Danish Shipping: Assesment of existing regulation before new ship recycling initiatives

The European Commission has published its long-awaited position on the feasibility of introducing a financial incentive to ensure that more ships are recycled at EU-approved facilities. Danish Shipping is opposing such a financial scheme but agrees with the Commission’s conclusion that effects of existing legislation must be known before introducing new initiatives.

The Commission will not commit to a new license scheme for ship recycling. According to a new report, the Commission points out that it is still uncertain how a ship recycling license would actually work.

The licence scheme would entail that is that all ships regardless of flag calling an EU-port must have prior acquisition of a license for the ship in question. When applying for the license, ship owners would be charged a contribution. The contribution follows the specific ship and will only be returned to the ship owner if recycling takes place in an EU-approved facility. If not, the owner will forfeit the amount.

“We see great challenges and many loose ends to the practical transposition of the licensing idea. Especially the calculation of the cost-gap between recycling at an EU-approved and a nonapproved facility, when the ship is to be recycled 10-15 years from now, is problematic. The Commission suggests it will be this difference that determines the size of the licence premium, but what happens when the ship is sold and who ensures that the market value of the ship will not degrade compared to ships not covered and therefore cheaper to buy,” says Casper Andersen, Director of EU-affairs for Danish Shipping.

Danish Shipping fears retaliation from third countries as also ships flagged outside the EU are included as soon as they call an EU-port. This was the case when the Commission tried to include international aviation in the EU’s emissions trading system.

“We can only envisage that third country ship owners, with support from their flag-state, will reject paying into the licence scheme, which will be tremendously distortive to the competitiveness of Danish ship owners, who make a third of all their calls to European ports,” says Casper Andersen.

Expand the white list and await the effects

In the report, the Commission recognizes that the ship recycling licence has advantages compared to other models. The Commission also concludes there is a need for further clarification as to how the licence model will actually work.

In addition, the Commission proposes to first assess the use and effects of the white list of approved facilities before recommending new legislation. The white list has not yet entered into force; this will happen by the end of 2018 at the latest.

“We support the Commission’s wait-and-see approach as the list rightfully needs time to work. It is essential that facilities with significant environmental and safety improvements make the list – even if they are geographically situated in areas generally associated with unacceptable conditions. We need better conditions for recycling here and now – not only in many years’ time until the licence scheme takes effect”, concludes Casper Andersen.

The Commission has chosen not to accompany a legislative proposal with the report to support the license scheme. The pivotal issue thus remains the ongoing inspections of the 22 applicant facilities to the EU-list of approved facilities outside EU. The Commission expects to have processed them this year.