What costs should we expect from the EU’s AI Act?

This short analysis aims to provide an overview of the anticipated costs caused by the EU’s proposed AI regulation, the AI Act (AIA), to impacted organisations: both providers and deployers of systems containing AI. We focus our analysis at an enterprise level, leaving the macroeconomic discussion for later. While the bulk of the paper explains and critiques the European Commission’s (EC) own analysis we also comment on the critiques raised recently by a high-profile US lobbyist, the Center for Data Innovation, in their report “How Much Will the Artificial Intelligence Act Cost Europe?” We conclude by highlighting topics that would benefit from further elaboration by the EC. As a reminder, the AIA is presently draft legislation, written by the European Commission. While something quite similar can be expected to be implemented ultimately by the European Union’s member states, the legislation is presently in a period of revision by the elected members of the European Parliament, in cooperation and consultation with EU national governments. While the heart of the EU’s regulatory proposal is in safeguarding people against AI risks to health, safety and fundamental rights, we acknowledge the importance of rooting policies in a sound analysis of financial impacts. It is only that way that requirements get translated into solid action plans and finally into actions. The process of such pragmatic analysis, can also get at assumptions and failures of coherence that might otherwise be overlooked. We also, separately, have a longer commentary on the act itself, see “Reflections on the EU’s AI Act and how we could make it even better.”Our analysis of the AIA costs is based on the two main sources: the EC’s Impact Assessment of the AIA, and the EC’s study to support an impact assessment of regulatory requirements for artificial intelligence in Europe. It is noteworthy that while the EC uses the support study as its main source for financial impact assessment, in some contexts, they specifically choose to interpret the figures differently, e.g. by excluding some categories of costs from the impact assessment. For this, it is critical to treat the EC’s impact assessment and the support study as two separate sources. This was one of a number of things apparently missed by the Center for Data Innovation in their report.