NGOs Push for Financial Incentives for Clean Ship Recycling

NGOs are calling on the European Union not to put on hold the introduction of a financial incentive for sustainable ship recycling under the EU Ship Recycling Regulation. 

Namely, the European Commission (EC) has released its report on the viability of such a financial incentive for sustainable ship recycling. Whilst it acknowledges the benefits of clean and safe ship recycling such an incentive would bring, the EC has decided to wait with its introduction.

NGOs urge the EU to take action now as it is well documented that shipowners will with ease be able to circumvent the EU Ship Recycling Regulation by simply swapping the flag of their vessel to that of a non-EU State, NGO Shipbreaking Platform said.

The report of the EC is based on the study which was conducted by Ecorys, DNV-GL and the University of Rotterdam/Erasmus, and published at the end of 2016. The proposed instrument in the study is in the form of a license which each ship, regardless of its flag, needs to acquire in order to enter EU ports. This license can be bought monthly, yearly, or every 5 years, depending on the trading requirements and will be ship-specific.

At the end of the ship’s life, the money spent on buying the licenses will have been put aside and can be paid back to the last owner of that ship once it is recycled at a facility which is approved according to the EU Ship Recycling Regulation. Such an incentive will offset the higher profits made when selling to substandard shipbreaking yards and ensure the proper recycling of EU-trading ships regardless of their flags.

In the report published on August 8, the EC sees the license system as a workable solution if it is demonstrated that there are many ships that will flag out to circumvent the EU Ship Recycling Regulation, thereby weakening its effectiveness. All EU-flagged vessels will have to be recycled in an EU-approved facility starting from the end of 2018 at the latest. Only once it is clear what the effects of the EU List are on the recycling choices of shipowners, the EC will consider whether to go ahead with introducing the Ship Recycling Licence. Therefore, if shipowners choose to recycle their vessels responsibly in a facility on the EU List and do not flag out in order to circumvent the abovementioned regulation, the EC believes that it will not be necessary to introduce a financial mechanism.

However, flagging out at end-of-life is a practice which is already widespread. Most shipowners sell their obsolete vessels to so-called cash buyers. These scrap-dealers become the new owners of the ships and both re-name and re-flag the vessels for their last voyage to the beaching yards in South Asia.

Particularly popular registries amongst the cash buyers are the Paris MoU grey- and black-listed flags of Comoros, Palau and St. Kitts and Nevis – flags that are known for their poor implementation of laws governing labor rights and environmental protection at sea. Maersk also already threatened that it would flag out its fleet from the Danish registry if the Alang beaching yards they have recently chosen to use are not approved by the EU.

Swapping the flag of a ship is easy and makes it very simple for cash buyers and shipowners to circumvent the law. The motivation for doing so is also simple: dirty and dangerous shipbreaking brings higher profits due to the lack of investments in infrastructure, illicit handling of hazardous wastes and extremely poor working conditions.

For these reasons, the NGO Shipbreaking Platform urges the EC to not wait for the effects of the EU List, but instead show that it intends to take all measures possible to change the current deplorable shipping practices and commit now to making a legislative proposal to introduce a financial incentive.

“The huge benefit of this licence scheme is that it will also apply to non-EU flagged ships, meaning that the scope of the EU Ship Recycling Regulation will be much wider and will truly be a driving force for change in the shipping industry,” Ingvild Jenssen, Director of the NGO Shipbreaking Platform, commented.

“Those shipowners that are already taking responsibility for their end-of-life fleet should be supportive of the Ship Recycling Licence as it will create a level playing field ensuring that also their competitors pay the price of clean and safe ship recycling,” Jenssen added.

As explained, legislation based on flag state jurisdiction alone is far too easy to circumvent. That is why more policies aimed at improving the social and environmental performance of shipping is being enforced via port state control. The Ship Recycling Licence is as such in line with international trade law.

Taking also into account the widespread acknowledgment that financial incentives are key in ensuring the success of environmental policies, it seems obvious that a return scheme for ships is needed to change the behavior of shipowners that currently earn profits at the detriment of workers’ health and lives and the environment, the NGO Shipbreaking Platform concluded.

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