Impact assessment on financing the environmentally sound recycling and treatment of ships
Client: European Parliament
The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, adopted in May 2009, is not expected to come into force until 2020 or later. In March 2012, the European Commission presented a proposal for an EU Regulation for early implementation of the requirements of the Hong Kong Convention in the EU, in particular for EU-flagged ships.
This impact assessment reviewed several instruments to finance environmentally sound recycling of ships. The main focus was on a levy and fund system as per an amendment by Mr. Carl Schlyter, MEP, to the Commission’s proposal. This amendment proposed an economic instrument as means of counterbalancing the perverse incentives for ship-owners to have their end-of-life vessels recycled at substandard facilities.
Work carried out in the context of this study included the following:
1. overview and initial screening of potential economic instruments, including a recycling levy and fund, a financial guarantee, and diverse insurance schemes. This part of the assessment focused primarily on: potential implementation timescales and associated hurdles; compliance and administrative costs; and discriminations amongst compliance entities;
2. an in-depth assessment of the economic instrument proposed by Mr. Schlyter (recycling levy and fund) as well as of viable alternatives. This assessment served to gauge the expected ability of the scheme to mobilise sufficient funding to meet its primary objective. It also focused on the potential effects related to the introduction of the proposed instruments in terms of trade distortions and asymmetric impacts on peripheral regions;
3. comparative analyses, both across the different instruments under consideration, and for those instruments assessed in greater detail across different design and implementation modalities.
These preliminary results are expected to be valuable in the context of current work at the EU-level to ensure the safe and sustainable dismantling of all end-of-life vessels.