05 April 2013

Bellona calls for a revision of state aid rules in light of new ship recycling regulation – a tool to ensure compliance with international standards

“Compliance with new Ship Recycling regulation should be linked to tonnage tax for shipping companies, ” says Paal Frisvold, Chairman of Bellona Europa, a founding member of the NGO Shipbreaking Platform
Bellona, 04/04-2013

The new system proposed in the Ship recycling regulation builds upon the IMO Hong Kong Convention for the safe and environmentally sound recycling of ships. The Convention was adopted in 2009, however in order to enter into force it has to be ratified by 15 countries representing 40% of the world’s gross tonnage, which is unlikely to happen before 2020.

“Nowadays, the EU ship owning companies benefit greatly from tax-free regime under the state aid guide lens of the EU. Making the granting of aid conditional on compliance with strict safety and environmental requirements is the only way that can guarantee swift adherence by shipping companies to international standards. This will also prevent re-flagging to open registers outside the EU and  the positive re-flagging trend achieved by the Maritime Guidelines,”- Frisvold explains.

Under the new regulation EU ship-owners will have to draw up an inventory of the hazardous materials present on board, and apply for an inventory certificate. Ship recycling facilities will have to meet strict requirements to be included on a list of authorized recycling facilities, which can be situated world wide.

European ships will be allowed to be recycled only in facilities on that list. Some of the requirements to be met by the ship recycling facilities are stricter than those of the Hong Kong Convention. The new proposal would oblige the ship-owners to report to national authorities when they send a ship for recycling.

With this data the authorities, who will also be responsible for issuing the inventory certificates, will be able to easily spot and sanction illegal recycling. The sanctions proposed in the Regulation are also more specific than those provided for in the Hong Kong Convention

“This proposal would guarantee better traceability for European ships,” says Frisvold. “Bellona specifically welcomes the fact that the European Parliament’s report made explicit that the requirements for ship recycling facilities need to go beyond those of the Hong Kong Convention. The standards of the Convention fall far short of the EU standards. For example,  they would still allow ships to be dismantled on beaches,” – he explains.

However, stricter regulation alone will result in EU ship-owners flagging out to avoid the costs. The Commission already has tools at hand to counteract such practices. It can use a simple ‘stick and carrot’ approach - making the grant of the state aid conditional upon compliance with the ‘stick’ of the stricter regulation.

“The revision of the state aid guidelines on Maritime Transport, due in 2013, now offers  a possibility for such an improvement. In any case, the services of DG Environment and DG Competition should cooperate closely to make sure that compliance with environmental legislation is taken into account when state aid grant assessment is being made on national level, “- Frisvold explains.

1) Ship Recycling Regulation proposal - current legislation at international and European levels has proven ineffective to stop unsafe practices in dismantling ships. The current widespread non-compliance is linked to:  the lack of recycling capacity available within the OECD; the unfair competition between the substandard facilities and facilities with higher technical standard; the fact that the current legislation is not adapted to the specificities of ships and international shipping.

The new proposal covers the whole life cycle of EU-flagged ships, and implements some of the requirements of the Hong Kong Convention:

·        Inventory of hazardous materials;

·        Obligation to recycle ships in safe and sound facilities;

·        Strict requirements applicable to ships prior to recycling.

The Environment Committee adopted a report on this Regulation on 26 March, after which the negotiations with the EU Council have started. The vote in plenary will take place in June.

2) The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships - was adopted in May 2009 by the International Maritime Organization.

This Convention, when it comes into force, will oblige the Parties, including EU Member States, to dismantle their large commercial ships only in countries that are Party to the Convention. This may include Asian countries, whose ship dismantling facilities will need to meet internationally accepted standards. These facilities will have to dismantle ships from non-Parties in a similar manner as ships flying the flags of the Parties to the Convention (‘no more favourable treatment’ clause).

3) Maritime Transport State aid guidelines - In 2004, the Commission adopted the Community Guidelines on State aid to maritime transport. A number of measures, such as tax exemptions, operational and investment aid, introduced by Member States, have contributed to keeping part of the fleet on European registers and generating jobs for European seafarers. These guidelines notably specify that they will be reviewed within seven years of their date of application

Source: Bellona. 4 April 2013

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