When a ship seems to have reached the end of its lifespan, the shipowner faces the question of whether it should be scrapped or recycled. An old ship still retains value due to valuable components and raw materials incorporated in its construction, but the scrapping process can also cause harm to humans and the environment. Ship recycling yards exist around the world, but shipyards in India, Pakistan and Bangladesh are particularly widely used. The use of these yards has been criticised due to poor working conditions for employees and the local environmental damage resulting from improper waste processing. In order to prevent European ships from ending up at Asian shipyards, the European Union introduced the Ship Recycling Regulation (EUSRR) in 2013. This Regulation aims to reduce the use of yards in these countries. The EUSRR will be evaluated at the end of 2023, and this blogpost looks ahead to this evaluation.

The popularity of Asian shipyards

Why do many ships end up at shipyards in India, Pakistan and Bangladesh? The answer to this question is closely related to the valuable components and materials found in the ships. There is a huge global demand for scrap, especially in Asia. Having a ship at a shipyard means that Asian countries can sell the scrap, other materials and raw materials from the ship on both domestic and international markets at an attractive price. Additionally, scrapping a ship provides employment for a large number of workers in these countries, making it crucial for them to sustain the ship recycling industry. The combination of a high demand for scrap, low labour costs, and weak enforcement of environmental and labour regulations, has created a situation where these Asian shipyards can purchase ships at high prices.

The Hong Kong Convention

To ensure that European ships no longer end up at Asian shipyards and contribute to poor labour and environmental conditions, agreements have been made in recent years at both European and international levels to enforce stricter rules regarding ship recycling. In 2009, under the supervision of the International Maritime Organization, the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships was adopted. Under this Convention, ships are required to prepare a list of hazardous materials on board and shipyards are obliged to develop a recycling plan for each ship. However, it is expected that the Hong Kong Convention will only come into force later this year, as it has been ratified by only 22 countries, including the Netherlands, Bangladesh and India.

The European approach

Anticipating the low expectations of the Hong Kong Convention, the EU took the initiative to introduce the EUSRR in 2013. This Regulation aims to prevent and minimise negative effects on human health and the environment resulting from the recycling of ships flagged under an EU country. While the content of the EUSRR partially overlaps with the Hong Kong Convention, the European Regulation imposes additional and stricter rules on the ship scrapping of European ships. An important aspect of the EUSRR is the list of shipyards where a European ship must be scrapped. A shipyard is admitted to this list if it meets a set of requirements established by the EU after which it is placed under strict control by independent parties. At this moment, the majority of the shipyards on the European list are located in Europe and North America. Through these measures, the EU aims to promote responsible and sustainable ship recycling, reduce the impact of end-of-life ships on the environment and workers, and discourage European ship owners from choosing an Asian shipyard.

Some critical notes

Criticism of the EUSRR mainly focuses on the fact that since its introduction, more ships under a European flag have switched to a non-European flag before going for scrapping. This poses a problem because the EUSRR only applies to ships flagged under a European country. By changing the flag, shipowners can bypass European regulations rendering them exempt from the obligation to send their ships to EU-certified shipyards. This circumvention of the Regulation has led to the EUSRR not having the desired effect. To repair this circumvention, the EU has looked into financial instruments. One of the options is the so-called Ship Recycling Licence which involves the levying of fees each time a ship enters a European port. The collected capital could then be used to subsidise sustainable end-of-life ship management, including a payable sum to ship owners as an incentive for choosing a shipyard on the European list. This way, shipowners are encouraged to opt for more sustainable shipyards.

Another point of criticism concerns the possibility of non-uniform enforcement of the Regulation by Member States. Article 11 of the Regulation states that port state control is conducted according to national law, potentially leading to varying applications across countries. To prevent this, the EU should carefully oversee how Member States implement the EUSRR in practice and ensure that enforcement is as uniform as possible.

Conclusion

In light of the criticism outlined, there are presently reservations regarding the efficacy of the EUSRR. However, it is worth noting that the concerns regarding ships changing flags seem to be addressed through the proposed financial instrument. As for the critiques concerning the regulatory enforcement and potential divergences among Member States, time will tell whether these concerns are warranted. The upcoming evaluation in December 2023, including a public consultation, will provide valuable insights into the effectiveness of the EUSRR. It will be up to the EU to further enhance this by addressing the concerns, thereby advancing the broader objective of establishing a safer ship recycling industry.

This blog was written as part of the Sustainability & Law lecture series (Duurzaamheid & Recht collegeserie).