EU Risk Regulation moves a step closer to Cost-Benefit Analysis

 

 

 

The European Commission launches a consultation on the preliminary opinion concerning 'Improvement of Risk Assessment in View of the Needs of Risk Managers'.

 

« Risk assessment makes little sense unless it is effectively informing the management process ». Although this statement might appear self-evident, recent EU risk regulatory decisions proved that often risk assessment is not capable or simply fails to providing useful guidance to the risk managers. As I often highlighted in my scholarship, EU risk assessment rarely addresses in a direct, systematic and transparent way the risk vs risk tradeoff and risk-benefit balance issues which may arise in the specific cases examined. This – I often argued – it is largely due to the too artificial divide that has been established between risk assessment and risk management. Indeed, risk managers - when posing questions - do not always provide an appropriate framework, notably by specifying the protection policy objectives in a manner that allows the risk assessors to deliver outputs that are readily usable and leave no room for misinterpretations. 

 

Now the Commission concludes in its preliminary opinion that « These differences in perceptions and responsibilities argue for a better dialogue between assessors and managers that should inform the framing of the questions raised by the initial mandate and then iteratively through subsequent refinements ».

 

 

This is an historical, hopefully not rhetorical, statement that deserves praise. The Commission, by committing to a more effective evidence-based policy-making, would like to regain the trust of business private operators who sometimes fall victim of endless and often highly emotional administrative procedures barring their products from entering the EU market . With the publication of the opinion, the Commission is not only increasingly becoming aware of the inherent limits of its risk regulatory model that it shares with its agencies but – more significantly – it also seems ready to address some of these flaws.

 

Thus, it admits that « risk assessment methods, procedures and expression of results are rarely co- ordinated with the cost-benefit or, more generally, multi-criteria assessment that risk managers and policy makers also need to inform their decisions. A crucial challenge in this process is the possibility (still to be determined) to establish and standardize approaches and methodologies to measure and quantify risks, benefits and costs so that weighing of these parameters in the risk assessment and risk management processes can be done in a comparable and meaningful manner. As a result of the lack of such approaches, comparisons of non-standardized parameters (e.g. potential health benefit versus socio-economic costs) vary considerably depending on the underlying assumptions used thereby limiting the value of these comparisons in policy making. Risk assessors often fill the gap between the technical parameters resulting from the process ( e.g.: a margin of safety) and the risk managers’ questions by "interpreting" themselves the risk assessment through more or less conventional expressions for "grading" the risk. When that happens outside a pre-defined and agreed scheme to frame risk expression, misunderstandings and confusion of roles are possible ».

 

It further addresses this issues but stating that « None thought that risk assessments should involve cost-benefit assessments per se since that would clearly breach the assessment/management divide. However, to be relevant in this respect requires that risks are expressed in terms of impacts on entities that matter; from a human-health perspective, this means using criteria such as changes in morbidity and mortality and from an ecological point of view, criteria such as changes in ecosystem services ».

 

This seems to suggest a turn to a more quantitative approach to facilitate the use of more cost-benefit analysis at the risk management stage. This is because health goals relating to mortality and morbidity effects of interventions may be combined into single units such as QALYs (Quality Adjusted Live Years), DALYs (Disability Adjusted Live Years), HYEs (Health Years Equivalent), and other health indices.

 

This is confirmed by the following statement : « that there are uncertainties in scientific assessments was acknowledged; and yet there was also a need for decisiveness in conclusions so that they could be translated into effective management decisions ».

 

At the same time, this turn towards a more quantitative approach is accompanied by a step back from the precautionary approach : « vague statements about uncertainties in risk assessment, such as always emphasizing a need for more research in conclusions, are less than helpful for managers ». As for the uncertainty deriving from divergent scientific sources, the report admits that «  if consensus is likely to lead to lack of clarity in conclusions then minority opinions would be a preferred route ».

 

The language supporting more use of CBA remains wary, yet more prescriptive than in the past : « In promoting socioeconomic evaluation, there is concern that there is too much emphasis on assigning monetary values to aspects of health and the environment, that are difficult—if not impossible—to quantify. There is also concern that decisions about health and environmental protection interventions might be made strictly on the basis of whether their quantifiable benefits outweigh their monetized, quantifiable costs. It should be noted though, that decision-makers will often find it hard to interpret and decide upon health or environmental endpoints that are the subject of interventions. They will generally find it easier to interpret monetary values for the purposes of making decisions about an intervention. Considering the incremental costs and benefits associated with alternative interventions (including doing nothing) can help to clarify the tradeoffs and implications associated with those interventions and help to set priorities ».

 

 

The two official messages arising from the opinion are that the outputs of risk assessment need to be more policy and management relevant and this ought to be facilitated by more dialogue. 

 

Given that management decisions are often taken against a back drop of tradeoffs between the benefits of interventions for human health and environment and the costs of restrictions for the economy, it follows that to be “management relevant” risk assessments need to inform these cost/benefit analyses.

 

To make this change the opinion recommends more dialogue between risk assessors and socioeconomists – for example by including economists on Commission Scientific Committees. Moreover, recommendations are also made for improving risk assessment reports, in particular in terms of: including the evaluation of different possible scenarios; making full characterization of the whole populations/ ecosystems at risk with attention to particularly sensitive subpopulations/species; including clear expressions of uncertainty; making explicit disclosure of hypotheses used without supporting evidence.

 

The informal, less visible message instead stemming from the opinion is that to make the EU risk regulatory framework more credible and efficient « CBA (shall), if practicable, be the preferred approach for evaluation ».

 

 

 

This opinion was not based on a comprehensive review of all the instruments involving risk assessment in EU law, but rather on the collective views of risk assessment practitioners across Commission Scientific Committees and risk managers across a number of customer Directorate Generals. Yet, its strongly empirical methodology seems to suggest that its findings could be extended to other EU providers of scientific expertise such as EFSA and ECHA Committees. One step in facilitating the development of better practice could be to arrange training for both assessors and managers based on a common manual. Although this did not fall in the working group’s mandated, it is suggested that this Opinion could provide a starting point for that.

 

 

 

The preliminary opinion can be found here.

 

All interested parties are invited to submit their comments and proposals on the preliminary opinion to the following website.

 

The deadline for submission of comments is 21 February 2012.