DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

128 • DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS
250 million annually 233 by increased adoption of remanufacturing and/or refurbishment
and new business models. But they need to be prepared to challenge their perception
of both their business models and design to capture the opportunity. For example,
the product design requires taking into account resource use and costs over several
life cycles, and identifying sub-components that could be more standardised and
modularised. There are also large logistical challenges to bring widely dispersed, large
products back to a remanufacturing facility, and to bring heavily worn parts back to an
‘as new’ state.
Finding solutions to overcome all these challenges will require further investigation, but
it can be noted that there are a number of methods to restore worn metal components
to ‘as new’ condition, for example cold spraying and other additive processes. 234
The US defence industry performs significant remanufacturing of aircraft, ships and
ground systems, of which many have been over 20 years in operation. It is also widely
anticipated that increased digitisation is an important enabler, both to drive the
continued efficiency improvement and to automate the remanufacturing process, for
example through fault detection software.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting
the ‘remanufacturing and new business models’ opportunity (see Section 2.2.4 for
the barriers framework). The critical barrier limiting the industry from taking the
remanufacturing opportunity is a lack of capabilities and skills: industrial designers and
engineers in the machinery sector often lack the knowledge and experience necessary
to run successful remanufacturing operations, which require the ability to design for
disassembly and set up reverse logistics systems. An industry player highlighted the
challenge to establish efficient and effective partnerships along the value chain in order
to ensure a reversed flow of products and components. While getting the products
into the market is a capability that has been developed for decades, the capabilities for
getting the products back are still in an immature state and also highly dependent on
the national market conditions.
The most important market failures are the transaction costs related to finding and
negotiating with new suppliers, since remanufacturing could significantly disrupt
material flows across the value chain; and the uneven distribution of knowledge among
manufacturers about the economic potential of remanufacturing and new business
models.
There is a steep technological development of hardware in many machinery categories,
which makes remanufacturing unfeasible in the short term, e.g. the size of wind turbines
is increasing rapidly, making the remanufacture of old parts for use in new products
unfeasible.
Even when they are fundamentally economic, some international remanufacturing
operations face a high administrative burden to comply with the regulations relevant
to being able to move remanufactured components across borders. The exact impact
in Denmark of such regulatory barriers would need to be further investigated for each
product type.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.3):
• Stimulating remanufacturing pilots that allow businesses (in particular SMEs)
to gain experience with remanufacturing and make the benefits more tangible to
them. In this context, it is worth investigating the scope for funding such pilots
through the Danish Fund for Green Business Development.
233 This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured in the
economy-wide CGE modelling.
234 For example, the Golisano Institute for Sustainability at the Rochester Institute of Technology develops methods
such as cold spraying and collaborates with companies to improve these technologies.