the analytical core of an RIA, used to estimate and compare the monetised costs and benefits of each option against the baseline. But RIA is broader: it also requires clear problem definition, consideration of non-regulatory alternatives, assessment of impacts that cannot be monetised, stakeholder consultation, and arrangements for monitoring. In short, cost-benefit analysis is the valuation engine, while RIA is the surrounding decision process that ensures regulation is justified, proportionate and transparent.

Because regulation is not free and is not always the best response to a problem. Including a do-nothing baseline forces analysts to show that the problem genuinely warrants action and provides the counterfactual against which options are measured. Including non-regulatory alternatives — information, incentives, self-regulation — guards against the reflex of always reaching for new rules and may reveal cheaper, lighter ways to achieve the objective. Omitting these options biases the analysis toward the regulation the proposer already favours.

The evidence is mixed and depends heavily on implementation. Where RIA is taken seriously, conducted early and subjected to independent scrutiny, it demonstrably improves the quality and proportionality of rules and can stop poorly justified ones. Where it is treated as a compliance formality produced to justify a decision already made, it adds cost without improving outcomes. The OECD therefore stresses institutional safeguards — oversight bodies, quality standards and ex-post evaluation — to keep RIA a genuine analytic discipline rather than mere paperwork.