Resource: Policy Study: Market Failures in Remanufacturing
This report examines the market failures in remanufacturing that prevent wider uptake. It compares to recycling markets and exemplifies with real products. Possible actions are suggested.
Friday, 26th March 2010
The causes of market failure identified are transaction costs, information failures, externalities (climate change, technological and consumption) and market power. Additionally some existing policies act as barriers for the greater adoption of remanufacturing and thus need to be reformed. A wide variety of measures to mitigate the market failures are suggested; some could be led by the market but supported by intervention (M) and others would need to be led by government policy (G). These are outlined below:
Recommendations for action
1. Transaction costs: � incentivise return of products (M) � web exchanges to link buyers & sellers (M) � subsidies for remanufacturing (G) � capital grants (G) � VAT rebates (G) 2. Information failures: � warranties (M) � long-term contracts (M) � creating standards (M) � certification schemes (M) � provide or subsidise testing facilities (G) � penalising miss-sellers (G) � provision of information (G or M) 3. Externalities: � strengthen underlying signals of externalities pricing (G) � modular design and open standards (M) � provision of information (G or M) � supply chain initiatives to encourage whole life management (G & M) 4. Market power: � national competition policy (G)