Government Gazette – Making Sure the New EU Ship Recycling Regulation Works

(Written by Ingvild Jenssen)

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15 April 2014 -
The NGO Shipbreaking Platform has actively contributed to the legislative process which in June 2013 ended with an agreed text for a new EU Regulation on Ship Recycling. The Regulation entered-into-force on 30 December last year and will be applicable within five years. However, unless an economic incentive is added to it, the registration of European ships under flags of convenience (FOC) will allow ship owners to easily circumvent the new rules and continue dumping their toxic ships in substandard facilities. Reflagging has always been a convenient way for ship owners to circumvent laws enforced by flag states and a regulation based only on the voluntary registration under a European flag will not have the promised impact.

Each year, the NGO Shipbreaking Platform publishes a list of ships dismantled globally. In 2013, we recorded 1,213 scrapped vessels. More than half of these were sold to substandard beaching facilities in India, Pakistan and Bangladesh. South Asia has become a preferred dumping ground for end-of-life ships as environmental, safety and labour rights standards are poorly enforced there. In South Asia, ships full of toxics such as asbestos, lead, PCBs and heavy metals are broken down on tidal mudflats by unskilled migrant workers, many of them children. The number of fatal accidents due to explosions or falling iron plates prompted the ILO to label shipbreaking in South Asia one of the most dangerous jobs in the world. Many more workers die of cancer related diseases due to the lack of adequate protective equipment. The hazardous wastes also ravage coastal ecosystems and have killed or devastated dozens of aquatic species, destroying with this the livelihoods of surrounding fishing communities.

Cheap labour and serious infrastructural deficiencies are what drives the toxic ships to developing countries. Ship owners sell their vessels to South Asian breakers for considerably greater profit than if they were to sell to clean and safe recycling facilities. Last year, approximately 40 percent of the ships scrapped on beaches in South Asia were EU-owned. Greece remains the worst European toxic ship dumper, closely followed by Germany. Owners in these countries disposed a record-high 80 percent of their end-of-life ships in India, Bangladesh and Pakistan. Comparatively, Japanese owners sent 43 percent of their ships to South Asia, whilst Chinese owners in vast majority opted for nationally available ship recycling capacity.

Once applicable, the EU Ship Recycling Regulation will only allow ships registered under the flag of an EU Member State to be dismantled in facilities that meet the requirements set out in the Regulation. It will be the responsibility of the European Commission to list these facilities. The Regulation disqualifies the beaching method and will only allow for downstream waste management that effectively meets European standards. Shipbreaking yards in South Asia will clearly not appear on the EU list of approved facilities. Still, selling a vessel or changing its flag prior to dismantling is not outlawed by the Regulation and will allow easy circumvention of the new rules. Only ships sailing under the flag of an EU Member State when heading for a dismantling yard will be covered by the new Regulation.

Already, of all the European owned ships that were scrapped last year more than two thirds were not registered under an EU flag. Flags of convenience (FOCs) such as Comoros, Tuvalu, Saint Kitts and Nevis, Togo and Sierra Leone, that are less favoured during operational use, were excessively popular flags for the end-of-life ships broken in South Asia. Unscrupulous ship owners have long used FOCs to evade tax rules, license regulations, safety and environmental standards and social requirements for the treatment of crew. Similarly, end-of-life vessels can re-flag several times before reaching the dismantling yard, a practice known as “flag hopping”, with the aim of avoiding stricter rules on ship recycling.

Backed by shell companies, joint-ventures and hidden owners, FOCs are considerable constraints to combating illegal toxic waste dumping as they make it extremely difficult to locate and penalise the real owners of the vessels. With the new Regulation being a further incentive to flag out, vessels still registered under a flag of an EU Member State at end-of-life is likely to decline to a disillusioning number of ships, rendering the impact of the Ship Recycling Regulation non-existent for the purpose of improving ship recycling practices and even negative with regards to EU policies aimed at strengthening the EU fleet. Without a strong incentive to ensure proper enforcement the new EU Regulation will in effect rid the EU with its responsibility – and opportunity – to provide solutions to the ship breaking crisis.

Taking stock of lessons learnt on waste policies related to other products, such as end-of-life vehicles and electronic equipment, the success of the new Ship Recycling Regulation will depend on the introduction of a financial incentive which holds the beneficiaries of shipping accountable for the costs and liabilities of their vessels at end-of-life. Several studies, also those issued by the European institutions, have stressed that a financial mechanism would be legally and economically practicable, and, more importantly, necessary for the effective implementation of the law.

Proposals for an economic incentive have included the obligation for all ships calling at European ports to either provide input to a ship recycling fund or bond; give evidence of a dedicated recycling savings account; or hold a compulsory insurance. Redistribution of the collected funds would then be made conditional to safe and environmentally sound recycling and would close the financial gap between substandard and safe and green recycling facilities. By involving all ships that use EU ports or enter EU waters – regardless of flag – in a mandatory financial scheme, the playing field will be levelled globally as most large commercial vessels – regardless of flag – travel to the EU during their operational lives.

Whilst the European Parliament Rapporteur MEP Carl Schlyter received strong support for his proposal to introduce a port fee for ship recycling by members of the European Parliament Environment Committee, the scheme was rejected in plenary by only seven votes. Prior to the plenary vote the European Sea Ports Organisation (ESPO) surprisingly strongly lobbied against MEP Schlyter’s proposal, basing their arguments on misinformed calculations of the costs involved. Ship owners categorically oppose themselves to any regional regulation on ship recycling, as they do for all shipping matters, and strongly reject any financial instrument that would hold them liable for their end-of-life vessels as they still do not consider ship recycling to be an issue of hazardous waste management.

A mandatory financial mechanism that ensures the internalisation of costs based on an individual ship owner scheme; discourages reflagging prior to dismantling; and promotes green design and pre-cleaning during the operational life of a ship will significantly increase the chances for successful implementation of the new Regulation. It will also reward those ship recycling facilities that have already invested in better practices. The European Commission is to report on the possibilities for a financial incentive by 2015, accompanied if appropriate by a legislative proposal.

We urge the European Commission and MemberStates to support the implementation of the polluter pays principle. We also urge ESPO to provide input that will help develop a workable scheme similar to existing port dues related to reduction of emissions from ships. Without an economic incentive, circumvention of European law covering end-of-life vessels will persist and the European shipping industry will continue to be at the heart of scandals involving severe pollution of coastal zones and exploitation of vulnerable workers in developing countries.