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