07 January 2016

Further developments in ship recycling:

Against the background of the perceived slow take–up of the Hong Kong Convention on recycling, the EU has engaged consultants to conduct a study which attempts to find a financial instrument which would incentivise ship owners to recycle their ships in an environmentally friendly way. Several options have been proposed and examined ranging across guarantees, escrow, insurance, port levies, licencing, or a hybrid of these.

Members of the IUMI Political Forum have attended three meetings where the various EU proposals were reviewed and the stakeholders asked to comment. The original idea which directly affected insurers was to create a fund which would be attached to the ship for its life and which would respond when the vessel was recycled at an EU approved yard. A revised version would have responded only where the vessel was a CTL.

There were a number of conceptual and legal problems which were enough for insurance to be dropped from the range of potential answers. We were able to liaise with the ICS and the IG in this regard and as a result, the consultants significantly revised their thinking. The new proposal is for a port levy and licence system which will require payments from any ship over 500gt using a European port. There remain unanswered concerns about the possible distortion of markets in ports, ship values and even recycling facilities.

The complexities, administrative structure and costs of the new scheme remain considerable and several flag states expressed reservations. Some noted that the scheme could lessen the attraction of EU ports and were concerned at the lack of approved yards. IUMI suggested that an alternative strategy might be for the EU to promote implementation of the Hong Kong convention, encourage the use of greener materials in ship construction, and support better recycling facilities.

Source: Hellenic shipping news. 29 December 2015

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