Economic analysis in Norway

Size: px

Start display at page:

Download "Economic analysis in Norway"

Melissa Bell
7 years ago
Views:

1 Economic analysis in Norway Gro Holst Volden, Research Director Concept research programme, Norwegian University of Science and Technology Gry D. Hamarsland, Head of section, Norwegian Government Agency for Financial Management Side 1

2 DFØ: counselling in use of CBA Concept: research on CBA DFØ Concept DFØ motivates the agencies to implement the use of cost-benefit analysis as part of their decision making Main activity is trailing research on major public investments (>750 mill. NOK) in Norway, for which CBA is mandatory. Our expertise represents the best practice within cost benefit analysis Major project this year: Developing a new guidance book for the use of cost-benefit analysis in the Norwegian public sector Develops knowledge on major public investment projects in the front-end phase, in order to improve their success Empirical and theoretically based studies, on CBA and other tools, practices, use of results etc. Side 2

Our expertise represents the best practice within cost benefit analysis Major project this year: Developing a new guidance book for the use of cost-benefit analysis in the

3 Economic analysis in steps Describe problem and target Describe and set a value on the impacts Calculate or describe uncertainties Describe alternative concepts Calculate NPV Overall judgement Recommendation Decicion Measure results, benefit realization and evaluation Side 3

Describe alternative concepts Calculate NPV Overall judgement

4 Instructions for Official Studies and Reports Regulations on Financial Management Ministry of Finance s Quality assurance scheme for major public investment projects (>750 mill. NOK) Guidelines assisting practitioners in economic analyses NOU 2012: 16 Cost-Benefit Analysis recommendations Sector spesific Sector guidelines spesific Sector guidelines spesific guidelines Side 4

NOK) Guidelines assisting practitioners in economic analyses NOU 2012: 16 Cost-Benefit

5 Cost benefit analyses in Norway Powerful management tool Since 2005 mandatory for major public investment projects Driving forces for increased use: Public expenditure crucial part of the national economy Increased expectations from taxpayers - more and better public services The government must produce services in a cost-efficient manner Side 5

crucial part of the national economy Increased expectations from taxpayers - more and

6 Improvement in CBA practical guidelines A Government appointed expert Committee recently reviewed the CBA framework in Norway, based on state of the art internationally Some important recommendations Joint carbon price path for all CBAs, based on shadow price following from binding domestic emission reduction targets Joint VSL for all CBAs Real price adjustment Declining social discount rate Wider impacts of transport infrastructure projects to be assessed as a supplement to main analysis /nou html?id= Side 6

domestic emission reduction targets Joint VSL for all CBAs Real price adjustment Declining social discount rate Wider impacts of transport

7 Current practice, some examples Transport sector: National Transport Plan for investments Defense sector Cost-effect for all major investments, focus on life-cycle cost Energy sector Regulator: Norwegian Water Resources and Energy Directorate in licensing System operator: Statnett: CBAs as a basis for decision-making Health care: The Norwegian Medicines Agency Administers the regulations relating to benefits for the coverage of expenses for essential drugs (Reimbursement regulations) Ministry of Children, Equality and Social Inclusion Value of universal design The Norwegian Petroleum Directorate Value of ecosystem Direktoratet services for økonomistyring Side 7

The Norwegian Medicines Agency Administers the regulations relating to benefits for the coverage of expenses for essential drugs (Reimbursement regulations) Ministry

8 Current practice, our assessment Increased use, but CBA sometimes comes too late and is a symbolic exercise. The quality of performed CBAs varies Often, only one alternative is analyzed Lack of systematic treatment of non-monetized effects. Lack of sensitivity analyses and scenario analyses Lack of explicit assumptions and data Inadequate analyses can be more misleading than guiding More competence in ministries and agencies with major investment projects under the QA scheme (esp. transport, defense) Decision makers often put little emphasis on the CBA results Side 8

Lack of sensitivity analyses and scenario analyses Lack of explicit assumptions and data Inadequate analyses can be more misleading than

9 Conclusion economic analyses in Norway Increased competence and demand for CBA Methodology is being improved OECD: strengthen regulatory requirements and quality assurance mechanism But still a potential for enhancing the use of analyses quality of analyses use of analysis results We are still very interested to learn more from other countries and exchange experience Side 9

still a potential for enhancing the use of analyses quality of analyses use of analysis

Background. When the Government Is the Landlord. 1 Norway's oil and gas reserves are all offshore.

Background. When the Government Is the Landlord. 1 Norway's oil and gas reserves are all offshore. Regional Details: Norway In this appendix, we describe the methods the government uses to obtain revenues from oil and gas production in Norway. We present quantitative estimates of revenues as well as