Markets for many classes of potentially recyclable materials are growing. However, market failures and barriers are constraining some markets. In many cases this arises because such markets possess characteristics which undermine their efficiency. Factors such as information failures, technological externalities, and market power can affect the prices, quantity, and quality of materials traded.

This report presents the case for the use of 'industrial' policies which address such market failures and barriers as complements to more traditional environmental policies. Indeed, encouraging ever-higher recycling rates in the absence of such complementary measures may impose very high social welfare costs.