March 24, 2013

Smarting Up EU Risk Management: The Needed Step Forward

Editor’s Note: It is essential for global economic growth that the Chief Scientific Adviser’s potential “ensuring that reliable, well-founded scientific evidence will form the basis for EU legislative and regulatory decisions” be achieved.

From: RegBlog

Lorenzo Allio

Managing risks related to public health and safety while protecting the environment is now one of the principal functions that public opinion expects from the European Union. This sentiment has visible repercussions on EU policymaking, as it has been estimated that risk management counts for more than 70% of all regulatory decisions taken in Brussels.

While it is common sense to regulate risk, excessive risk-aversion can sometimes backfire. Since risk management is key for spurring innovation and economic growth while preserving high standards of living, getting it right helps address many of the challenges faced by Europe today. Account must be taken of the benefit side of the regulatory equation. Poor or disproportionate regulation can put a roadblock in the way of sustainable prosperity.

To be sure, significant improvements have been made  in the EU risk governance over the past decade, in part because of the Better / Smart Regulation agenda of the European Commission. New risk assessment bodies have been set up and existing ones have been reorganized. New policy objectives were conferred on the EU by expanding its scope of intervention to encompass, for instance, life-style risks. Technical guidelines for impact and risk assessment have been introduced, and both public consultation and regulatory oversight have been enhanced. The appointment in late 2011 of a Chief Scientific Adviser by the President of the Commission creates unparalleled potential for ensuring that reliable, well-founded scientific evidence will form the basis for EU legislative and regulatory decisions. More recently, the establishment in February 2013 of a Science and Technology Council is a testament of the President’s commitment to investing in science and innovation.

Yet, gaps still persist in these reforms—most notably the lack of consolidated formal policies and guidelines in key areas such as the quality of scientific advice and risk communication. The European Risk Forum (ERF), a Brussels-based think tank, was one of the few contributors to the 2012 public consultation on Smart Regulation that raised these issues. The ERF recently published an Action Plan, capitalizing on several years of research and relying on OECD good practices as well as cross-sectoral lessons from direct private sector expertise.

The Action Plan lays out clear principles, procedures, and tools that will help the EU institutions find the best ways to handle risk. It covers a wide range of issues, including:

  • the EU Law on Administrative Procedures;
  • impact assessment and public consultation;
  • the role of the Commission’s Chief Scientific Adviser;
  • the application of the precautionary principle;
  • recourse to cost-effectiveness analysis and the emphasis on regulatory benefits; and
  • the relations between risk management and ex post evaluation and judicial review.

The Action Plan emphasizes, among other issues, the extensive use of evidence, especially science; clear and comprehensive descriptions and assessments of problems and their underlying causes; the rigorous definition of policy objectives; a realistic understanding of the costs and benefits of policy options; and a timely and extensive consultation of stakeholders.

The development of a thorough, evidence-based understanding of the benefits of government action is an essential prerequisite for making high quality risk management decisions. It helps improve effectiveness by highlighting “cause-effect” relationships and facilitating comparison of regulatory options. To that end, the technical guidance for the rigorous measurement of health, safety, and environmental benefits should be improved to require the use, wherever possible, of cost-effectiveness analyses and techniques like willingness-to-pay and value-of-statistical-prevented-fatality.

Another critical front is the application of the precautionary principle, which can in itself cause harm if considered in isolation. If a substance is banned, such a ban may on occasion lead to the use of an even more dangerous (or less-known) substance in its place—the famous “risk-risk paradox.” Regulators should systematically review the precautionary measure so that it should be possible to adapt it once the unknown risks become known. However, not everyone within and outside the EU regulatory process is yet willing to embrace this approach.

The issue is not to look exclusively at the quantity and burdensome character of regulation, a pitfall into which many smart regulators fall. Nor is it to only promote and support excellence in European research, a fundamental pre-condition in itself. (The current record of European Nobel Prize winners is impressive, as we must remain mindful that there are more scientists at work today than there have been cumulatively throughout history of mankind. They are equipped with tools and computing skills that were unimaginable even 25 years ago.) The issue at stake here is rather the conversion of such research into new jobs, markets, and growth.

Future prospects for growth and prosperity in Europe very much depend on a vision of society that is favorable to innovation and progress. Most governments are organized in silos—with disparate ministries and agencies for the economy, finance, employment, social services, education and trade. But innovation and growth occur across all these policy areas—and also in social concepts such as science and education, technology, labor market mobility and public attitudes towards change. It requires a consensus about the kind of society we want – something that Smart Regulation should help trigger.

Lorenzo Allio is a Senior Policy Analyst at the European Risk Forum (ERF), a Brussels-based think tank.

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