Fiscal constraint, globalization of markets, and accelerated technological change have resulted in a new focus on the cost-effectiveness of government activities and, in turn, on methods of policy evaluation. An exploration of regulatory problems, and the use of regulation as a public policy instrument, reveals a commonalty of experience in all industrialized countries. This paper provides a brief synopsis of the Government of Canada`s perspective on cost-effective regulation. To understand cost-effective regulation, this paper examines the principles of regulatory reform which underlie the current strategy of the federal government (collaborative decision-making mechanisms., methods of clear policy evaluation, and well defined lines of accountability). It discusses the nature of, and rationale for, government regulation, the reasons for regulatory reform in the economy, and the principal aims of Canadian regulatory reform and regulatory policy assessment. It does so by specifically addressing the role of cost-benefit analysis in the process of regulatory assessment - a method which involves systematically identifying, and quantifying where possible, the social benefits and costs associated with alternative public policy actions - with a particular focus on regulation which affects the Canadian nuclear industry. (author). 51 refs.