2.8.6—Evaluating policy responses

Policy evaluation compares effectiveness, efficiency, equity, administrative feasibility, unintended effects and sustainability.

A policy can meet its target at high cost or shift harm to another group or place; outcomes should be measured against a counterfactual where possible.

State the criterion, evidence and trade-off before recommending or rejecting a policy.

A carbon tax cuts emissions but burdens low-income households unless revenue is recycled or alternatives are available.

Evaluation is not a list of pros and cons without a clear objective.

For each policy, evaluate how accurately the externality can be measured, whether the intervention changes behaviour, administrative and enforcement costs, evasion and consequences for consumers, producers, government and third parties. Global sustainability problems cross borders, so international agreements can prevent free-riding or leakage, but differences in incentives, monitoring capacity and enforcement make cooperation difficult.