E.U. Call for Ship Recycling License


By MarEx 2016-07-07 02:31:44

Ships regardless of their flag should not be allowed to call at any E.U. port without a ship recycling license to incentivize sustainable ship recycling, a European Commission report recommends.

The report written by Ecorys, DNV-GL and the Erasmus University School of Law, looks into the possibility of introducing a financial incentive to enhance safe and environmentally sound ship recycling. 

Ship recycling license fees would be earmarked to cover the cost-gap between substandard and sustainable end-of-life ship management. The capital amount accumulated during the operational life of the vessel would be set aside for the ship and only paid back to the last owner of the vessel as a premium if the ship is recycled in a sustainable facility approved by the E.U.

The 2013 E.U. Ship Recycling Regulation requires all vessels sailing under an E.U. flag to use an approved ship recycling facility. A major shortcoming of the Regulation, however, is that shipowners can circumvent the law by simply flagging out to a non-E.U. flag, says NGO Shipbreaking Platform. “Last year, Bangladesh, where human rights abuses and pollution caused by shipbreaking activities are known to be the worst, was the preferred destination for end-of-life ships. E.U. owners account for around one third of the end-of-life tonnage beached in substandard yards in Bangladesh, India and Pakistan. Thus, the E.U. is the single largest market sending end-of-life ships for dirty and dangerous shipbreaking and has a particular responsibility to regulate ship recycling, says the Platform. 

Environmentalist Support

“E.U. shipping companies should not circumvent E.U. environmental laws and not utilize practices that would never be allowed in Europe,” says Sotiris Raptis, shipping and aviation officer at the environmental group Transport and Environment. “E.U. flag-neutral measures which apply equally to all ships calling at E.U. ports are necessary to increase environmental protection.” 

We call on the European Commission to follow-up this report with a legislative proposal, says Stephane Arditi, Products & Waste Policy Manager of the European Environmental Bureau. “The effective implementation of European environmental policies has been dependent on making the polluter pay. If the E.U. is serious about its commitment to sustainable ship recycling, all shipowners trading in Europe need to be held financially liable.”

Details of the proposal

The basic idea behind the ship recycling license is that a contribution is charged to the shipowner, when he applies for this license. This contribution consists of two elements. The first part, a (small) charge to cover the administrative costs of issuing the license, is retribution. The second part, a premium, is levied from the shipowner, and transferred to the ship-recycling fund, where it is administered separately in a transparent manner, together with the other capital already accumulated by the relevant ship as an individual credit to a future payment of the same amount.

The amount of the premium levied, depends on the capital amount that needs to be accumulated for the relevant ship and the set time-frame, within which the capital is to be accumulated. The capital amount needed for a particular ship in turn depends on factors connected to the individual characteristics of the relevant ship (e.g. its size and ship type). 

To be effective in terms of recycling behavior, the capital amount would need to bridge the revenue gap between the revenues for a shipowner opting for ship recycling in compliance with the Ship Recycling Regulation and the situation in which the shipowner opts for the (currently) more lucrative option of non-regulation-compliant ship recycling.

The full capital amount does not become payable until after the ship has been recycled. It is payable to the ultimate shipowner only if the ultimate shipowner proves that the ship has been recycled in compliance with the Ship Recycling Regulation at a ship recycling facility included in the European List. If, however, it becomes apparent that the ship has been dismantled in a facility not included in the European List, the shipowner forfeits the accrued rights to the payment of the capital amount which would then be transmitted by the Ship Recycling Fund to a general benefit fund in the area of ship recycling. 

In order to avoid that the ship recycling license and the premium thus levied from ships calling at E.U. ports work out disproportionally for ships with either a very high frequency (e.g. tugboats and coastal vessels) or a very low frequency of calling at E.U. ports, the license validity would be time-based rather than linked to the number of calls. The duration of the license’s validity could be differentiated, e.g. offering shipowners the choice to apply for a license with a validity of a month instead of a year, and to adjust the premium accordingly, in the interest of ships with very low frequencies of call in E.U. ports.

The report is available here.