Study on a potential financial incentive to facilitate safe and sound ship recycling.
Date: 2025-06-05
Institutions: Directorate-General for Environment
Subjects: economic consequence, environmental impact, environmental risk prevention, financial incentive, financial instrument, market planning, regulation (EU), report, social impact, vessel, waste recycling

Study on a potential financial 
incentive to facilitate safe and 
sound ship recycling 

Final report 

February – 2025 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Environment 

Directorate B - Circular Economy 

Unit B.3.— Waste to Resources 

Contact:  ENV-SHIP-RECYCLING@ec.europa.eu 

European Commission 

B-1049 Brussels

February - 2025February 2025 
February 2025 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Study on a potential financial 
incentive to facilitate safe and 
sound ship recycling 

Final report 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LEGAL NOTICE 

The information  and  views  set  out  in this  document  are  those  of  the  authors  and  do  not 
necessarily reflect the official opinion of the European Union. Neither the European Union 
institutions and bodies nor any person acting on their behalf may be held responsible for 
the use which may be made of the information contained therein. More information on the 
European Union is available on the Internet (http://www.europa.eu). 

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February - 2025February 2025 
February 2025 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

TABLE OF CONTENTS 

LIST OF FIGURES ........................................................................................................................... 7 
LIST OF TABLES .......................................................................................................................... 10 
LIST OF ABBREVIATIONS ........................................................................................................... 12 
ABSTRACT .................................................................................................................................... 14 
EXECUTIVE SUMMARY ............................................................................................................... 15 
APERÇU ........................................................................................................................................ 21 
RÉSUMÉ ANALYTIQUE ................................................................................................................ 22 
INTRODUCTION AND BACKGROUND ............................................................................... 29 
1 
1.1  General background of the study ................................................................................ 29 
1.2  State of play in ship recycling ..................................................................................... 30 
The regulatory framework to reduce adverse effects of ship recycling ...................... 36 
1.3 
1.4  Aim of the study and structure of the report ............................................................... 38 
DESIGN OF A POTENTIAL FINANCIAL INSTRUMENT ..................................................... 40 
Introduction ................................................................................................................. 40 
2.1 
2.2  Alternative measures to a ship recycling licence ........................................................ 40 
2.3  General design of the proposed financial instrument: a Ship Recycling Licence ....... 44 
2.4  Stakeholder views on the Ship Recycling Licence ..................................................... 45 
2.5  Possible legal implications for future implementation of the SRL ............................... 46 
ELABORATION OF A BASELINE ....................................................................................... 49 
Introduction ................................................................................................................. 49 
3.1 
3.2  Development of the global merchant fleet and recycling ............................................ 50 
3.3 
Trends in recycling of vessels ..................................................................................... 56 
3.4  Port calls in the EU ..................................................................................................... 59 
3.5  Preliminary  considerations  on  the  impact  of  the  ratification  of  the  Hong  Kong 

2 

3 

4 

5 

Convention in the baseline (absence of a financial instrument) ................................. 61 
ASSESSMENT OF THE IMPACTS ...................................................................................... 64 
Introduction ................................................................................................................. 64 
4.1 
4.2  Elements of the safe and environmentally sound recycling prediction model ............ 66 
4.3  Elements of the safe and sound recycling prediction model ...................................... 71 
The design assumptions of the safe and sound recycling prediction model .............. 74 
4.4 
4.5  Economic impacts ....................................................................................................... 76 
4.6  Social impacts ............................................................................................................. 90 
4.7  Environmental impacts................................................................................................ 94 
4.8  Conclusion .................................................................................................................. 95 

IMPORTANT  ELEMENTS  FOR  IMPLEMENTATION  OF  THE  SHIP  RECYCLING 
LICENCE ............................................................................................................................... 97 
Introduction ................................................................................................................. 97 
5.1 
5.2  Options for a European entity ..................................................................................... 97 
5.3  Use of forfeited funds ................................................................................................ 100 

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5.4  Applying the certification and notification scheme .................................................... 103 
5.5 
Integration into Port State control ............................................................................. 104 
5.6  Setting up a monitoring and evaluation regime ........................................................ 106 
Impacts of a possible extension of the SRL to small vessels (< 500 GT) ................ 109 
5.7 
CONCLUSIONS AND RECOMMENDATIONS .................................................................. 112 
6.1  Possible future implications implementing the SRL .................................................. 112 
6.2  Main conclusions on the SRL ................................................................................... 114 
6.3  Possible roadmap for implementation ...................................................................... 117 
ANNEX I – BIBLIOGRAPHY ....................................................................................................... 119 
ANNEX II – PROCEDURAL AND METHODOLOGICAL APPROACH ...................................... 123 
ANNEX III – SUPPORTING EVIDENCE TO THE ANALYSIS OF THE BACKGROUND .......... 129 
ANNEX IV – DETAILED BACKGROUND OF THE BASELINE ................................................. 137 
ANNEX V – POSSIBLE IMPACTS OF THE ENTRY INTO FORCE OF HKC ON THE SRL ..... 147 

ANNEX  VI  –  COMPARISON  BETWEEN  2016  AND  2025  STUDIES  ON  A  POTENTIAL 

FINANCIAL INCENTIVE ..................................................................................................... 157 

ANNEX  VII  –  SUPPORTING  ANALYSIS  OF  THE  ELEMENTS  FOR  THE 

IMPLEMENTATION OF THE SRL ...................................................................................... 163 
ANNEX VIII – SYNOPSIS OF STAKEHOLDER CONSULTATION ............................................ 171 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

List of Figures 

Figure 1.1 Ship recycling countries by percentage of vessels and LDT recycled in 2022 ............... 30 
Figure 1.2 Number of vessels recycled by country (2012-2022) ..................................................... 31 
Figure 1.3 Volume of DWT recycled by country (2012-2022) .......................................................... 31 

Figure 1.4 Fluctuation of the rates for recycling vessels in Bangladesh, India, Pakistan, and Türkiye
 ................................................................................................................................................. 35 
Figure 3.1 Forecasted yearly recycled LDT from world fleet ........................................................... 53 
Figure 3.2 Forecasted yearly recycled LDTs from world fleet by vessel age group ........................ 53 
Figure 3.3 Forecasted yearly recycled LDT from world fleet by vessel size category ..................... 54 
Figure 3.4 Forecasted yearly recycled LDTs from world fleet by vessel type .................................. 55 
Figure 3.5 LDT volume recycled per year (thousand of tonnes, 2013-2022) .................................. 56 
Figure 3.6 EU vessels flag change and recycling locations before recycling (2013- 2022)............. 57 
Figure 3.7 Forecasted yearly recycled LDTs from the EU-flagged fleet .......................................... 58 
Figure 3.8 Frequency of port calls for vessels calling in EU ports by vessel flag (2019 data) ......... 60 
Figure 3.9 Frequency of port calls for vessels calling in EU ports by vessel size (2019 data) ........ 60 

Figure 4.1 Stepwise process between the baseline, the safe and sound recycling prediction model, 
and the impacts ....................................................................................................................... 65 
Figure 4.2 Visualisation of the impacts of introducing a financial instrument in the form of a SRL . 69 
Figure 4.3 Visualisation of the safe and environmentally sound recycling prediction model ........... 73 
Figure 4.4 Percentage of fleet opting for safe and environmentally sound recycling (2030-2055) .. 80 
Figure 4.5 Volume of vessels opting for safe and sound recycling over time (LDT million) ............ 81 

Figure 4.6 The fund expenditure of vessels opting for safe and sound recycling over time (million)
 ................................................................................................................................................. 83 
Figure 4.7 Fund revenue and expenditure (left axis) and accumulated size of the fund (right axis) 83 

Figure 5.1 Analysis of the responses to the question ‘Based on your experience, what would be the 
best use of the forfeited funds?’ ............................................................................................ 101 

Figure 5.2 Analysis of the responses to the question ‘The financial instrument in the form of a Ship 
Recycling Licence should apply to vessels smaller than 500 GT’ ......................................... 110 

Figure A.1 Steps of the follow-up exploratory study on a potential financial incentive, methods, and 
deliverables ............................................................................................................................ 123 

Figure  A.2  Volume  of  imports  and  exports  of  waste  and  scrap  and  remelting  scrap  ingots  for 
Bangladesh, India and Pakistan (millions of tonnes, 2011-2022) ......................................... 129 

Figure A.3 Volume of imports and exports of waste and scrap and remelting scrap ingots for Türkiye 
and the EU (Millions of tonnes, 2011-2022) .......................................................................... 130 

Figure A.4 Trend  of recycling  rates for  dry bulk  ships in  India, Bangladesh,  Pakistan  and  Türkiye 
($/LDT, 2019-2023) ............................................................................................................... 130 

Figure  A.5  Trend  of  demolition  rates  for  tanker  ships  in  India,  Bangladesh,  Pakistan  and  Türkiye 
($/LDT, 2019-2023) ............................................................................................................... 131 

Figure A.6 Trend of demolition rates for container ships in India, Bangladesh, Pakistan and Türkiye 
($/LDT, 2019-2023) ............................................................................................................... 131 
Figure A.7 Average recycling age of different types of vessels over time ..................................... 141 
Figure A.8 Estimated number of vessels from current fleet remaining in operation until 2055 ..... 143 
Figure A.9 Estimated GT from current fleet remaining in operation until 2055 .............................. 143 

7 

 
Figure A.10 Estimated GT added to fleet with new constructions until 2055 ................................. 144 
Figure A.11 Estimated size of the fleet in GT per year, broken down by type of vessel................ 145 
Figure A.12 Estimated total LDT recycled until 2055 ..................................................................... 145 

Figure  A.13  Development  the  rates  for  recycling  vessels  ($  per  LDT)  in  Bangladesh,  India  and 
Pakistan, Türkiye and EU ...................................................................................................... 148 
Figure A.14 Scenarios of the development of the price gap for recycling vessels (€ per LDT) ..... 149 

Figure A.15 Fund revenue and expenditure (left axis) and accumulated size of the fund (right axis) – 
Scenario 1 .............................................................................................................................. 151 

Figure A.16 Fund revenue and expenditure (left axis) and accumulated size of the fund (right axis) – 
Scenario 2 .............................................................................................................................. 154 

Figure A.17 Fund revenue and expenditure (left axis) and accumulated size of the fund (right axis) – 
2016 price gap ....................................................................................................................... 161 
Figure A.18 Estimated forfeited funds (present value, € million) ................................................... 170 

Figure A.19 Analysis of the responses to the question ‘On the basis of your experience in the country 
(countries) where you operate, how do you expect that each cause contributing to the problem 
of dismantling large commercial ships will evolve in the future (up to 2050), in the absence of a 
financial instrument being implemented?’ ............................................................................. 171 

Figure A.20 Analysis of the responses to the question ‘On the basis of your experience in the country 
(countries) where you operate, how do you expect the dismantling of ships will evolve in the 
future up to 2050 without a EU intervention addressing that issue?’ .................................... 171 

Figure A.21 Analysis of the responses to the question ‘On the basis of your experience, should the 
Hong Kong Convention enter into force over the coming years, are you of the opinion that’ 172 

Figure A.22 Analysis of the responses to the question ‘To stimulate safe and environmentally sound 
recycling there is a need for a financial instrument’ .............................................................. 172 

Figure  A.23  Analysis  of  the  responses  to  the  question  ‘In  general,  what  would  be  the  impact  of 
introducing a financial instrument in the form of a Ship Recycling Licence in facilitating safe and 
environmentally sound ship recycling?’ ................................................................................. 173 

Figure A.24 Analysis of the responses to the question ‘Do you think that a financial instrument in the 
form of a Ship Recycling Licence would still be relevant in the Hong Kong convention will enter 
into force?’ ............................................................................................................................. 173 

Figure A.25 Analysis of the responses to the question ‘In particular, what do you think would be the 
impacts of introducing a financial instrument in the form of a Ship Recycling Licence (with no 
other change being implemented), when it comes to:’ .......................................................... 174 

Figure A.26 Analysis of the responses to the question ‘Based on your experience, do you think it is 
relevant introducing a financial instrument in the form of a Ship Recycling Licence if the scope 
of the ship recycling Regulation would be linked to the beneficial ownership?’ .................... 174 

Figure  A.27  Analysis  of  the  responses  to  the  question  ‘How  would  the  introduction  of  a  financial 
instrument  in  the  form  of  a  Ship  Recycling  Licence  affect  the  operating  costs  at  your 
organisation?’ ........................................................................................................................ 175 

Figure A.28 Analysis of the responses to the question ‘Considering the  introduction of a financial 
instrument in the form of a Ship Recycling Licence to promote safe and environmentally sound 
recycling of ships, can you provide an estimate of the type and quantity of one-off costs (e.g. 
adjustment  costs  for  personnel  and  equipment  costs  occurring  only  once)  for  your 
organisation?’ ........................................................................................................................ 175 

Figure A.29 Analysis of the responses to the question ‘Considering the  introduction of a financial 
instrument in the form of a Ship Recycling Licence to promote safe and environmentally sound 
recycling of ships, can you provide an estimate of the type and quantity of recurring costs (e.g. 
adjustment  costs  for  personnel  and  equipment  costs  occurring  on  annual  basis)  for  your 
organisation?’ ........................................................................................................................ 176 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

Figure A.30 Analysis of the responses to the question ‘The financial instrument in the form of a Ship 
Recycling Licence should apply to ships smaller than 500 gross tonnes’............................. 176 

Figure A.31 Analysis of the responses to the question ‘Based on your experience, what the best use 
of the funds forfeited would be?’ ............................................................................................ 177 

Figure A.32 Analysis of the responses to the question ‘The financial instrument in the form of a Ship 
Recycling  Licence  should  completely  cover  the  revenue  gap  between  sound  and  unsound 
recycling for a certain type of ship’ ........................................................................................ 177 

Figure  A.33  Summary  of  the  responses  to  the  questions  ‘The  procedure  to  define  the  amount 
accumulated should be specific to the age, size, type and operating profile of a vessel?’ (n = 
29) .......................................................................................................................................... 186 

9 

 
 
List of Tables 

Table 1.1 Recycled materials and percentage of the recycled weight (LDT) by type of vessel....... 33 
Table 1.2 Key summary statistics of EU-listed recycling facilities in 2023 ....................................... 38 
Table 2.1 Options of financial instrument and main shortcomings .................................................. 44 
Table 3.1 Share of world fleet vessels by flag .................................................................................. 50 
Table 3.2 Average vessel age by vessel type (years)...................................................................... 50 
Table 3.3 Median age at which vessels are recycled, broken down by vessel size and type ......... 51 
Table 3.4 Estimates for the number of port calls in EU ports over time ........................................... 61 
Table 4.1 Operational costs per vessel type and size...................................................................... 67 
Table 4.2 Basic design assumptions and variables used ................................................................ 74 
Table 4.3 Economic impacts ............................................................................................................ 77 
Table 4.4 Amounts to accumulate per vessel size and the annual licence fee ............................... 77 
Table 4.5 Amounts to accumulate and costs of the licence per vessel type ................................... 78 
Table 4.6 Percentage of fleet opting for safe and environmentally sound recycling, by vessel type80 

Table 4.7 Percentage of fleet opting for safe and environmentally sound recycling, by size category
 ................................................................................................................................................. 81 
Table 4.8 Licence fee as percentage of yearly operational costs per vessel type and size ............ 85 

Table 4.9 Sensitivity analysis of the impact of the financial incentive under changes of the various 
assumptions ............................................................................................................................. 88 
Table 4.10 Labour needed per recycling location ............................................................................ 92 
Table 4.11 Percentage of capacity in LDT per region ...................................................................... 93 
Table 4.12 Impact of the SRL on the number of accidents in recycling facilities ............................. 93 

Table 4.13 Potential pollution reduction against the baseline from environmentally sound recycling 
(without Chinese ban) .............................................................................................................. 95 

Table 4.14 Potential pollution reduction against the baseline from environmentally sound recycling 
(with Chinese ban) ................................................................................................................... 95 

Table 5.1 Estimated costs for implementing the regulatory requirements of the SRL (€ million, present 
values) ................................................................................................................................... 100 
Table 5.2 Proposed operational objectives and monitoring framework for the SRL ...................... 108 
Table 5.3 Economic impacts of without and with extension to small vessels (i.e. < 500 GT) ........ 111 

Table A.1 Overview of the methods applied to carry out a follow-up exploratory study on a potential 
financial incentive .................................................................................................................. 124 

Table A.2 The economics of ship recycling for a sample of vessels (for illustrative purpose only), data 
gathered from desk research ................................................................................................. 132 

Table A.3 The economics of ship recycling for a sample of vessels recycled in Norway (for illustrative 
purpose only), data gathered from stakeholder consultation ................................................ 133 
Table A.4 Recycling methods and processes ................................................................................ 133 
Table A.5 Detailed statistics of EU listed recycling facilities in 2023 ............................................. 135 
Table A.6 Equasis data for GT in the global fleet in 2021 .............................................................. 137 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

Table A.7 Percentage of the fleet that flies an EU flag, per vessel type and size ......................... 138 
Table A.8 Frequency of calls in EU ports by non EU-flagged vessels ........................................... 140 
Table A.9 Median age at which vessels are recycled, broken down by vessel size and type ....... 141 
Table A.10 Amounts to accumulate per vessel size and the annual licence fee – Scenario 1 ...... 149 
Table A.11 Amounts to accumulate and costs of the licence per vessel type – Scenario 1 .......... 149 

Table A.12 Licence fee as percentage of yearly operational costs per vessel type and size – Scenario 
1 ............................................................................................................................................. 151 
Table A.13 Impact of the SRL on the number of accidents in recycling facilities – Scenario 1 ..... 152 

Table A.14 Potential pollution reduction against the baseline from environmentally sound recycling 
(Without Chinese Ban) – Scenario 1 ..................................................................................... 152 

Table A.15 Potential pollution reduction against the baseline from environmentally sound recycling 
(With Chinese Ban) – Scenario 1 .......................................................................................... 152 
Table A.16 Amounts to accumulate per vessel size and the annual licence fee – Scenario 2 ...... 153 
Table A.17 Amounts to accumulate and costs of the licence per vessel type – Scenario 2 .......... 153 

Table A.18 Licence fee as percentage of yearly operational costs per vessel type and size – Scenario 
2 ............................................................................................................................................. 155 
Table A.19 Impact of the SRL on the number of accidents in recycling facilities – Scenario 2 ..... 155 

Table A.20 Potential pollution reduction against the baseline from environmentally sound recycling 
(Without Chinese Ban) – Scenario 2 ..................................................................................... 155 

Table A.21 Potential pollution reduction against the baseline from environmentally sound recycling 
(With Chinese Ban) – Scenario 2 .......................................................................................... 156 
Table A.22 Comparison of vessels’ size categories between 2016 and 2025 studies .................. 157 
Table A.23 Comparison of vessels’ age categories between 2016 and 2025 studies ................... 157 
Table A.24 Comparison of vessels’ type categories between 2016 and 2024 studies .................. 158 
Table A.25 Comparison of the SRL level between 2016 and 2025 studies ................................... 159 

Table A.26 Licence fee as percentage of yearly operational costs per vessel type and size  – 2016 
price gap ................................................................................................................................ 161 

Table A.27 Administrative costs for the activities of implementing the regulatory requirements of the 
SRL (€ million, present values) .............................................................................................. 168 

Table A.28 Total estimated costs for implementing the regulatory requirements of the SRL (€ million, 
present values) ...................................................................................................................... 169 
Table A.29 Benchmark analysis of the staff for establishing the public entity of the SRL ............. 169 
Table A.30 Purchase cost of new vessels (€ million) ..................................................................... 170 

11 

 
List of abbreviations 

Abbreviation 
AIS 
BIMCO 
CII 
CJEU 
COVID-19 
CO2 
CPC 
DNV 
DWT 
EASA 
EC 
ECSA 
EEA 
EEA 
EEXI 
EIB 
EIF 
EMSA 
EPRS 
EQUASIS 
ERA 
ESG 
ESM 
ETS 
EU 
FPSO 
FPU 
FTE 
GATS 
GATT 
GT 
HKC 
HICP 
IEEP 
IHM 
IMO 
ISRA 
LDT 
MARPOL 
MEPC 
MFN 
MRV 
NGO 
OECD 
OIOO 
PCB 

Full definition 
Automatic Identification System 
Baltic and International Maritime Council 
Carbon Intensity Indicator 
Court of Justice of the European Union 
Coronavirus Disease 2019 
Carbon Dioxide 
Central Product Classification 
Det Norske Veritas 
Dead Weight Tonnage1 
European Union Aviation Safety Agency 
European Commission 
European Community Shipowners' Associations 
European Economic Area 
European Environment Agency 
Energy Efficiency Existing Ship Index 
European Investment Bank 
European Investment Fund 
European Maritime Safety Agency 
European Parliament Research Service 
Electronic Quality Shipping Information System 
European Union Agency for Railways 
Environmental, Social and Governance 
Environmentally Sound Management 
Emission Trading System 
European Union 
Floating Production Storage and Offloading (Vessel) 
Floating Production/Offloading (Vessel) 
Full Time Equivalent 
General Agreement on Trade in Services 
General Agreement on Tariffs and Trade 
Gross Tonnage2 
Hong Kong Convention 
Harmonised Index of Consumer Prices 
Institute for European Environmental Policy 
Inventory of Hazardous Materials 
International Maritime Organization 
International Ship Recycling Association 
Light Displacement Tonnage3 
International Convention for the Prevention of Pollution from Ships 
Marine Environment Protection Committee 
Most Favoured Nation 
Monitor, Report and Verify 
Non-governmental organization 
Organisation for Economic Co-operation and Development 
One-In-One-Out 
Polychlorinated biphenyls 

1   Deadweight Tonnage refers to the total weight a vessel can carry, and it is a vital measure for ship owners, charterers, 
and cargo owners as it helps determine a vessel's capability to transport goods and as such industry data also often is 
presented with this measurement. 

2   Gross Tonnage is a measurement of a vessel's overall size, including both the enclosed and open spaces, primarily used 
for administrative and regulatory purposes, such as determining registration fees and safety regulations, and as such is 
also the most widely available measure of vessel size in fleet data. 
Light  Displacement  Tonnage  represents  the  weight  of  the  vessel  when  it  is  empty,  without  any  cargo,  fuel,  or  other 
consumables. It is a measure of the vessel's actual physical weight and widely used in the recycling industry as it provides 
a more accurate approximation to the quantities of recyclable material on a vessel. 

3  

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

Abbreviation 
PFOS 
PSC 
RO 
ROC 
SCM 
SRL 
SRP 
SRR 
SWD 
TEU 
TFA 
TFEU 
THETIS 
UN 
UNCLOS 
UNCTAD 
UK 
USD 
VLCC 
WEEE 
WSR 
WTO 

Full definition 
Perfluoro octane sulfonic acid 
Port State Control 
Recognised Organisation 
Return on Capital 
Standard Cost Model 
Ship Recycling Licence 
Ship recycling plan 
Ship Recycling Regulation 
Staff Working Document 
Twenty-foot equivalent unit 
Trade Facilitation Agreement 
Treaty on the Functioning of the European Union 
The Hybrid European Targeting and Inspection System 
United Nations 
United Nations Convention on the Law of the Sea 
United Nations Conference on Trade and Development 
United Kingdom 
United States Dollar 
Very Large Crude Carrier 
Waste Electrical and Electronic Equipment 
Waste Shipment Regulation 
World Trade Organization 

13 

 
 
 
 
Abstract 

Regulation (EU) No 1257/2013, the Ship Recycling Regulation (SRR), entered into force on 
30  December  2013.  To  address  concerns  over  its  effectiveness,  Article  29  provides  the 
possibility for the European Commission to create a financial incentive. The concerns arise 
because  the  Regulation  requires  only  sound  recycling  for  EU-flagged  ships,  a  criterion 
circumvented through a vessel’s timely re-flagging to a non-EU flag. To be effective, the 
financial  incentive  must  be  capable  of  inducing  a  change  in  behaviour  of  ship  owners 
towards recycling their vessels in compliance with the SRR. 

This study analyses the introduction of a financial incentive in the form of a ship recycling 
licence (SRL). The SRL would be required for entry to EU ports and the fees paid would 
accumulate  capital  with the  aim to  bridge the  revenue  gap  between  sound  and  unsound 
recycling. The study has elaborated a baseline, taking into account key forces, trends and 
market outlooks, and produced an assessment of the economic social and environmental 
impacts. The study also analyses other important elements for the future implementation of 
the proposed SRL. 

14 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Executive Summary 

Regulation (EU) No 1257/2013, the Ship Recycling Regulation (SRR), entered into force on 
30 December 2013. Since then, concerns have emerged about its effectiveness, as it only 
mandates safe and environmentally sound recycling for EU-flagged vessels, a requirement 
that  can  be  easily  circumvented  simply  by  re-flagging  a  vessel  to  a  non-EU  flag.  The 
economics of ship recycling suggests that this behaviour is driven by the higher demolition 
rates  offered  by  recycling  facilities  located  in  South-Asian  countries.  Incentivising  ship 
owners  to  recycle  their  vessels  in  a  safe  and  environmentally  sound  manner  could  be 
achieved through a financial instrument applicable to all vessels calling at a Member State’s 
port or anchorage, irrespective of the flag they are flying. 

The need for the European Commission to work on such a financial incentive was already 
provided  in  Article  29  of  the  SRR,  according  to  which  ‘the  Commission  shall,  by  31 
December  2016,  submit  to  the  European  Parliament  and  to  the  Council  a  report  on  the 
feasibility of a financial instrument that would facilitate safe and sound ship recycling and, 
shall,  if  appropriate,  accompany  it  with  a  legislative  proposal’.  Recital  19  of  the  SRR’s 
preamble  illustrates  that  the  European  Commission  was  charged  with  this  task  ‘in  the 
interests of protecting human health and the environment and having regard for the ‘polluter 
pays’  principle’’.  The  recital  also  clarifies  that  the  report  concerns  the  ‘feasibility  of 
establishing a financial mechanism applicable to all ships calling at a Member State’s port 
or  anchorage,  irrespective  of  the  flag  they  are  flying,  to  generate  resources  that  would 
facilitate  the  environmentally  sound  recycling  and  treatment  of  ships  without  creating  an 
incentive to re-flag’. 

The  Commission  submitted  its  report  in  2017,4  with  the  support  of  a  study  completed  in 
2016  by  Ecorys,  DNV-GL  and  Erasmus  University.  With  the  perspective  of  a  possible 
revision of the SRR and prior to a comprehensive impact assessment, which would need to 
accompany any Commission proposal for a new SRR, the Commission considered there 
was a need to update and complement the study from 2016. The present study is the result 
of this work. 

To  be  effective,  a  financial  instrument must  be  capable of  inducing  a  change  in the  ship 
owners’ behaviour towards vessel recycling in compliance with the SRR. The premium the 
ship  owners  are  getting  from  the  higher  revenue  earned  for  end-of-life  vessels  sold  to 
recycling  facilities  that  do  not  dismantle  the  vessels  in  a  safe  and  environmental  sound 
manner rather than to EU-listed facilities, must be eliminated. 

The 2016 study identified a new financial instrument, in the form of a Ship Recycling Licence 
(SRL):  an  incentive  designed  to  collect  capital  at  port  calls.  While  overcoming  the 
shortcoming of the port levy, the SRL also incorporates some of the design elements from 
other options previously considered: 

•  All vessels calling at EU ports must obtain a licence from a designated European entity. 
This licence is used to impose a financial instrument upon the ship owners to incentivise 
safe  and  environmentally  sound  ship  recycling.  To  be  effective  in  terms  of  recycling 
behaviour,  the  capital  amount  needs  to  bridge  the  gap  between  revenues  for  a  ship 
owner opting for an EU-listed recycling facility and the scenario in which a ship owner 
opts for the more lucrative option of non-SRR-compliant ship recycling. 

•  The idea behind the SRL is to impose to the ship owners a contribution, consisting of 
two elements. Firstly, a charge for the administrative costs of issuing the SRL. Secondly, 
a premium, levied from the ship owner, and transferred to a ship recycling fund, where 

4   COM(2017) 420 final. 

15 

 
it is administered separately and transparently with the other capital accumulated by a 
specific vessel, as an individual credit to a future payment of the same amount.  

•  The  premium’s  amount  depends  on  the  capital  that  needs  to  be  accumulated  for  a 
vessel, depending on its characteristics (i.e. size and type) and the set timeframe within 
which the capital is to be accumulated.  

•  The full capital amount does not become payable until the vessel has been recycled in 
compliance  with  the  SRR  at  an  EU-listed  recycling  facility.  However,  if  it  becomes 
apparent that the vessel has been recycled in a non-EU listed recycling facility, the ship 
owner  forfeits  the  accrued  rights  to  the  payment  of  the  capital  amount.  Once  the 
forfeiture procedure has been concluded, the Ship Recycling Funds transmits the capital 
amount to a general fund on ship recycling.  

•  To avoid that the SRL and the premium levied for calling at EU ports are disproportionate 
for vessels with either very high or very low frequency of calling at EU ports, the SRL’s 
validity would be time-based rather than frequency based. The shipowner could have 
the choice to opt for a monthly or annual validity. 

Predicted impacts of the financial instrument 

The  analysis  of  the  current  situation  shows  a  practice  of  re-flagging  EU-flagged  vessels 
prior to recycling, leading to a low percentage of EU-flagged vessels being recycled in EU-
listed recycling facilities. Although 14.9% of the global fleet by GT consists of EU-flagged 
vessels, they were only 2.8% of the recycled LDT in 2022. 

Taking into account the entry into force of the Hong Kong Convention (HKC) on 26 June 
2025,  the  present  study  has  elaborated  a  baseline  scenario  against  which  the  SRL’s 
potential  impacts  were  assessed.  The  baseline  scenario  projects  the  likely  trends  in  the 
absence of the SRL being implemented and focuses on the number of vessels, their sizes 
and types, the destinations for ship recycling, and differentiation based on EU-flagged or 
non-EU-flagged vessels. The baseline relies on data regarding the global fleet, order books, 
age of  vessels  at recycling,  and  information  on port calls  at  EU  ports.  Notably,  it  utilises 
Equasis and UNCTAD’s data for the global number of vessels and Gross Tonnage (GT) 
across different segments and combines historical recycling data to elaborate projections 
until 2055. 

From the identified trends for the baseline scenario, bulk carriers are expected to take longer 
to  be  recycled  due  to their  lower  average  age  compared  to median  recycling  ages.  The 
projection suggests a recycling peak at almost 25 million LDT by 2033, driven by the ageing 
of the global fleet. Large and very large vessels contribute significantly to this peak. Factors 
like market and geo-political conditions, order books, and environmental regulations might 
influence  the  ship  owners’  recycling  decisions,  and  therefore  would  potentially  cause 
deviations from these trends. For the baseline scenario, the projected volume of recycled 
EU-flagged vessels would follow the trend of the global fleet. The demand for recycling EU-
flagged vessels is expected to increase up to almost 2.5 million LDT in 2032, before it falls 
back to around 2.2 million LDT from 2039 onwards. 

The prediction model developed to assess the impacts stemming from the SRL assumes a 
demolition  rate  gap  equal  to  €  370  per  LDT  and  produces  estimates  of  the  number  of 
vessels that would be recycled in a safe and environmentally sound manner until 2055. The 
prediction model determines the SRL’s fee based on the likely future projections of the world 
fleet,  port  calls  and  demolition  rate  gap  between  sound  or  unsound  ship  recycling.  By 
combining the demolition rate gap with the average GT per type of vessel, it also determines 

16 

 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

the  total  required  amount  of  capital  per  size  of  vessel  that  has  to  be  covered  over  the 
considered period.  

On the economic impacts, notably on the SRL’s level, the estimated annual fee would vary 
between about € 108,000 for the smallest type and € 756,000 for the largest type, as derived 
by  optimising  the  fee  to  cover  the  recycling  costs  over  a  20-year  period.  It  must  be 
underlined  that  the  model  for  the  present  study  is  developed  based  on  the  average 
demolition rate gap between price offered by EU-listed recycling facilities located in the EU 
and the price offered by recycling facilities located in South Asia. The model elaborates the 
estimates with data from 2023. In this respect, it is worth noting that the model is destined 
to be adjusted regularly according on the evolution of the actual demolition rate gap for sake 
of robustness of the predictions. The reference gap of the demolition rates is not the only 
parameter that might evolve in the future, as other parameters could also be set otherwise 
when establishing the legal framework for the financial instrument, which some that might 
have a significant impact on the actual price of the SRL. 

On  the  basis  of  the  assumptions  introduced for  this  study,  the  analysis  of  the  economic 
impacts estimates that about 27,800 SRLs would be requested annually and that during the 
initial period of the implementation of the SRL only a minor fraction of vessels would change 
their usual end-of-life destination due to insufficient funds accumulated. However, after 15 
years,  a  significant  increase  would  materialise  with  most  of  the  vessels  accumulating 
sufficient  funds  and  reaching  100%  in  2045.  The  model  predicts  that  almost  all  vessels 
would be recycled in a safe and environmentally sound manner in 2048 onwards. When it 
comes to size, the larger vessels would be recycled in a safe and environmentally sound 
manner at a later stage compared with the smaller ones. 

For the  capital  accumulation,  the  prediction  model  foresees  it  as  a  gradual  process.  It  is 
expected that during the initial period a significant portion of the accumulated funds would 
not be returned to the ship owners, as it is more likely they would not change their behaviour 
and accept forfeiture due to insufficient funds accumulated. During the intermediate period, 
as the revenues exceed expenses, a substantial fund would build up, stabilising after 20 
years, when a significant portion of the fleet would stop contributing. 

The  capital  accumulated  during  the  initial  period  could  be  repurposed  or  serve  as  a 
temporary fund to ease the transition period. For a period of up to 15 years after the SRL 
being  introduced,  using  excess  funds  to  support  sound  recycling  could  be  considered, 
especially  for  ageing  vessels  predicted  to  be  recycled  within  10  years  but  lacking  the 
required accumulation time. The accumulated fund returned to the ship owners after sound 
recycling,  initially  limited,  would  increase  up  to  approximately  €  1.3  billion,  with  a  total 
cumulative size of the fund that would reach about € 13 billion in 2055. 

The  SRL  also  has  implications  for  potential  improvement  of  EU-listed  recycling  facilities’ 
competitive  advantage  over  non-EU  listed  ones.  The  prediction  model  suggests  an 
increasing  number  of  vessels  opting  for  safe  and  environmentally  sound  recycling,  and 
therefore a growing demand for such practices. The recycling demand would rise gradually, 
as more vessels would accumulate sufficient funds to cover the demolition rate gap. The 
baseline scenario suggests that the capacity  of the European list should keep growing to 
face the forecasted demand. Especially during the anticipated peak in demand for recycling 
at global level, ship owners might face challenges finding available recycling facilities. If the 
EU-listed recycling facilities should also dismantle additional non-EU flagged vessels, as a 
result of the implementation of the SRL, it will be necessary to increase the capacity of the 
European list even further. 

With  the  SRL  being  implemented,  the  demand  for  recycling  in  EU  listed  facilities  would 
increase significantly after 15 years, aligning with the time when sufficient funds have been 
accumulated.  In this  scenario,  the  peak  for  recycling  EU-flagged  vessels  would  occur  in 
2032. That suggests that the SRL would not constrain the recycling demand and capacity 

17 

for EU-listed recycling facilities. The future situation would be eased, also considering the 
past extension trend of EU-listed recycling facilities, and the potential inclusion of recycling 
facilities of third countries. 

In terms of the SRL’s impact on the vessels’ operating costs, the prediction model suggests 
that  for  the  assumed  vessel  types,  it  would  be  between  5%  and  32%.  However,  the 
estimated percentages could vary for changed fuel prices or adjusted operating profiles of 
the vessels. 

Enforcing the SRL would involve not only verifying vessels' SRLs, but also ensuring that 
ship recycling took place in line with the SRR at EU-listed recycling facilities. The Member 
States, under Port State control, and the European entity designated for the management 
of the SRL will need to make sure the verifications of the relevant documentary proof will 
be effective. As these checks can be combined with other current requirements under SRR, 
the additional costs for these verifications are considered marginal. 

On the social impacts, the SRR aims to improve the working conditions of the ship recycling 
industry’s workers. The SRL aligns with this policy objective. As more vessels would shift 
towards safe and sound recycling, in general, better working conditions should be expected 
as a result of the EU listing process and its more active use.  

Recycling facilities located in South Asia are more labour intensive and do not work with 
same  stringent  health  and  safety  standards  as  in  the  EU.  The  lack  of  proper  protective 
measures contribute to a high number of accidents. The entry into force of the Hong Kong 
Convention  (HKC)  in  2025  is  likely  to  reduce  the  number  of  accidents  compared  to  the 
current situation. With the SRL being implemented, the prediction model foresees a further 
potential  reduction  of  both  fatal  and  non-fatal  accidents  for  the  period  2030-2055.  The 
impact would again be closely tied to the SRL’s effectiveness in promoting environmentally 
sound ship recycling, notably after 15 years, when most of the vessels accumulate sufficient 
funds  to  bridge  the  revenue  gap.  The  same  applies  to  the  environmental  impacts,  with 
estimates suggesting a pollution reduction, measured on the basis of data gathered on the 
volume of hazardous materials onboard of the vessel. 

Important elements for the implementation of the Ship Recycling Licence 

Elaborating  on  the  conclusions  of  the  2016  study,  important  elements  for  the  SRL’s 
implementation have been further analysed. If the Commission will opt to propose a SRL, 
the analysis of these elements may support the operational implementation of the financial 
incentive. The results emerging from the analysis of these elements are as follows. 

•  The  establishment  of  a  European  public  entity  tasked  with  implementing  the  SRL’s 
regulatory  requirements  would  require  between 20  and  21  FTE  and  a total  cost  of  € 
560.4  million  for  the  period  2030-2055,  expressed  in  present  values.  The  estimated 
costs include (i) the resources to implement the administrative and technical activities 
and  (ii)  the  cost  of  the  facility  where  the  designated  European  entity  will  be  located. 
From this amount, it is worth noting that the cost of third party asset management is the 
majority of the costs to (i) set the appropriate SRL premium and, (ii) collect the premium, 
and (iii) manage the ship recycling fund. 

•  The  estimated  accumulated  forfeited  funds  could  reach  approximately  €  1.05  billion, 
expressed in present value for the period 2030-2055. They could be used to promote 
research and development in sustainable shipping and ship recycling, supporting non-
EU listed facilities in raising their standards or for promotion of awareness campaigns. 

18 

 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

•  Considering that non-EU flagged vessels visiting EU ports would also be subject to the 
SRL, the 2016 study recommended exploring a certification and notification scheme for 
non-EU flagged vessels destined to recycling, similar as the one applying today to EU-
flagged  vessels.  To  address  this,  a  parallel  system  is  suggested,  requiring  non-EU 
flagged vessels to obtain a ready for recycling certificate, such as for the Inventory of 
Hazardous Materials (IHM). 

•  On the integration of the SRL requirement into the Port State Control (PSC), the ship 
owners  would  need  a  certificate  to  show  compliance  with  payment  obligations.  As 
inspections made by the relevant port state would be crucial to verify compliance, the 
digitalisation of the certificate would allow to pre-load it to the THETIS-EU database.5 
The inspector from the relevant port state would then have access to the certificate prior 
to  inspection  and  be  able  to  check  beforehand  the  availability  of  the  information. 
Challenges  may  arise  for  fishing  vessels  not  covered  by  the  PSC  Directive  and  for 
vessels smaller than 500 GT if included in the scope of the SRR.   

•  The implementation of a SRL would require a monitoring framework on aspects relevant 
for  the  modelling  and  necessary  for  its  future  application.  The  monitoring  framework 
should include elements related to (i) the fleet’s characteristics, (ii) the port calls, (iii) the 
recycling capacity, (iv) the evolution of the price of the scrap steel for end-of-life vessels, 
and (v) the tasks and costs borne by the designated European entity. The data gathered 
on these elements will be necessary to feed and calibrate the model set up to monitor 
the  future  demand  of  recycling  of  end-of-life  vessels  vis-à-vis  the  recycling  capacity. 
Regular  data  collection 
is 
recommended  for  effective  implementation  of  the  model,  monitoring  of  demand  and 
capacity and future evaluation of the initiative. 

from  stakeholders  and  coordination  among 

them 

•  Further  legal  and  administrative  considerations  would  need  to  be  addressed  for  the 
extension  of  SRR  requirements  to  non-EU  flagged  vessels.  In  this  respect,  potential 
conflicts  with  international  legal  frameworks  were  analysed  such  as GATT,  TFA,  and 
GATS,  focusing  on  principles  of  non-discrimination,  freedom  of  transit,  and  fair 
treatment  in  trade  and  services.  Challenges  include  ensuring  that  the  SRL  does  not 
unfairly  disadvantage non-EU  vessels  or favour EU  services.  The  legal  analysis  also 
examined whether the SRL would align with environmental protection exceptions under 
WTO  agreements,  emphasising  the  need  for  proportionality.  The  legal  analysis 
concluded that even if the SRL would infringe on substantive commitments under GATS, 
the SRL may still be justified under Article XIV (b) GATS pertaining to the environmental 
protection, as long as there are no reasonably available alternative measures meeting 
the same objectives in a less trade restrictive manner. 

Conclusions  

A number of limitations for the model’s estimations used in this study need to be highlighted. 
This concerns in the first place the baseline and the quantification of the impact of the entry 
into force of  the HKC on the ship recycling sector due to the lack of quantitative estimates 
on  the  key  parameters.  The  model  is  also  based  on  parameters  with  high  degree  of 
uncertainties, including  the unpredictable fluctuation of the price of the end-of-life vessels, 
which in turn depends on local market conditions and exogenous evolving factors that are 
beyond  the  scope  of  this  analysis.  Against  this  background,  it  is  essential  that  the 
mechanisms for implementation of a financial instrument as the SRL includes a continuous 
monitoring and review mechanisms to ensure its effectiveness. 

It is important to underline that the study has made a number of assumptions regarding the 
calculations.  In  particular,  the  determination  of  the  price  gap  for  end-of-life  vessels  that 

5  

In relation to the SRR, THETIS-EU provides an overview of vessels for EU inspection authorities to guide and support 
the inspection process required for the Regulation. The data comes from vessels’ inspections, and no data on facilities 
or on IHM is inspected, other than as part of the vessel inspection. The vessel inspection is also only an enforcement 
inspection and not an authorisation. 

19 

 
exists between recycling facilities located in different countries, the accumulation period or 
the way to calculate the actual licence price for individual vessel are all design options for 
the purpose of modelling and could also be set otherwise when establishing more precisely 
the legal framework for the financial instrument. The final setting of these parameters might 
significantly  impact  the  outcome  on  the  ship  recycling  licence  price.  The  choices  made 
should therefore not be seen as any commitment to any specific design proposal. This said, 
the choices of the parameters determining the ship recycling licence made in this study are 
considered reasonable to achieve the objective pursued by such financial instrument. This 
study is aimed at serving as a basis for further detailed impact assessment should a ship 
recycling  licence  be  considered  as  an  option  in  the  context  of  a  future  possible  revision 
process of the EU Ship Recycling Regulation.  

The  information  and  views  set  out  in  this  study  are  those  of  the  authors  and  do  not 
necessarily  reflect  the  official  opinion  of  the  Commission.  The  Commission  does  not 
guarantee the accuracy of the data included in this study. Neither the Commission nor any 
person acting on the Commission’s behalf may be held responsible for the use which may 
be made of the information contained therein. 

20 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Aperçu 

Le Règlement (UE) N° 1257/2013 relatif au recyclage des navires, est entré en vigueur le 
30 décembre 2013. Pour répondre aux préoccupations quant à son efficacité, l’Article 29 
prévoit la possibilité pour la Commission européenne de créer une incitation financière. Ces 
préoccupations  proviennent  du  fait  que  le  Règlement  n’exige  un  recyclage  sur  et 
écologiquement rationnel que pour les navires battant pavillon de l’UE, un critère contourné 
par le changement en temps opportun du pavillon d’un navire sous un pavillon tiers. Pour 
être  efficace,  l’incitation  financière  doit  être  capable  d’induire  un  changement  de 
comportement  des  armateurs  vers  le  recyclage  de  leurs  navires  conformément  au 
Règlement. 

Cette étude analyse l'introduction d'une incitation financière sous la forme d'une contribution 
au recyclage des navires (SRL). Cette contribution serait exigée pour l’entrée dans les ports 
de l’UE et les montants payés accumuleraient du capital dans le but de combler l’écart de 
travailleurs  et  préjudiciable  à 
revenus  avec  un  recyclage  dangereux  pour 
l’environnement. L'étude a élaboré une base de référence, en tenant compte des forces, 
des  évaluations et des perspectives du marché, et a produit une évaluation des impacts 
économiques, sociaux et environnementaux. L'étude analyse également d'autres éléments 
importants pour la mise en œuvre future de la contribution proposée. 

les 

21 

 
Résumé analytique 

Le règlement (UE) no 1257/2013, le règlement relatif au recyclage des navires (SRR), est 
entré en vigueur le 30 décembre 2013. Depuis lors, des inquiétudes sont apparues quant 
à son efficacité, étant donné qu’il n’impose qu’un recyclage sûr et écologiquement rationnel 
pour les navires battant pavillon de l’UE, exigence qui peut être facilement contournée par 
le simple changement de pavillon d’un navire battant pavillon d’un pays tiers. Le modèle 
économique du recyclage des navires suggère que ce comportement est dû aux prix de 
démolition plus élevés offerts par les installations de recyclage situées dans les pays d’Asie 
du Sud. Il serait possible d’inciter les propriétaires de navires à recycler leurs navires d’une 
manière sûre et écologiquement rationnelle au moyen d’un instrument financier applicable 
à tous les navires faisant escale dans un port ou mouillage d’un État membre, quel que soit 
le pavillon qu’ils battent. 

La nécessité pour la Commission européenne de travailler sur une telle incitation financière 
était déjà prévue à l’article 29 du SRR, selon lequel «la Commission présente au Parlement 
européen et au Conseil, au plus tard le 31 décembre 2016, un rapport sur la faisabilité d’un 
instrument financier qui faciliterait le recyclage sûr et sain des navires et, le cas échéant, 
l’accompagne  d’une  proposition  législative».  Le  considérant  19  du  préambule  du  SRR 
illustre que la Commission européenne était chargée de cette tâche «dans l’intérêt de la 
protection  de  la  santé  humaine  et  de  l’environnement  et  dans  le  respect  du  principe  du 
pollueur-payeur». Le considérant précise également que le rapport porte sur la «faisabilité 
de la mise en place d’un mécanisme financier applicable à tous les navires faisant escale 
dans un port ou mouillage d’un État membre, quel que soit le pavillon qu’ils battent, afin de 
générer  des  ressources  qui  faciliteraient  le  recyclage  et  le  traitement  écologiquement 
rationnels des navires sans créer d’incitation au changement de pavillon». 

La Commission a présenté son rapport en 2017,6 à l’appui d’une étude réalisée en 2016 
par Ecorys, DNV-GL et Erasmus University. Dans la perspective d’une éventuelle révision 
du SRR et avant une analyse d’impact complète, qui devrait accompagner toute proposition 
de  la  Commission  relative  à  un  nouveau  règlement,  la  Commission  a  estimé  qu’il  était 
nécessaire  de  mettre  à  jour  et  de  compléter  l’étude  de  2016.  La  présente  étude  est  le 
résultat de ces travaux. 

Pour être efficace, un instrument financier doit être capable d’induire un changement dans 
le comportement des propriétaires de navires en ce qui concerne le recyclage des navires, 
conformément  au  SRR.  Il  convient  d’éliminer  la  prime  que  les  propriétaires  de  navires 
perçoivent des recettes plus élevées pour les navires en fin de vie vendus à des installations 
de recyclage qui ne démantèlent pas les navires d’une manière sûre et respectueuse de 
l’environnement par rapport à une vente aux installations figurant sur la liste de l’UE. 

L’étude de 2016 a identifié un nouvel instrument financier, sous la forme d’une contribution 
au  recyclage  des  navires  (SRL):  une  incitation  visant  à  collecter  des  capitaux  lors  des 
escales. Tout en remédiant à l’insuffisance de la taxe portuaire, la SRL intègre également 
certains des éléments de conception d’autres options préalablement envisagées: 

•  Tous les navires faisant escale dans les ports de l’UE doivent obtenir une licence auprès 
d’une entité européenne désignée. Cette licence est utilisée pour imposer un instrument 
financier  aux  propriétaires  de  navires  afin  d’encourager 
le  recyclage  sûr  et 
écologiquement rationnel des navires. Pour être efficace en termes de comportement 
de  recyclage,  le  montant  en  capital  doit  combler  l’écart  entre  les  recettes  d’un 
propriétaire de navire optant pour une installation de recyclage figurant sur la liste de 

6   COM (2017) 420 final. 

22 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

l’UE et le scénario dans lequel un propriétaire de navire opte pour l’option plus lucrative 
du recyclage de navires non conforme au SRR. 

•  L’idée qui sous-tend la SRL est d’imposer aux propriétaires de navires une contribution 
composée de deux éléments. Premièrement, une redevance pour les frais administratifs 
liés à l’émission de la SRL. Deuxièmement, une prime, perçue auprès du propriétaire 
du  navire  et  transférée  à  un  fonds  de  recyclage  du  navire,  lorsqu’elle  est  gérée 
séparément  et  de  manière  transparente  avec  les  autres  capitaux  accumulés  par  un 
navire donné, en tant que crédit individuel pour un paiement futur du même montant.  

•  Le  montant  de  la prime dépend  du  capital  qui  doit  être  accumulé pour  un navire,  en 
fonction de ses caractéristiques (c’est-à-dire sa taille et son type) et du délai fixé pour 
l’accumulation du capital.  

•  Le  montant  total  du  capital  n’est  pas  payable  tant  que  le  navire  n’a  pas  été  recyclé 
conformément au SRR dans une installation de recyclage figurant sur la liste de l’UE. 
Toutefois,  s’il  apparaît  que  le  navire  a  été recyclé  dans  une  installation de  recyclage 
non accreditée par l’UE, le propriétaire du navire perd les droits acquis au paiement du 
montant du capital. Une fois la procédure de saisie achevée, le fonds de recyclage des 
navires transmet le capital à un fonds général pour le recyclage des navires.  

•  Afin d’éviter que la SRL et la prime perçue pour les escales dans les ports de l’UE ne 
soient disproportionnées pour les navires faisant escale dans des ports de l’UE à très 
haute ou à très faible fréquence, la validité de la SRL serait fondée sur le temps plutôt 
que  sur  la  fréquence.  L’armateur  pourrait  avoir  le  choix  d’opter  pour  une  validité 
mensuelle ou annuelle. 

Incidences prévues de l’instrument financier 

L’analyse de la situation actuelle montre une pratique consistant à changer de pavillon de 
navires battant pavillon de l’UE avant leur recyclage, ce qui entraîne un faible pourcentage 
de navires battant pavillon de l’UE recyclés dans des installations de recyclage figurant sur 
la  liste  de  l’UE.  Bien  que  14,9 %  de  la  flotte mondiale  en  GT  soit  composée  de  navires 
battant pavillon de l’UE, ils ne représentaient que 2,8 % du LDT recyclé en 2022. 

Compte tenu de l’entrée en vigueur de la convention de Hong Kong (HKC) le 26 juin 2025, 
la  présente  étude  a  élaboré  un  scénario  de  référence  à  l’aune  duquel  les  incidences 
potentielles du SRL ont été évaluées. Le scénario de base prévoit les tendances probables 
en l’absence de mise en œuvre de la SRL et se concentre sur le nombre de navires, leur 
taille et leur type, les destinations du recyclage des navires et la différenciation fondée sur 
les navires battant pavillon de l’UE ou ne battant pas pavillon d’un État membre de l’UE. Le 
scénario de référence repose sur des données concernant la flotte mondiale, les carnets 
de commande, l’âge des navires au recyclage et les informations sur les escales dans les 
ports de l’UE. Elle utilise notamment les données d’Equasis et de l’UNCTAD pour le nombre 
mondial  de  navires  et  le  tonnage  brut  (GT)  dans  différents  segments  et  combine  les 
données historiques de recyclage pour élaborer des projections jusqu’en 2055. 

D’après  les  tendances  recensées  pour  le  scénario  de  référence,  les  vraquiers  devraient 
prendre  plus  de  temps  pour  être  recyclés  en  raison  de  leur  âge  moyen  inférieur  à  l’âge 
médian de recyclage. Selon les projections, le taux de recyclage devrait atteindre près de 
25 millions  de  LDT  d’ici  à  2033,  sous  l’effet  du  vieillissement  de  la  flotte  mondiale.  Les 
grands et les très grands navires contribuent de manière significative à ce pic. Des facteurs 
tels  que  les  conditions  du  marché  et  les  conditions  géopolitiques,  les  carnets  de 
commandes et les réglementations environnementales pourraient influencer les décisions 
des propriétaires de navires en matière de recyclage et pourraient donc entraîner des écarts 
par rapport  à  ces tendances.  Pour  le  scénario de référence,  le  volume  prévu  de  navires 
recyclés battant pavillon de l’UE suivrait la tendance de la flotte mondiale. La demande de 
recyclage  des  navires  battant  pavillon  de  l’UE  devrait  augmenter  jusqu’à  près  de 

23 

2,5 millions de LDT en 2032, avant de retomber à environ 2,2 millions de LDT à partir de 
2039. 

Le  modèle  de  prévision  mis  au  point  pour  évaluer  les  incidences  découlant  de  la  SRL 
suppose un écart de taux de démolition égal à € 370 par LDT et produit des estimations du 
nombre de navires qui seraient recyclés d’une manière sûre et écologiquement rationnelle 
jusqu’en  2055.  Le  modèle de  prévision  détermine  la redevance  de  SRL sur  la base des 
projections futures probables de la flotte mondiale, des escales portuaires et de l’écart de 
taux de démolition entre le recyclage  des navires au sein de chantiers listés par l’UE ou 
non. En combinant l’écart de taux de démolition avec le GT moyen par type de navire, il 
détermine  également  le  montant  total  requis  de  capital  par  taille  du  navire  qui  doit  être 
couvert au cours de la période considérée.   

En ce qui concerne les incidences économiques, notamment sur le montant de la SRL, la 
redevance annuelle estimée varierait entre environ € 108,000 pour la plus petite gatégorie 
de navires et € 756,000 pour la plus grande catégorie, tel qu’il ressort de l’optimisation de 
la redevance pour couvrir les coûts de recyclage sur une période de 20 ans. Il convient de 
souligner  que le  modèle de  la  présente  étude est  élaboré  sur  la base de l’écart  de  taux 
moyen de démolition entre le prix proposé par les installations de recyclage figurant sur la 
liste de l’UE situées dans l’UE et le prix offert par les installations de recyclage situées en 
Asie du Sud. Le modèle élabore les estimations à partir des données de 2023. À cet égard, 
il convient de noter que le modèle est destiné à être adapté régulièrement en fonction de 
l’évolution de l’écart réel de taux de démolition, afin de garantir la solidité des prévisions. 
L’écart de référence des taux de démolition n’est pas le seul paramètre qui pourrait évoluer 
à l’avenir, étant donné que d’autres paramètres pourraient également être fixés autrement 
lors de l’établissement du cadre juridique de l’instrument financier, dont certains pourraient 
avoir une incidence significative sur le montant effectif de la contribution.  

Sur  la  base  des  hypothèses  présentées  pour  cette  étude,  l’analyse  des  incidences 
économiques estime qu’environ 27,800 SRL seraient demandées chaque année et qu’au 
cours de la période initiale de mise en œuvre du SRL, seule une petite fraction des navires 
changerait  leur  destination  habituelle  en  fin  de  vie  en  raison  de  l’insuffisance  des  fonds 
accumulés.  Toutefois,  après  15 ans,  une  augmentation  significative  se  concrétiserait,  la 
plupart  des  navires  accumulant  des  fonds  suffisants  et  atteignant  100 %  en  2045.  Le 
modèle  prévoit  que  presque  tous  les  navires  seront  recyclés  d’une  manière  sûre  et 
écologiquement rationnelle à partir de 2048. En ce qui concerne la taille, les navires plus 
grands  seraient  recyclés  d’une  manière  sûre  et  écologiquement  rationnelle  à  un  stade 
ultérieur par rapport aux plus petits. 

En ce qui concerne l’accumulation de capital, le modèle de prévision prévoit qu’il s’agit d’un 
processus  progressif.  Au  cours  de  la  période  initiale,  une  part  importante  des  fonds 
accumulés ne serait pas restituée aux propriétaires de navires car il est plus probable qu’ils 
ne changeraient pas leur comportement et accepteraient la perte des fonds en raison de 
l’insuffisance des fonds accumulés. Au cours de la période intermédiaire, étant donné que 
les  recettes  dépassent  les  dépenses,  un  fonds  substantiel  devrait  se  constituer,  se 
stabilisant après 20 ans, lorsqu’une partie importante de la flotte cesserait d’y contribuer.  

Le capital accumulé au cours de la période initiale pourrait être réaffecté ou servir de fonds 
temporaire pour faciliter la période de transition. Pendant une période pouvant aller jusqu’à 
15 ans après l’introduction de la SRL, l’utilisation de fonds excédentaires pour soutenir le 
recyclage rationnel pourrait être envisagée, en particulier pour les navires vieillissants dont 
le  recyclage  est  prévu  dans  un  délai  de  10 ans,  mais  qui  ne  disposent  pas  du  temps 
d’accumulation requis. Le fonds accumulé restitué aux propriétaires de navires après un 
recyclage  dans  un  chantier  agréé,  initialement  limité,  augmenterait  jusqu’à  environ  € 

24 

 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

1,3 milliards, avec un volume total cumulé du fonds qui atteindrait environ € 13 milliards en 
2055. 

Le  SRL  a  également  des  répercussions  sur  l’amélioration  potentielle  de  l’avantage 
concurrentiel  des  installations  de  recyclage  figurant  sur  la  liste  de  l’UE.  Le  modèle  de 
prévision  suggère  un  nombre  croissant  de  navires  optant  pour  un  recyclage  sûr  et 
respectueux de l’environnement, et donc une demande croissante de telles pratiques. La 
demande  de  recyclage  augmenterait  progressivement,  étant  donné  qu’un  plus  grand 
nombre  de  navires  accumuleraient  des  fonds  suffisants  pour  couvrir  l’écart  de  prix  de 
démolition. Le scénario de référence suggère que la capacité de l’actuelle liste européenne 
de  recyclage  des  navires  devrait  continuer  à  augmenter  pour  faire  face  à  la  demande 
prévue. En particulier lors du pic attendu de la demande de recyclage au niveau mondial, 
les  propriétaires  de  navires  pourraient  rencontrer  des  difficultés  pour  trouver  des 
installations de recyclage disponibles. Si les installations de recyclage figurant sur la liste 
de l’UE devaient également démanteler des navires ne battant pas pavillon de l’UE, à la 
suite de la mise en œuvre de la SRL, il sera nécessaire d’accroître encore la capacité de la 
liste européenne. 

Avec la mise en œuvre des SRL, la demande de recyclage dans les installations figurant 
sur la liste de l’UE augmenterait considérablement après 15 ans, ce qui correspondrait au 
moment où des fonds suffisants ont été accumulés. Dans ce scénario, le pic de recyclage 
des navires battant pavillon de l’UE se produirait en 2032. Cela donne à penser que le SRL 
ne  limiterait  pas  la  demande  et  la  capacité  de  recyclage  des  installations  de  recyclage 
figurant sur la liste de l’UE. La situation future serait assouplie, compte tenu également de 
la tendance antérieure à l’extension des installations de recyclage figurant sur la liste de 
l’UE et de l’inclusion potentielle d’installations de recyclage de pays tiers. 

En ce qui concerne l’impact de la SRL sur les coûts d’exploitation des navires, le modèle 
de prévision suggère que, pour les types de navires concernés, il serait compris entre 5 % 
et  32 %.  Toutefois,  les  pourcentages  estimés  pourraient  varier  en  fonction  de  l’évolution 
des prix du carburant ou de l’adaptation des profils d’exploitation des navires. 

L’application de la SRL impliquerait non seulement de vérifier les SRL des navires, mais 
aussi de veiller à ce que le recyclage des navires ait lieu conformément au SRR dans les 
installations de recyclage figurant sur la liste de l’UE. Les États membres, sous le contrôle 
de l’État du port, et l’entité européenne désignée pour la gestion du SRL devront veiller à 
ce  que  les  vérifications  des  preuves  documentaires  pertinentes  soient  efficaces.  Étant 
donné que ces contrôles peuvent être combinés avec d’autres exigences actuelles au titre 
du  SRR,  les  coûts  supplémentaires  liés  à  ces  vérifications  sont  considérés  comme 
marginaux. 

En ce qui concerne les incidences sociales, le SRR vise à améliorer les conditions de travail 
des  travailleurs  de  l’industrie  de  recyclage  des  navires.  Le  SRL  s’aligne  sur  cet  objectif 
stratégique. Étant donné qu’un plus grand nombre de navires passeraient à un recyclage 
sûr et sain, de meilleures conditions de travail devraient en général être attendues à la suite 
du processus d’inclusion sur la liste de l’UE et de son utilisation plus active.  

Les installations de recyclage situées en Asie du Sud sont à plus forte intensité de main-
d’œuvre et ne respectent pas les mêmes normes strictes en matière de santé et de sécurité 
que dans l’UE. L’absence de mesures de protection adéquates contribue à un nombre élevé 
d’accidents. L’entrée en vigueur de la convention de Hong Kong en 2025 est susceptible 
de réduire le nombre d’accidents par rapport à la situation actuelle. Avec la mise en œuvre 
de la SRL, le modèle de prévision prévoit une nouvelle réduction potentielle des accidents 
mortels et non mortels pour la période 2030-2055. L’impact serait à nouveau étroitement 
lié à l’efficacité  de  la SRL  dans  la promotion  du recyclage écologiquement rationnel  des 
navires,  notamment  après  15 ans,  lorsque  la  plupart  des  navires  accumulent  des  fonds 
suffisants  pour  combler  le  déficit  de  recettes.  Il  en  va  de  même  pour  les  incidences  sur 

25 

l’environnement,  avec des  estimations  suggérant  une réduction  de  la pollution,  mesurée 
sur  la  base  des  données  recueillies  sur  le  volume  de  matières  dangereuses  à  bord  du 
navire. 

Éléments importants pour la mise en œuvre de la licence de recyclage des navires 

En s’appuyant sur les conclusions de l’étude de 2016, des éléments importants pour la mise 
en œuvre du SRL ont été analysés plus en détail. Si la Commission choisit de proposer une 
SRL,  l’analyse  de  ces  éléments  peut  soutenir  la  mise  en  œuvre  opérationnelle  de 
l’instrument. Les résultats de l’analyse de ces éléments sont les suivants. 

•  La  création  d’une  entité  publique  européenne  chargée  de  mettre  en  œuvre  les 
exigences réglementaires de la SRL nécessiterait entre 20 et 21 FTE et un coût total de 
€ 560,4 millions  pour la période 2030-2055, exprimé en valeurs actuelles. Les coûts 
estimés comprennent (i) les ressources nécessaires à la mise en œuvre des activités 
administratives  et  techniques  et  (ii)  le  coût  lié  au  bâtiment  hébergeant  l’entité 
européenne. Parmi ces coûts, il convient de noter que le coût de la gestion d’actifs par 
des  tiers  représente  la  majorité  des  coûts,  gestion  destinée  à  (i)  fixer  le  montant 
approprié  de  la  SRL,  (ii)  percevoir  les  contributions,  et  (iii)  gérer  le  fonds  pour  le 
recyclage des navires. 

•  Selon les estimations, les fonds non-récupérés cumulés pourraient atteindre environ € 
1,05 milliards, exprimés en valeur actuelle pour la période 2030-2055. Ils pourraient être 
utilisés pour promouvoir la recherche et le développement dans le domaine du transport 
maritime durable et du recyclage des navires,  pour aider des installations ne figurant 
pas sur la liste européenne à relever leurs normes ou promouvoir des campagnes de 
sensibilisation. 

•  Étant donné que les navires battant pavillon de pays tiers qui visitent des ports de l’UE 
seraient  également  soumis  à  la  SRL,  l’étude  de  2016  recommandait  d’étudier  un 
système de certification et de notification pour les navires battant pavillon de pays tiers 
destinés au recyclage, similaire à celui qui s’applique aujourd’hui aux navires battant 
pavillon  de  l’UE.  Pour  remédier  à  cette  situation,  un  système  parallèle  est  proposé, 
exigeant  des  navires  battant  pavillon  de  pays  tiers  qu’ils  obtiennent  un  certificat  prêt 
pour le recyclage, de façon plus ou moins similaire à ce qui est requis pour l’inventaire 
des matières dangereuses (IHM). 

•  En ce qui concerne l’intégration de l’exigence de la SRL dans le contrôle par l’État du 
port  (PSC),  les  propriétaires  de  navires  auraient  besoin  d’un  certificat  attestant  le 
paiement de la contribution. Étant donné que les inspections effectuées par l’État du 
port  seraient  essentielles  pour  vérifier  la  détention  de  la  SRL,  la  numérisation  du 
certificat permettrait de le charger dans la base de données THETIS-EU.7 L’inspecteur 
de l’État du port concerné aurait alors accès au certificat avant l’inspection et serait en 
mesure de vérifier au préalable la disponibilité des informations. Des difficultés peuvent 
se poser pour les navires de pêche qui ne sont pas couverts par la directive PSC et 
pour  les  navires  d’une  jauge  brute  inférieure  à  500  s’ils  sont  inclus  dans  le  champ 
d’application du SRR.   

•  La  mise en  œuvre  d’une SRL  nécessiterait  un cadre de suivi  des  aspects  pertinents 
pour la modélisation et nécessaires à son application future. Le cadre de surveillance 
devrait inclure des éléments liés (i) aux caractéristiques de la flotte, (ii) aux escales, (iii) 
à la capacité de recyclage, (iv) à l’évolution du prix de la feraille des navires en fin de 
vie  et  (v)  aux  tâches  et  aux  coûts  supportés  par  l’entité  européenne  désignée.  Les 

7   En ce qui concerne le SRR, THETIS-EU fournit une vue d’ensemble des navires aux autorités d’inspection de l’UE afin 
de guider et de soutenir le processus d’inspection requis par le règlement. Les données proviennent des inspections des 
navires et aucune donnée sur les installations ou sur l’IHM n’est inspectée, si ce n’est dans le cadre de l’inspection des 
navires. L’inspection du navire n’est également qu’une inspection d’exécution et non une autorisation. 

26 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

données recueillies sur ces éléments seront nécessaires pour alimenter et calibrer le 
modèle mis en place pour suivre la demande future de recyclage des navires en fin de 
vie par rapport à la capacité de recyclage. La collecte régulière de données auprès des 
parties prenantes et la coordination entre celles-ci sont recommandées pour la mise en 
œuvre efficace du modèle, le suivi de la demande et des capacités et l’évaluation future 
de l’initiative. 

•  D’autres  considérations 

juridiques  et  administratives  devraient  être  prises  en 
considération  pour  l’extension  du  champ  d’applicaiton  du  SRR  aux  navires  battant 
pavillon  de  pays  tiers.  À  cet  égard,  les  conflits  potentiels  avec  les  cadres  juridiques 
internationaux  ont  été  analysés,  tels  que  le  GATT,  le  TFA  et  le  GATS,  en  mettant 
l’accent  sur  les  principes  de  non-discrimination,  de  liberté  de  transit  et  de  traitement 
équitable dans le commerce et les services. Il s’agit notamment de veiller à ce que le 
SRL ne désavantage pas injustement les navires de pays tiers ou ne favorise pas les 
services  de  l’UE.  L’analyse  juridique  a  également  examiné  si  la  SRL  pouvait  tomber 
sous le champ des exceptions en matière de protection de l’environnement prévues par 
les accords de l’OMC, en soulignant la nécessité de proportionnalité. L’analyse juridique 
a conclu que, même si la SRL enfreignait les engagements en substance pris dans le 
cadre du GATS, il peut néanmoins être justifié au titre de l’article XIV, point b), du GATS 
relatif  à  la  protection  de  l’environnement,  tant  qu’il  n’existe  pas  d’autres  mesures 
raisonnablement  disponibles  répondant  aux  mêmes  objectifs  d’une  manière  moins 
restrictive pour le commerce. 

Conclusions  

Il  convient  de  souligner  un  certain  nombre  de  limites  pour  les  estimations  du  modèle 
utilisées dans la présente étude. Il s’agit en premier lieu de la situation de référence et de 
la quantification de l’incidence de l’entrée en vigueur de la Convention de Hong Kong sur 
le secteur du recyclage des navires en raison de l’absence d’estimations quantitatives sur 
les paramètres clés. Le modèle repose également sur des paramètres présentant un degré 
élevé d’incertitude, y compris la fluctuation imprévisible du prix des navires en fin de vie, 
qui dépend à son tour des conditions du marché local et de facteurs d’évolution exogènes 
qui ne relèvent pas du champ d’application de la présente analyse. Dans ce contexte, il est 
essentiel que les mécanismes de mise en œuvre d’un instrument financier tel que la SRL 
comprennent  des  mécanismes  de  suivi  et  de  réexamen  continus  afin  de  garantir  son 
efficacité. 

Il  est  important  de  souligner  que  l’étude  a  formulé  un  certain  nombre  d’hypothèses.  En 
particulier, la détermination de l’écart de prix pour les navires en fin de vie qui existe entre 
les installations de recyclage situées dans différents pays, la période d’accumulation ou la 
manière de calculer le prix effectif de la contribution pour chaque navire constituent toutes 
des options de conception à des fins de modélisation et pourraient également être fixées 
autrement lors de l’établissement plus précis du cadre juridique de l’instrument financier. 
La fixation définitive de ces paramètres pourrait avoir une incidence significative sur le prix 
de la SRL. Les choix opérés ne doivent donc pas être considérés comme un engagement 
à l’égard d’une proposition de conception spécifique. Cela étant, les choix des paramètres 
déterminant  la  contribution  de  recyclage  de  navires  effectués  dans  cette  étude  sont 
considérés  comme  raisonnables  pour  atteindre  l’objectif  poursuivi  par  cet  instrument 
financier. Cette étude vise à servir de base à une analyse d’impact plus approfondie si un 
instrument  tel  que  la  SRL  devait  être  envisagé  dans  le  cadre  d’un  futur  processus  de 
révision du règlement de l’UE sur le recyclage des navires. 

Les informations et les points de vue exposés dans la présente étude sont ceux des auteurs 
et ne reflètent pas nécessairement l’opinion officielle de la Commission. La Commission ne 
garantit  pas  l’exactitude  des  données  incluses  dans  cette  étude.  Ni  la  Commission  ni 
aucune personne agissant au nom de la Commission ne peuvent être tenues responsables 
de l’utilisation qui peut être faite des informations qu’elles contiennent. 

27 

28 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

1 

Introduction and background 

1.1  General background of the study 

Ship  recycling,  if  not  carried  out  in  a  safe  and  sound  manner,  presents  risks  for  human 
health and for the environment. Vessels contain hazardous materials and the conditions for 
recycling  them  are  often  poor  or  absent,  particularly  in  major  vessels  recycling  nations 
located  in  South  Asia  such  as India,  Bangladesh,  and  Pakistan.  The  vessels  are  mostly 
recycled on tidal beaches, unable to support heavy lifting equipment and where recycling 
activities  are  carried  out  manually  by  workers  without  appropriate  safety  measures  and 
protections. 

Against this background, the International Maritime Organization (IMO) adopted the Hong 
Kong Convention for the Safe and Environmentally Sound Recycling of Ships (HKC) in May 
2009.8 With unclear perspective on its ratification,9 the EU adopted in 2013 Regulation (EU) 
No 1257/2013, i.e. the Ship Recycling Regulation (SRR),10 as early implementation of the 
HKC. The SRR also contains provisions going beyond the HKC, including a requirement for 
shipowners of EU-flagged vessels to ensure that their vessels are only recycled in facilities 
listed  by  the  Commission  as  complying  with  stringent  standards  on  the  protection  of  the 
environmental  and  human  health.  The  SRR  started  applying  in  gradual  stages,  with  the 
obligation since 31 December 2018 for EU flagged ships to be recycled in facilities included 
in the European List of Ship Recycling Facilities.11  

However,  despite  the  SRR  being  in  force,  the  loss  of  revenue  linked  to  safe  and 
environmentally sound ship recycling led the ship owners to find ways to maintain lucrative 
ship recycling in facilities that do not have the infrastructures and practices necessary to 
dismantle  the  vessels  in  a  safe  and  environmentally  sound  manner,  eventually 
circumventing the SRR’s through changing the flag flown by the vessels. This circumvention 
behaviour has been reported in annual publications by the NGO Shipbreaking Platform,12 a 
coalition  of  environmental,  human  rights,  and  labour  rights  organisations.  The  risk  of 
circumvention was somewhat expected, as the SRR refers under its Article 29 to the need 
to assess the feasibility of establishing a financial instrument that would facilitate safe and 
sound ship recycling of vessels calling at EU ports. 

The Commission submitted its report in 2017,13 with the support of a study completed in 
2016  by  Ecorys,  DNV-GL  and  Erasmus  University.  With  the  perspective  of  a  possible 
revision of the SRR and prior to a comprehensive impact assessment which would need to 
accompany any Commission’s proposal for a new SRR, the Commission considered there 
was a need to update and complement the study from 2016. The present study is the result 
of this work. 

The authors wish to highlight that the study started in November 2022, when the perspective 
of the entry into force of the HKC was still unclear as the criteria related to its ratification 
were not met yet. These criteria were met on 26 June 2023 and the HKC will enter into force 

8  

International  Maritime  Organization  (2009).  Adoption  of  the  final  act  and  any  instruments,  recommendations  and 
resolutions resulting from the work of the conference, Hong Kong International Convention for Safe and Environmentally 
Sound Recycling of Ships 2009, Text adopted by the Conference. Agenda item 8, SR/CONF/45, 19 May 2009. Original 
document available here. 

9   See also the support study to the evaluation of Regulation (EU) No 1257/2013. 
10   Official Journal of the European Union (2013). Regulation (EU) No 1257/2013 of the European Parliament and of the 
Council of 20 November 2013 on ship recycling and amending Regulation (EC) 2013/2006 and Directive 2009/16/EC, 
Strasbourg 20 November 2013, L330/1. Original document available here. 

11   According to Article 32 of the SRR, the general application was set not earlier than 31 December 2015 (Article 32.1) and 

not later than 31 December 2018 (Article 32.1(b)). 

12   The annual list of scrapped vessels includes information about the change of flag. Data are available for the period 2013-

2022. 

13   COM(2017) 420 final. 

29 

 
on 26 June 2025.14 That said, there were several uncertainties still on the actual impacts 
stemming from the entry into force at the time of elaboration of  this study. The entry into 
force of the HKC has been considered, as far as possible, in the elaboration of the baseline, 
mainly on the basis of qualitative approach. 

1.2  State of play in ship recycling 

In  the  current  situation,  the  majority  of  all  end-of-life  vessels  are  recycled  in  India, 
Bangladesh,  and  Pakistan.  According  to  the  NGO  Shipbreaking  Platform  and  European 
Maritime Safety Agency’s (EMSA) data, it is estimated that they jointly recycled 65.7% of 
the vessels in 2022. Of the 34.3% recycled in 2022 in recycling facilities located in other 
countries, Türkiye shows the most important remaining share of the market, equal to 11.4%. 
Measuring the recycled vessels in terms of light displacement tonnage (LDT),15 the three 
aforementioned  South  Asian  countries  appear  to  have  an  even  more  prominent  role,  as 
they accounted for 77.2% of the LDT recycled in 2022. To be precise, the larger vessels 
are  mostly  recycled  in  recycling  facilities  located  in  these  countries,  whereas  smaller 
vessels are recycled in recycling facilities located in other countries (see Figure 1.1).  

Figure 1.1 Ship recycling countries by percentage of vessels and LDT recycled in 2022 

0%

20%

40%

60%

80%

100%

2,9%

Number of vessels

27,7%

28,4%

9,6%

11,4%

7,4%

12,5%

LDT

30,0%

33,6%

13,6%

13,0%

5,6%

Bangladesh

India

Pakistan

China

Türkiye

EU/EEA

Other

2,3%

1,9%

Source: elaboration of the authors based on data of NGO Shipbreaking Platform and EMSA. 

On  the  recycling  trends  at  global  level,  between  2012  and  2022,  data  of  the  NGO 
Shipbreaking Platform and EMSA show that despite the decreasing number of vessels and 
deadweight tonnage (DWT),16 the share recycled in South Asian countries has been in an 
increasing pattern between 2013 and 2022 (see Figure 1.2 and Figure 1.3). 

14   See Article 17 of the HKC. 
15   Light  Displacement  Tonnage  represents  the  weight  of  the  vessel  when  it  is  empty,  without  any  cargo,  fuel,  or  other 
consumables. It is a measure of the vessel's actual physical weight and widely used in the recycling industry as it provides 
a more accurate approximation to the quantities of recyclable material on a vessel. 

16   Deadweight Tonnage refers to the total weight a vessel can carry, and it is a vital measure for ship owners, charterers, 
and cargo owners as it helps determine a vessel's capability to transport goods and as such industry data also often is 
presented with this measurement. 

30 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Figure 1.2 Number of vessels recycled by country (2012-2022) 

s
l
e
s
s
e
v
d
e
l
t
n
a
m
s
i
i

d
f
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e
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N

1.600

1.400

1.200

1.000

800

600

400

200

0

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Bangladesh
China
Other

India
Turkey
% recycled in South Asia

Pakistan
EU/EEA

Source: elaboration of the authors based on data of NGO Shipbreaking Platform and EMSA. 

Figure 1.3 Volume of DWT recycled by country (2012-2022) 

)
T
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n
o

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a
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45

40

35

30

25

20

15

10

5

0

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%

100%

90%

80%

70%

60%

50%

40%

30%

20%

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0%

a
i
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%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Bangladesh

Turkey

India

EU/EEA

Pakistan

Other

China

% South Asia

Source: elaboration of the authors based on data of NGO Shipbreaking Platform and EMSA. 

Ship recycling primarily is also a dangerous activity, especially for the workers that work on 
vessels  recycled  using  the  ‘beaching’  method.  This  method  is  used  in recycling  facilities 
located in South Asia, where the coastal areas have high tidal amplitude, and the recycling 
process is carried out on the beach by using the advantages of this natural phenomenon. 
However, the ‘beaching’ method is the most uncontrolled in terms of environmental pollution 
and  has  the  highest  safety  risks  for  the  workers.17  Waste,  pollutants,  and  hazardous 
materials on board of the vessels are dispersed in such a way that they cannot be properly 
cleaned  and  thus  mix  directly  with  the  local  soil  and  water.  Since  2009,  the  NGO 
Shipbreaking Platform has been monitoring the number of accidents and incidents resulting 
from beaching the vessels. The NGO’s data shows18 that since the start of the monitoring 

17   Human  Rights  Watch  and  NGO  Shipbreaking  Platform  (2023).  Trading  Lives  for  Profit.  How  the  Shipping  Industry 

Circumvents Regulations to Scrap Toxic Ships on Bangladesh’s Beaches. 

18   According to data available until November 2023. The NGO Shipbreaking Platform also published a special report on 
Türkiye, which cites a document from the Istanbul Health and Safety Labour Watch. The Turkish entity reported that 97 

31 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
activity in 2009, 7,751 vessels were beached. During these operations, 447 workers lost 
their  lives  and  another  393  were  injured.19  However,  the  number  of  injured  workers  in 
particular might be underestimated. 

On the other end of recycling methods, the dry-dock method is the most controlled and least 
risky for the workers. There are also advantages and disadvantages of two other methods 
between these ends, such as the ‘landing’ and ‘alongside’ methods. Table A.4 in Annex III 
describes the four recycling methods. In general, recycling operations carried out on shores 
and  piers  pose  more  environmental  risks  than  the  activities  carried  out  in  dry-docks. 
Although solutions are in place to recycle a vessel without exposing the workers and the 
environment to the negative impacts of hazardous and toxic materials, not all the vessels 
are recycled using the least risky method. As noted in several literature instances, recycling 
facilities in South Asia recycle the vessels in such a way that the environment and human 
beings can be negatively impacted. 

Moreover, besides the danger of the beaching method, ship recycling involves child labour 
as well, especially in South Asia. A study20 on labour conditions in Bangladeshi recycling 
facilities revealed that all 33 locations included in the study use child labour. Overall, 13% 
of all employees in those facilities were estimated to be under the age of 18. Most of the 
children involved are aged 15, 16 or 17. Compared to the past, the use of younger children 
(i.e. < 15 years) seems to have stopped. The study observed that during day shifts, about 
6% of the workers are children, whereas during night shifts this share is estimated to be 
20%. The study indicated that these estimations might be an underestimation of the actual 
situation. Thus, despite several international Conventions prohibiting the use of child labour, 
it is still quite common practice when it comes to recycling the end-of-life vessels.  

1.2.1  The economics of ship recycling (demolition costs and rates) 

Ship  recycling  is  a  commercial  business  for  which  the  recycling  facilities  pay  the  ship 
owners21  a  significant  amount  of  money  to  salvage  raw  materials  and  equipment  from 
recycled vessels. Interviews with the steel sector’s stakeholders, as well as the literature 
review,  confirmed  that  a  substantial  portion  of  a  vessel’s  components  consists  of  high-
quality metals22 and approximately 60-85% of the weight (measured in LDT) can be recycled 
for subsequent uses.23,24 Comparable estimations on the quantity of recycled material can 
be  found  in  previous  studies,25  according  to  which  85%  of  a  vessel’s  weight  consists  of 
metal, 8% of other elements and 7% of material that cannot be recycled (i.e. weight loss). 

workers lost their lives between 2013 and 2022 in all sectors in Aliağa, a location hosting a major cluster of recycling 
facilities, and concluded that several of these fatalities occurred in the ship recycling sector. Also, for Türkiye, the data 
might be underreported because a database of accident and near-miss accident databank is not maintained to conduct 
post-investigations and analyse the root causes for accidents. See NGO Shipbreaking Platform (2023), Ship Recycling 
in Turkey, Challenges and Future Direction, 20 December 2023 (NGO Shipbreaking Platform, 2023). 

19   Additional information retrieved for various recycling facilities located in Alang (India) shows that over the period from 
2015 to 2024 there have been a total of 142 incidents, of which 26 (i.e. 18%) related to fires and 116 (i.e. 82%) related 
to accidents, respectively. The Gujarati authority reported 3 deaths due to fire incidents and 41 deaths due to accidents. 
A total of 6 injuries were related to the fire incidents and 102 injuries to accidents. 

20   Chowdhury  M.  S.  (2019).  Study  Report  on  Child  Labour  in  the  Shipbreaking  sector  in  Bangladesh,  University  of 

Chittagong, Chittagong, Bangladesh. 

21   Usually, the cash buyers that the HKC considers as final ship owners. This means the ship owner is no longer responsible 
for the vessel once sold to the cash buyer. According to (Bernike, 2019), cash buyers mediate 80% of end-of-life sales. 

22   AncelorMittal (2023). Smarter steel for people and planet, Presentation at Shipbreaking Lab 20/09/2022. 
23   Mahindrakar, et al. (2008),  Ship breaking industry in India: Assessment of Opportunities and Challenges, Paper 765, 
Journal  of  Air  &  Waste  Management  Association,  January  2008;  OECD  (2017),  Ship  recycling,  An  overview.  AJL 
Consulting and EVAK (2017), Ship Recycling in Finland Virtual project of a ship purchased, dismantled and recycled at 
Turku Repair Yard, Final Report, 11 January 2017. 
In general, the metallic scrap can be recycled both as re-rollable scrap and melting scrap. About 60% of the total weight 
of a vessel’s steel may consist of re-rollable scrap and comprises of steel in form of plates, beams, girders, and angle 
bars. The re-rollable scrap is sold at a premium compared to the remaining 40%, and which consists of irregular pieces 
of steel earmarked as melting scrap. Heavy Melting Scrap (HMS) is a globally used definition for steel scrap. 

24  

25   Sarraf,  et  al.  (2010),  Ship  Breaking  and  Recycling  Industry in Bangladesh  and  Pakistan, the  World  Bank,  Report  No 
58275-SAS.  Jain,  et  al.  (2016),  Quantitative  assessment  of  material  composition  of  end-of-life  ships  using  onboard 
documentation, Delft University of Technology. 

32 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Table  1.1  presents  the  recycled  materials  and  the  percentage  of  the  recycled  weight 
(measured in LDT) from three types of vessels. 

Table 1.1 Recycled materials and percentage of the recycled weight (LDT) by type of vessel 

Recycled material 
Re-rollable ferrous steel 
Meltable ferrous steel 
Cast iron scrap 
Non-ferrous metals 
Weight loss 
Machinery  
Wooden furniture and fitting / 
Fixtures 

General cargo  Bulk carriers 
56 - 70% 
10% 
1.5 - 5% 
0.5 - 1% 
9 - 15% 
4 -8 % 
5% 

61 - 76% 
8 - 10% 
1.5 - 2.5% 
0.5% 
10 - 16% 
1 - 6% 
1 - 5% 

Oil tankers 
72 - 81% 
5 - 7% 
1.5 - 3% 
0.5 - 2% 
10 - 12% 
0.5 - 2% 
1.5 - 2% 

Source: Compilation based on Mahindrakar et al. (2008). 

In this commercial business, the ship owners are therefore incentivised to capitalise on an 
end-of-life vessel, monetising its end-of-life value based on the price offered by the recycling 
facilities to purchase it. The end-of-life value of a vessel very much depends on the price of 
the  material  that  can  be  recycled  from  it,  steel  in  particular,  and  ultimately  the  cost  of 
recycling  the  vessel  at  the  recycling  facility.  For  illustrative  purposes  only,  Table  A.2  in 
Annex  III  provides  examples  drawn  from  the  literature  reviewed  and  stakeholder 
engagement as regards the revenues and costs of recycling. 

Literature research also shows that the price of scrap steel may fluctuate through time and 
vary significantly by world region. Therefore, the price at which a ship owner can sell an 
end-of-life vessel varies with respect to the time and local demolition rates offered by the 
recycling  facilities.  When  it  comes  to  the  price  offered  to  buy  an  end-of-life  vessel,  the 
literature review and stakeholder consultation highlighted that a significant difference exists 
between EU-located and non-EU-located recycling facilities.26 Two elements may explain 
the difference. 

1.  South  Asian  countries  in  particular  tend  to  rely  more  on  the  shipbreaking  industry  to 
supply  the scrap  steel  demanded from  other  sectors  of  their  local  economies.  Trends 
elaborated from UN’s Comtrade database show that the volume of imported scrap steel 
is significantly higher in countries such as Bangladesh, India, and Pakistan compared to 
these  countries’  scrap  steel  exports  (see  Figure  A.2  and  Figure  A.3  in  Annex  III). 
Moreover, the literature review shows that the percentage of steel recycled from end-of-
life vessels, and subsequently used in other sectors, amounts to 10-15% in India and 
Pakistan, and 60% in Bangladesh.27 In Europe, the quantity of metal reclaimed from end-
of-life  vessels  for  other  sectors  is  smaller  (i.e.  5%),  and  according  to  stakeholders 
representing the steel industry, it plays a negligible role in determining the price of the 
scrapped steel.28 In other words, in economic contexts where the demand for recycled 
steel  is  bigger,  the  price  offered  for  this  material  is  higher;  as  such,  the  ship  owner’s 
income potential is bigger. The high demand for scrap steel in South Asian countries, 
and their reliance on shipbreaking to supply it, partly explains the higher prices offered 
by the recycling facilities in the region.  

26  

ISL (2021), Shipping statistics and market review, Volume 65 - No. 9. Sustainable Shipping Initiative (2021), Exploring 
shipping's transition to a circular industry, Findings from an inquiry to understand how circular economy principles can 
be applied to shipping, June 2021. Izmir Development Agency (2022), Izmir Aliaga Ship Recycling Sector Analysis, Izmir. 
27   Zulfikar Ali & Pierce (2020), The South Asia Shipbreaking Industry and its Unsafe Mining Practice, Aspects Min Miner 

Sci 5(2), AMMS.000607.2020. 

28   According to AncelorMittal  (2023), the volume  of scrapped  metal from ships  is  estimated  around  5 million  tonnes  on 
annual basis, which corresponds to approximately 5% of metal scrap availability reported by Eurofer in the EU for the 
current situation (i.e. around 100 million tonnes). 

33 

 
2.  The evaluation of the SRR concluded that among the four dismantling methods, the so-
called ‘beaching’ method can generate up to 7 or 8 times more revenues29 due to lower 
labour, operational, and infrastructure costs,30 as well as reduced expenses related to 
handling hazardous materials on board of vessels.31 Furthermore, desk research shows 
that for the period between 2014 and 2023, the price offered by recycling facilities located 
in South Asia, using the ‘beaching’ method, was from 30% to 90% higher than the price 
offered  by recycling  facilities  located  in  Türkiye, using  the  ‘landing’  method.  The  price 
difference is even bigger for recycling facilities located in the EU, using the ‘alongside’ 
method. The stakeholders reported a value of about € 100 per LDT in the EU,32 namely 
approximately  30%  of  the  recycling  quotation  observed  in  Türkiye  and  approximately 
18% of the price offered in South Asia. 

Figure  1.4  shows  the  fluctuation  of  rates  for  recycling  vessels  in  Bangladesh,  India, 
Pakistan, and Türkiye for the period 2011-2023 (in € per LDT). Figure A.4, Figure A.5 and 
Figure A.6 in Annex III present in detail the trends of the rates offered to recycle dry bulk, 
tanker, and container ships in Bangladesh, India, Pakistan, and Türkiye for the period 2019-
2023. 

29   Choi, et al. (2016), Economic and environmental perspectives of end-of-life ship management, Resources, Conservation 
and Recycling, Volume 107, February 2016, Pages 82-91. Sarraf, et al. (2010), Ship Breaking and Recycling Industry in 
Bangladesh and Pakistan, the World Bank, Report No 58275 (European Community Shipowners' Associations, 2016). 
30   Findings from stakeholder consultation activities also suggest that recycling facilities located in South Asia are able to 
pay more the ship owners as they are able to use the low cost method of re-rolling the recycled steel, which is cheaper 
compared to melting the metal done in the EU. In this respect, it is interesting to note a development in India according 
to which using ship breaking steel plates for Thermo-Mechanically Treated bars production has been rejected on the 
ground of the need of more extensive testing and data analysis to ensure the structural integrity, quality, and durability 
of the resulting rebars. See Shipping inbox (2023), India’s Steel Ministry Committee Rejects Proposal: Ship-breaking 
Steel Plates Not Fit for TMT Bars. 

31   Barua,  et  al.  (2018),  Environmental  hazards  associated  with  open-beach  breaking  of  end-of-life  ships:  a  review, 
Resources, Conservation and Recycling, Volume 107, February 2016, Pages 82-91. Choi, et al. (2016), Economic and 
environmental  perspectives  of  end-of-life  ship  management,  Resources,  Conservation  and  Recycling,  Volume  107, 
February  2016,  Pages  82-91.  Du,  et  al.  (2017),  Challenges  and  solutions  for  ship  recycling  in  China,  Ocean  Eng, 
2017;137:429-439. 

32   See also data reported in (Mosconi & Tola, 2023). The research authors reported the end-of-life value of ships recycled 
in facilities in the EU as equal to $ 110 for bulk carriers, $ 115 for oil tankers and USD 120 for container ships, respectively. 
Assuming the official exchange rate between $ and € recommended by the European Central Bank for 2023, we found 
the value reported in this research consistent with the value from the field research carried out in the context of this study. 

34 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Figure 1.4 Fluctuation of the rates for recycling vessels in Bangladesh, India, Pakistan, and 
Türkiye 

Source: elaboration based on  (Sustainable Shipping Initiative, 2021), (Developed by 2BHonest based on  (Mikelis, 2020)), 
(ISL, 2021), (Izmir Development Agency, 2022) and GMS website ((*) average value until 31 December 2023). 

1.2.2  EU flagged vessels 

As noted earlier, the provisions related to recycling obligations under the SRR apply only to 
vessels flying EU flags. To be able to benefit from the difference in recycling prices between 
locations, the ship owners change the flag of end-of-life vessels. The analysis of fleet and 
flag data shows that older vessels are less likely to fly an EU flag. Elaborations based on 
UNCTAD data confirm that the share of the EU-flagged merchant fleet was equal to 14.2% 
of the  total  world  fleet  in  2022,  however,  considering  end-of-life  vessels,  this  percentage 
was lower for that year and equal to 6.1%. Moreover, data of NGO Shipbreaking Platform 
and  EMSA  show  that  out  of  the  451  vessels  from  the  global  fleet  known  to  have  been 
recycled in 2022, 176 vessels (i.e. 39% of the total) were re-flagged just before recycling. 
In the specific case of the EU-flagged fleet, 10 out of the 37 vessels  were re-flagged 1 year 
before recycling (i.e. 27% of the total). 

The main purpose of introducing a financial instrument is that this would contribute towards 
reducing the incentive to change the flag of a vessel and eventually circumvent the SRR. 
However,  a  financial  instrument  based  on  EU-flagged  vessels  alone  is  not  expected  to 
overcome the revenue gap with facilities that do not have the infrastructures and practices 
necessary to recycle the vessels in a safe and environmentally sound manner, because this 
would create an incentive to avoid putting vessels under EU-flags from the start. Not all ship 
owners will necessarily do so: as emerged from the consultation activities, there are benefits 
from  keeping  vessels  flying  EU-flags  and  showing  that  environmental  objectives  are 
pursued  at  company  level.  However,  this  behaviour  should  be  expected  in  general. 
Introducing a financial instrument that applies to vessels calling at EU ports could change 
this  behaviour.  Therefore,  one  of  the  design  elements  that  will  be  discussed  in  the  next 
chapter, when it comes to the design of a financial instrument, is that it should apply to all 
vessels calling at EU ports. 

35 

 
 
1.3  The regulatory framework to reduce adverse effects of ship recycling 

Several international attempts have been made to agree on international rules to reduce 
the adverse effects of ship recycling. This section describes three relevant documents, i.e. 
(i) the Basel Convention and the Ban Amendment, (ii) the Hong Kong Convention and (iii) 
Regulation (EU) No 1257/2013 on ship recycling.   

1.3.1  The Basel Convention and the Ban Amendment 

The first convention is the Basel Convention on the Control of Transboundary Movements 
of  Hazardous  Wastes  and  their  Disposal  (henceforth:  the  Basel  Convention).33  This 
Convention was adopted on 22 March 1989 and has been ratified by 187 States and political 
and/or  economic  integration  organisations.  The  Convention  entered  into  force  on  5  May 
1992.  

The Convention  aims to  manage  and  dispose  of  hazardous waste  in an environmentally 
sound manner. More specifically, the Parties are called upon to (1) minimise the export of 
and transport between countries of hazardous waste as much as possible, (2) minimise the 
content of hazardous substances in waste, (3) process the hazardous waste as close to the 
source  as  possible  (e.g.  within  countries  where  the  waste  is  produced),  and  (4)  assist 
developing countries to process hazardous waste in an as environmentally friendly fashion 
as possible. It is important to note that the Basel Convention applies to all types of waste, 
and not specifically to vessels. Once it is decided to recycle a vessel, its last journey (i.e. to 
the country where the vessel will be recycled) is often seen as a transboundary movement 
of hazardous waste.34 

The  Basel  Convention  has  been  amended  several  times.  For  ship  recycling,  the  Ban 
Amendment, which was concluded in 1995 and entered into force only in December 2019, 
is  important.  The  Ban  Amendment  states  that  transboundary  movements  from  OECD 
States  to  non-OECD  States  are  forbidden.  To  ensure  that  EU  Member  States  already 
fulfilled the requirements of the Ban Amendment, the Waste Shipment Regulation (WSR)35 
was adopted in 2006. Based on the Ban Amendment, the movement of waste produced in 
one of the Member States cannot be shipped to a non-OECD country. Before the adoption 
of the SRR, the WSR prohibited that EU-flagged vessels could be recycled in South Asian 
facilities. With the application of the SRR on 31 December 2018, EU-flagged vessels have 
been excluded from the scope of the WSR (while vessels flying the flag of third countries 
have remained covered by it). By doing this, the SRR has potentially broadened the scope 
of  legal  destinations  for  EU-flagged  end-of-life  vessels  outside  the  OECD.  With  the  Ban 
Amendment’s entry into force, the legal situation changed again. To ensure that the WRS 
is in line with the Ban Amendment, the EU legislator has introduced changes to the WRS. 
In  operational  terms,  these  changes  mean  once  again  subjecting  EU-flagged  vessels 
covered by the SRR that become waste in the EU to the WSR provisions implementing the 
Basel Ban Amendment (i.e. export ban outside the OECD).36 

33   See here.  
34   See  President  Judicial  Division  of  the  Netherlands  Council  of  State  –  12  December  2001  Case  No.  2001-12-

12/SES_26121, LNJ: AK4607, Schip&Schade 2002, 81 The Sandrien. 

35   Official Journal of the European Union (2006). Regulation (EC) No 1013/2006 of the European Parliament and of the 

Council of 14 June 2006 on shipment of waste, 12.7.2006, L 190/1.  

36   With the entry into force of the Ban Amendment, two legal regimes exist for EU operators who wish to recycle their vessel 
(i.e. the Ban Amendment and the WRS). The study on the evaluation of the SRR considered whether coherence issues 
have arisen. See UN (2019), Basel Convention on the control of transboundary movements of hazardous wastes and 
their disposal, Protocol on liability and compensation for damage resulting from transboundary movements of hazardous 
wastes and their disposal, Text and Annexes, revised in 2019 (UN, 2019). Document available here. 

36 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

1.3.2 The Hong Kong Convention  

As the Basel Convention was considered not adapted to the specificities of vessels, making 
it difficult to identify when a vessel becomes waste and therefore not difficult to circumvent, 
the Hong Kong International Convention for the Safe and Environmentally Sound Recycling 
of Ships (the Hong Kong Convention, henceforth: HKC) was adopted in May 2009 under 
the umbrella of the International Maritime Organization (IMO). The HKC aims to ensure that 
all vessel recycling activities are carried out in a safe and environmentally sound manner. 
Safe and environmentally sound recycling applies to vessels flying the flag of a Party to the 
Convention and to all facilities located on their territory. 

To achieve this objective, several measures need to be taken: 

•  Each vessel that is due for recycling should provide an Inventory of Hazardous Materials 
(IHM).  The  inventory  contains  information  on  the  types,  quantities,  and  locations  of 
hazardous materials onboard of each vessel. The IHM needs to be compiled once the 
vessel is built, updated during its lifetime, and needs to be completed before recycling. 
Additionally,  onboard  verification  is  required,  through  initial  and  additional  surveys 
carried out by the classification society (not exceeding 5 years); 

•  The recycling facility needs to prepare a recycling plan, which is vessel-specific. The 
plan  details  how  the  vessel  will  be  recycled,  in  the  safest  and  most  environmentally 
sound  manner.  All  States  with recycling  facilities,  that  are Party to the  HKC,  need  to 
ensure that their recycling facilities comply with the Convention rules;  

•  All Parties to the HKC need to take effective measures to ensure compliance with it. 

Especially the combination of the first and second measure tackle some of the problems 
mentioned earlier. The workers are aware of the presence of hazardous and toxic materials 
on board of the vessels, as this is included in the IHM, and know how to deal with them in 
a safe manner, as this is laid down in the vessel specific recycling plan. This would help to 
reduce the number of accidents related to vessels’ recycling activities. Nevertheless, the 
HKC’s main shortcoming is that it does not include the ‘polluter pays principle’.37 The HKC 
will enter into force38 on 26 June 2025.39,40 

1.3.3  Regulation 1257/2013 on Ship Recycling 

To ensure that the agreements made under the HKC do apply to EU Member States, the 
European Commission decided to adopt Regulation (EU) No 1257/2013 on ship recycling 
(the Ship Recycling Regulation or SRR henceforth).41 

The SRR does not only implement the requirements of the HKC, but also added more and 
stricter rules  for  EU Member  States.  The  main additional  requirement  is  that  EU-flagged 
vessels  shall  be  recycled  in  a  EU-listed  recycling  facility  (Article  6(2)(a)).  This  recycling 
facility  could  be  either  located  in  an  EU/EEA  Member  State  or  in  a  third  country. 
Nevertheless, the recycling facility needs to fulfil a set of criteria and needs to be included 
at the so-called European List of Recycling Facilities. Recycling facilities located within the 

37   The  ‘polluter  pays  principle’  is  at  the  core  of  EU  environmental  policy.  It  states  that  those  responsible  for  the 
environmental damage should pay to cover the costs. The idea of the polluter pays principle was developed by a project 
led by Institute for European Environmental Policy (IEEP) for DG Environment. 

38   See IMO here. 
39   Article 17 of the HKC stipulates that it shall enter into force 24 months after the date on which three conditions are met.  
40   See IMO Status of Conventions here (updated until 1 January 2024). In December 2023, the HKC had 23 Contracting 

Parties, including India, Bangladesh, and Pakistan, the latter two countries ratified the Convention in 2023. 

41   Official  Journal  of  the  European  Union,  2013.  Regulation  (EU)  No  127/2013  of  the  European  Parliament  and  of  the 
Council of 20 November 2013 on ship recycling and amending Regulation (EC) No 1013/2006 and Directive 2009/16/EC. 
Strasbourg: 10.12.2013, L 330/1. 

37 

 
 
EU are inspected by authorities of the Member State in which they are located (Article 14). 
Recycling  facilities  located  outside  the  EU  are  inspected  by  the  European  Commission 
(Article 15). The list published on 6 December 202342 contained 45 recycling facilities with 
a  maximum  annual  recycling  output43  of  1.24  million  of  LDT;  33  facilities  are  in  EU-EEA 
countries with a combined maximum annual recycling output of 548,800 LDT (i.e. 44% of 
the total) and 12 are in third countries44 with a combined maximum annual recycling capacity 
of 689,288 LDT (i.e. 56% of the total). Table 1.2 shows summary statistics of the EU-listed 
recycling facilities in 2023 and Table A.5 in Annex III provides the detailed overview of their 
characteristics. 

Table 1.2 Key summary statistics of EU-listed recycling facilities in 2023 

Location 

Number of 
recycling 
facilities 

Maximum 
recycling 
output (LDT) (A) 

EU and EEA 
Third countries 
Total 

33 
12 
45 

548,800 
689,288 
1,138,682 

Maximum 
theoretical 
capacity (LDT) 
(B) 
1,853,000 
850,423 
2,703,423 

Share of the 
maximum 
theoretical 
capacity (A/B) 
30% 
81% 
46% 

Source: elaboration based on (Official Journal of the European Union, 2023). 

The  SRR  mainly  applies  to  EU-flagged  vessels  (Article  2(1)).  However,  the  SRR  also 
introduces some specific requirements for non-EU flagged vessels that enter an EU port as 
well (Article 12). Non-EU flagged vessels are obliged to have an Inventory of Hazardous 
Materials  (IHM)  on  board.  They  are  also  prohibited  from  installing  any  of  the  materials 
mentioned in Annex I of the SRR,45 while in port or at anchorage in a Member State. In case 
the  non-EU  flagged  vessel  is  not  in  compliance  with  the  obligation,  it  can  be  warned, 
detained,  dismissed,  or  excluded  from  ports  in  the  Member  States  (Article  15(5)).  The 
requirement  to  have  an  IHM  onboard  the  vessel  was  introduced  gradually.  Since  21 
December 2020, all vessels, both EU and non-EU flagged vessels, need to have an IHM 
on board. 

According  to  the  SRR’s  Article  29,  'Financial  incentive',  the  European  Commission  shall 
report on ‘the feasibility of a financial instrument that would facilitate safe and sound ship 
recycling and, if appropriate, accompany the report with a legislative proposal’. Moreover, 
recital 19 of the preamble to the SRR illustrates that the European Commission was charged 
with this task ‘in the interests of protecting human health and the environment and having 
regard to the ‘polluter pays’ principle’’. The recital also clarifies that the report concerns the 
‘feasibility of establishing a financial mechanism applicable to all ships calling at a port or 
anchorage of a Member State, irrespective of the flag they are flying, to generate resources 
that  would  facilitate  the  environmentally  sound  recycling  and  treatment  of  ships  without 
creating an incentive to re-flag’. 

1.4  Aim of the study and structure of the report  

The  current  SRR  is  an  important  step  towards  the  establishment  of  safe  and 
environmentally sound recycling practices. As noted earlier, 10,670 vessels were recycled 
between  2012  and  2022  worldwide,  of  which  60%  of  them  were  recycled  in  unsafe  and 

42   Official Journal of the European Union (2023). Commission Implementing Decision (EU) 2023/2726 of 6 December 2023 
amending Implementing Decision (EU) 2016/2323 establishing the European List of ship recycling facilities pursuant to 
Regulation (EU) No 1257/2013 of the European Parliament and of the Council, 7.12.2023. 

43   The maximum annual ship recycling output is determined by selecting the highest value occurring in the preceding 10-
year period for each  recycling facility or in the case of a newly authorised recycling facility, the highest annual value 
achieved at that facility. 

44   The distribution of the recycling facilities is as follows: 9 in Türkiye, 2 in the UK, and 1 in the USA. 
45   Materials  mentioned  are  Asbestos,  Ozone-depleting  substances,  Polychlorinated  biphenyls  (PCB),  Perfluoro  octane 

sulfonic acid (PFOS), and anti-fouling compounds and systems. 

38 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

environmentally unsound manner in facilities located in South Asian countries, as they can 
offer higher prices for end-of-life vessels (see also Figure 1.4), and hence pointing to ship 
owners’ financial optimisation behaviour. 

The aim of this study is to carry out a follow-up exploratory analysis on a potential financial 
instrument  to  facilitate  safe  and  environmentally  sound  ship  recycling,  building  on  the 
previous  study  of  2016.46  This  study  also  provides  supplementary  information  to  the 
evaluation of the SRR and support the Commission’s services in its decision regarding the 
need to progress with an impact assessment in the context of a possible review of  the SRR.  

The study is organised as follows: 

•  Chapter 2 will introduce the design of a potential financial instrument; 

•  Chapter 3 will present the elaboration of a baseline; 

•  Chapter  4  will  describe  the  assessment  of  the  economic,  social  and  environmental 

impacts; 

•  Chapter  5  will  describe  the  analyses  carried  out  for  other  important  elements  for  the 

implementation of the Ship Recycling Licence; 

•  Chapter 6 will summarise the main conclusions on the Ship Recycling Licence and a 

possible roadmap for its implementation. 

The following annexes complement the main chapters of the report: 

•  Annex I presents the list of documents cited throughout the chapters; 

•  Annex II illustrates the procedural and methodological approach to the analysis; 

•  Annex III presents the supporting evidence to the analysis of the background; 

•  Annex IV provides a detailed background of the baseline; 

•  Annex V provides an analysis of the possible impacts of the entry into force of the Hong 

Kong Convention on the Ship Recycling Licence; 

•  Annex VI presents a comparison with the 2016 study; 

•  Annex VII provides supporting analysis to the elements for the implementation of the 

SRL; 

•  Annex VIII is the synopsis of the consultation activities, notably in relation to the potential 

implementation a financial incentive. 

46   Ecorys, DNV-GL and Erasmus School of Law (2016), Financial instrument to facilitate sound ship recycling, Final Report. 
See also European Commission (2017), Report from the Commission to the European Parliament and the Council on 
the feasibility of a financial instrument that would facilitate safe and sound ship recycling, COM(2017) 420 final, Brussels, 
8.8.2017. 

39 

 
 
 
2  Design of a potential financial instrument 

2.1 

Introduction 

To  encourage  ship  owners  to recycle their  vessels  in  a  safe  and  environmentally  sound 
manner, Article 29 of Regulation (EU) 1257/2013 lays down the obligation for the European 
Commission to assess the feasibility of a financial instrument. The overall objective of such 
a potential financial instrument is essential in order to tackle the revenue gap with facilities 
that do not have the infrastructures and practices necessary to recycle the vessels in a safe 
and environmentally sound manner, and eventually address undesired behaviours of the 
ship owners. 

This chapter will describe the key elements for the introduction and design of a financial 
instrument. Firstly, it will present a review of the possible instruments that were analysed to 
introduce  a  financial  instrument.  Secondly,  it  will  show  the  main  design  elements  of  the 
selected option, namely the Ship Recycling Licence (henceforth: SRL). Thirdly, the chapter 
will  summarise  the  view  of  the  stakeholders  when  it  comes  to  the  SRL’s  potential 
introduction.  Lastly,  the  chapter  will  illustrate  possible  legal  implications  for  future 
implementation of the SRL. 

2.2  Alternative measures to a ship recycling licence 

Several  studies  were  carried  out  looking  into  the  possibilities  of  introducing  a  financial 
instrument to recycle the vessels in a safe and environmentally sound manner. The studies 
carried  out  by  Ecorys  (2005),47  COWI  and  Milieu  (2009),48  Profundo  (2013),  and  Milieu 
(2013)49  identified  different financial  instruments,  such  as the  Ship  Recycling Guarantee, 
the Ship Recycling Escrow Account, the Ship Recycling Insurance, and a Port Levy/Ship 
Recycling Fund option. The study that Ecorys, DNV-GL, and the Erasmus School of Law 
carried  out  in  2016  also  analysed  non-financial  measures,  re-assessed  the  previously 
analysed  options,  provided  insights  into  the  main  shortcomings  of  each  of  these  options 
and, in conclusion, proposed to introduce a SRL, which included the previously proposed 
instruments’ strong elements while eliminating the shortcomings. 

2.2.1  Non-financial measures targeting the ship owner 

The  review  of  the  above-mentioned  studies  concluded  that  two  non-financial  measures 
could overcome the problem of re-flagging the vessels, and thereby the circumvention of 
the  SRR.  Firstly,  extending  the  SRR  to  the  beneficial  owner,  to  make  it  no  longer 
advantageous for a ship owner to (i) use a third-party entity to own a vessel on paper, (ii) 
be based in a non-EU State and flag, or (iii) change the vessel’s flag to that of a country 
outside the EU to circumvent the SRR. However, these studies also concluded at that time 
that it would have led to new circumvention mechanisms, as European ship owners could 
change  the  ownership  from  an  EU-based  company  to  a  company  based  in  a  non-EU 
Member State, through setting up separate subsidiaries in other countries (Profundo, 2013). 

Another non-financial measure considered was to make the penultimate owner responsible 
for the safe and environmentally sound recycling of the vessel as well. The responsibility to 

47   Ecorys (2005), The Ship Recycling Fund. 
48   COWI and Milieu (2009), Study in relation to options for new initiatives regarding dismantling of ships. 
49   Milieu (2013), Financing the environmentally sound recycling and treatment of ships. 

40 

 
 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

comply  with  the  SRR  does  not  only  rest  on  the  last  owner  of  a  vessel,  but  also  on  its 
penultimate owner. The aim of this second non-financial measure would be to ensure that 
if any sale (which in itself is completely legitimate) takes place, the aim of the sale is not to 
circumvent  the  provisions  of  the  SRR.  The  administrative  burden  and  responsibility  both 
rest with the penultimate owner, who therefore must ensure that the subsequent owner of 
the  vessel  complies  with  the  SRR.  However,  the  weakness  of  this  second  non-financial 
measure  would  be  a  lack  of  possibilities  to  enforce  the  SRR  after  the  initial  sale  of  the 
vessel.50 Lastly, from the review of the previous studies it was concluded that this solution 
could  even reduce  the  attractiveness  of  vessels  falling  under  this  obligation  for  potential 
buyers,  as  the  vessel  would  be  sold  with  an  additional  obligation  (without  having  any 
financial compensation built in), and hence exerting a downward pressure on prices. 

2.2.2  Ship Recycling Guarantee 

The Ship Recycling Guarantee consists of equipping a vessel with a guarantee, equivalent 
to the incremental costs of sound ship recycling.51 A Ship Recycling Guarantee ensures that 
a  third-party  financial  institution,  such  as  a  bank,  will  make  a  future  payment  if  the 
preconditions defined in the guarantee are met. In practical terms, this means that the ship 
owner would enter certain financial obligations towards the bank, which were secured by 
forms of collateral, such as a ship mortgage. An advantage of a Ship Recycling Guarantee 
is that, from day one, payment of the fixed amount is guaranteed, even if the ship owner 
becomes  insolvent  or  the  vessel  becomes  a  constructive  total  loss  due  to  a  maritime 
casualty. In case the vessel is not recycled in a sound manner, the ship owner will lose the 
money accumulated (i.e. a ‘fine’ for unsound recycling). 

However, there are practical issues for the implementation of the Ship Recycling Guarantee. 
Firstly, for securing a guarantee when a ship owner combines a loan with a savings scheme, 
as  the  risk  persists  that  the  vessel  could  become  a  constructive  total  loss  before  the 
complete capital amount is accumulated.52 Secondly, stringent regulatory rules applicable 
to banks, requiring them to verify the identity of the clients, pose difficulties when vessels 
change the ownership; compliance rules may lead to discontinuation of the guarantee if the 
new  ship  owner  is  not  accepted  by the bank.  Thirdly, the  guarantee  implies a  prolonged 
financial commitment for the ship owner, potentially extending beyond their ownership of 
the vessel, adding a layer of complexity. Lastly, for vessels calling EU ports infrequently, 
committing to a long-term guarantee scheme solely for access to EU ports might be deemed 
disproportionate by ship owners, raising concerns about the practicality and fairness of such 
requirements. 

2.2.3  Ship Recycling Escrow Account 

A  Ship  Recycling  Escrow  Account  consists  of  an  obligation  for  a  ship  owner  to  open  an 
escrow account at an accredited bank or financial institution and towards which the ship 
owner makes regular deposits (e.g. annual minimum contributions mandatory for entering 

50   Note that the Commission’s proposal for the SRR addressed the possibility of re-flagging stipulating that the penultimate 
shipowner would have been penalised if a vessel had been recycled at a non-authorised recycling facility 6 months after 
its sale to another ship owner. This condition was meant to prevent a shipowners from selling the vessel to a cash buyer, 
who then would have sold the vessel to a non-authorised facility. That means that this mechanism would have been 
effective only if the vessel had been recycled within 6 months after the sale. It would not have been effective if the vessel 
had been recycled more than 6 months after the sell and also not if the vessel had been registered in a non-EU-country 
long before the recycling. Moreover, the sale of the vessel more than once, over a period longer than 6 months, and to 
a non-EU ship owner, would have undermined the effectiveness of this non-financial measure and made more complex 
the enforcement thereof. 

51   This  financial  instrument  consists  of  a  deposit  of  funds,  a  mortgage,  on  the  ship  owner’s  property,  or  any  notarised 
commitment to the payment of funds required by the competent authority, sufficient to cover the costs of sound ship 
recycling (Profundo, 2013). 

52   This  necessitates  the  ship  owner  to  lock  up  part  of  own  equity  or  provide  collateral,  such  as  a  vessel  mortgage, 

introducing complexities in the transferability of the guarantee if the vessel is sold. 

41 

 
 
EU ports).53 A specific escrow account corresponds to a vessel and the proof of the regular 
deposits might be requested when entering an EU port. The deposit can later be used to 
pay for safe and environmentally sound ship recycling.  

An escrow account also consists of a special type of savings account with two important 
characteristics. Firstly, the Ship Recycling Escrow Account is a blocked account, which is 
to say the ship owner is not at liberty to withdraw the money from it. Nor is the bank at liberty 
to  follow  directions  from  the  ship  owner.  The  payments  made  from  the  Ship  Recycling 
Escrow Account, whether by the ship owner or by the bank, are strictly controlled by the 
regulations  which  govern  the  Ship  Recycling  Escrow  Account.  Secondly,  the  obligations 
under the  Ship  Recycling  Escrow  Account  should  be  transferred  to the  new  owner  if the 
vessel  is  sold;  that  is,  if the  vessel  is  sold, the  Ship Recycling  Escrow  Account,  and the 
capital accumulated therein, will follow the vessel rather than its previous owner. In case 
the ship owner opts to recycle a vessel in a safe and environmentally sound manner, the 
ship owner will receive the deposit back with the accumulated interest of the capital in the 
escrow account. 

Notable shortcomings were identified for the Ship Recycling Escrow Account. Firstly, unlike 
the guarantee, it does not guarantee immediate availability of the required capital for the 
vessel,  potentially  causing  issues  in  the  event  of  an  early  loss  thereof.  Additionally,  this 
measure,  similar  to  the  guarantee,  entails  a  long-term  financial  commitment  for  the  ship 
owner,  potentially  extending  beyond  the  ownership  of  the  vessel.54  Lastly,  especially  for 
vessels infrequently visiting EU ports, mandating a prolonged escrow account solely for EU 
port access might be perceived as disproportionate, raising questions about its practicality 
and fairness. 

2.2.4  Ship Recycling Insurance 

The Ship Recycling Insurance consists of a certificate that each vessel entering an EU port 
needs to have. This option was analysed in the form of a ‘stand-alone’ insurance product 
compulsory for the ship owner and linked to the vessel. It consists of an amount to cover 
the difference between sound and unsound recycling and to build up such amount, the ship 
owner would have to pay a fee, on a regular basis (i.e. monthly, or annual) to an insurance 
company. If the vessel were recycled in a safe and environmentally sound manner, the ship 
owner would be reimbursed by the insurance company. 

The insurance product was designed consisting of two elements. Firstly, a capital amount 
to be saved (i.e. the capital insurance). Secondly, a loss insurance, providing cover against 
the occurrence of a random or uncertain event. A parallel was drawn with the example of a 
funeral cost insurance. A certain part of the insurance premium could accumulate during 
the operational life of the vessel to the capital amount needed for safe and environmentally 
sound ship recycling. The other part of the insurance premium would be a risk premium to 
cover the risk of a potential unexpected earlier disruption of the operating life of the vessel. 

In  relation  to  this  option,  the  2016’s  study  on  a  financial  instrument  concluded  that  its 
implementation  had  faced  the  opposition  of  the  marine  insurance  industry,  if  such  novel 
mixed insurance product would have been introduced.55 The 2016’s study also concluded 

54  

53   For this financial instrument, the ship owner would make minimal annual deposits and the incremental costs stemming 
from it would be calculated by independent certification bodies (e.g. classification societies) based on the type of vessel 
and according to an assumed depreciation period (Profundo, 2013). 
In this respect, it is worth observing that if a ship owner pays a premium for some millions of Euros into a fund, and gets 
it back 10 years later, it should be considered whether the premium increases with the inflation or because it has been 
managed in such escrow account. These questions should be further investigated in an impact assessment study as 
they have very different implications, when it comes to the costs borne by the ship owners. 

55   See (Ecorys, DNV-GL and Erasmus School of Law, 2016). 

42 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

that,  in  this  case,  time  would  have  been  a  critical  factor,  since  any  system  of  capital 
accumulation had presupposed a certain time frame during which the targeted amount can 
be gathered through periodic payments. This would have implied that an early end to the 
vessel’s life span would have left a gap between the amount already accumulated and that 
needed. Because of this gap, the financial incentive for the ship owner to opt for safe and 
sound ship recycling might be insufficient. 

2.2.5  Port levy 

Introducing a port levy was another option considered in the previous studies. It assumes 
that every time a vessel enters an EU port, it would pay a levy. It is important to determine 
this  port  levy’s  exact  legal  nature.  From  the  perspective  of  tax  law,  if  the  port  levy  is 
essentially a forced payment to the Government and the Government does not provide any 
direct, individual performance to the ship owner in return, the port levy must be considered 
a (general) tax. In that case, the Government can spend the revenues from the port levy as 
it sees fit. 

The money collected would become part of a fund and the recycling facilities could receive 
a subsidy out of this fund to cover the incremental costs of sound recycling for each vessel 
recycling following the requirements of the SRR. 

Implementing  a  port  levy  for  funding  ship  recycling  faces  several  challenges.  Firstly,  the 
connection  between  the  levy  collected  by  local  ports  and  the  services  they  provide  was 
found weak, raising questions about whether it qualifies as a tax. Secondly, introducing a 
port  levy  at  the  EU  level  would  likely  require  drafting  a  Directive,  followed  by  its 
implementation  at  national  level.  This  process  would  involve  potential  issues,  including 
regulatory loopholes and legal proceedings at both national and European levels. Thirdly, 
the  practical  execution  of  the  port  levy  would  involve  collecting,  administering,  and 
accounting for the levies at local ports, followed by transferring funds from local to national 
and European levels. This multi-tiered process could lead to disproportionate administrative 
costs compared to the raised funds, making the implementation costly. 

2.2.6  Conclusions on the previous options for a potential financial instrument 

The common idea behind the financial incentives illustrated in the previous sections is that, 
during the operational life of a vessel, the ship owners are compelled, directly or indirectly, 
to contribute periodically to the accumulation of a certain capital amount. This amount is 
tied to the vessel and, at a later stage, is released for the benefit of the ultimate ship owner 
only when the vessel has been recycled in a safe and environmentally sound manner in an 
EU listed recycling facility. Therefore, the contribution is not a charge or a tax, but a premium 
that generates credit to the future payment of a capital amount and enjoyed by the ultimate 
ship owner if the vessel will be recycled in compliance with the provisions of the SRR. If the 
ship owner were to opt for a non-EU-approved ship recycling facility, then as a penalty, the 
ship owner shall forfeit the credits accumulated for the future payment. The capital amount 
accumulated  in  relation  to  the  vessel  shall  instead  be  transferred  to  a  general  fund, 
controlled, and administered by a European designated entity, and committed to achieving 
the objectives of safe and environmentally sound ship recycling. 

However,  all  the  previously  identified  options  have  specific  shortcomings,  which  would 
make it difficult to introduce them as EU-wide instruments. Table 2.1 summarises the main 
shortcomings. 

43 

 
 
Table 2.1 Options of financial instrument and main shortcomings 

Option of financial 
instrument 
Non-financial measure 

Ship Recycling Guarantee 

Ship Recycling Escrow 
Account 

Ship Recycling Insurance 

Port levy 

Source: compilation of the authors. 

Main shortcoming 

Easy to circumvent or stimulating additional circumvention 
behaviour, and/or lack of suitable enforcement mechanism 
Difficult to transfer in case of change of ownership. 
Disproportionate to vessels with low frequency of calls at EU 
ports as the scheme might have a long duration 
Difficult to transfer in case of change of ownership. 
Disproportionate to vessels with low frequency of calls at EU 
ports 
Lack of “insured object” due to lack of unforeseen event, other 
than loss of the vessel due to an accident. Not feasible as 
separate instrument 
High administrative burden for ports; potentially not WTO 
compliant; possibly considered as tax (outside the mandate of 
the EC) 

2.3  General design of the proposed financial instrument: a Ship Recycling 

Licence 

An  alternative  financial  instrument  that  overcomes  the  drawbacks  of  the  previous 
instruments and builds on their points of strength is the option presented in the 2016’s study. 
It features the following elements: 

•  All vessels that wish to call at an EU port are obliged to obtain a licence prior to entering 
the port. The licence should be obtained from a designated European entity entrusted 
with this task; 

•  The licence has both the characteristics of a financial incentive and a potential penalty. 
In case the ship owner opts for safe and environmentally sound recycling (and can prove 
this decision), the accrued money will be transferred to the ship owner. In case the ship 
owner opts for unsafe and environmentally unsound recycling, the accrued money will 
be forfeited and becomes part of a general fund managed by the designated European 
entity; 

•  The licence is valid for a set period. By introducing a certain validity period, vessels with 
a high call frequency or a low call frequency are not treated disproportionally. The actual 
validity of the licence can be differentiated, offering the ship owners the choice to apply 
for  a  SRL with  different duration  (e.g.  a  month  or  a  year)  and  adjust the money  paid 
accordingly (see section 4.4).56 Section 4.4.2 will provide more details on this matter;  

•  When the ship owner applies for the licence, a contribution is charged. This contribution 
consists of two elements. Firstly, a small contribution for issuing the licence (i.e. covering 
the administrative costs made by the designated European entity). Secondly, a premium 
levied from the ship owner to the ship recycling fund. This premium is earmarked to the 
specific vessel and will be accrued with the other premiums paid; 

•  The  amount  of  premium  levied  depends  on  the  capital  that  is  needed  to  recycle  the 
vessel  in  a  safe  and  environmentally  sound manner.  To  be  effective in terms  of  ship 
owner  recycling  behaviour,  the  amount  of  the  premium  would  need  to  bridge  the 

56   This assumption means that if a vessel calls an EU port once or twice, it will not pay the full amount as in the case of a 
vessel regularly trading with EU port. A time-based mechanism would allow to avoid that the SRL and the premium levied 
from vessels calling at EU ports work out disproportionally for vessels either with a very high frequency or a very low 
frequency of calling at EU ports. 

44 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

revenue  gap  between  the  revenues  for  a  ship  owner  opting  for  recycling  a  vessel  in 
compliance with the SRR and the situation in which the ship owner opts for the more 
lucrative option of non-SRR-compliant recycling of a vessel; 

•  The accrued money will only become available for the ship owner once the vessel has 
been  recycled  in  a  safe  and  environmental  sound  manner.  The  ship  owner  needs  to 
show proof that this was indeed the case. Without proof, the money will not be paid to 
the owner but will be forfeited to the general fund. 

2.4  Stakeholder views on the Ship Recycling Licence 

As  noted  earlier,  a  potential  financial  incentive  was  analysed  in  2016’s  study.  On  that 
occasion, the consulted stakeholders agreed to different extents on the idea of introducing 
a financial incentive for safe and environmentally sound ship recycling, with the ship owners 
being  critical  and  presenting  a  legal  assessment  of  the  potential  financial  incentive 
highlighting  several  potential  legal  problems.  However,  in  general,  the  stakeholders 
provided interesting suggestions for the mechanism and use of the funds raised through the 
financial incentive. 

For this follow-up study, although the stakeholders acknowledged that it is challenging to 
tackle  the  practice  of  changing  a  vessel’s  flag  in  the  current  regulatory  framework,  the 
majority  of  those  that  responded  to  the  survey  questionnaire  either  strongly  agreed  or 
agreed that a financial incentive (completely or partially) bridging the revenue gap may be 
helpful  to  encourage  safe  and  environmentally  sound  ship  recycling.57  Overall,  the 
stakeholders  providing  an  opinion  to  the  survey  questionnaire  believe  that  introducing  a 
financial incentive would have a positive impact. A different opinion has been expressed, 
during  the  targeted  interviews  programme  as  well,  by  the  ship  owners’  representatives. 
They  would  not  recommend  introducing  a  financial  incentive,  because  from  their 
perspective,  it  would  not  be  necessary  and  produce  a  negative  impact  on  the  maritime 
sector. They argue that it would be applied only on a regional scale, whereas the maritime 
sector operates on a global scale. They believe also that this situation might trigger political 
tensions between regions.  Representatives of the ship owners recommend increasing the 
number of recycling facilities to address the capacity issue and, in this respect, they believe 
that the recent ratification of the HKC provides an opportunity. 

On the ratification of the HKC, the representatives of the ship owners foresee that it may 
lead  to  a  situation  with  improved  recycling  standards  of  the  non-EU  listed  facilities. 
Representatives of  EU recycling facilities offered an opposite view both during the interview 
programme and responding to the survey questionnaire. They argued that the ratification of 
the HKC might instead decrease  recycling standards, widening the existing standard gap 
with the EU listed recycling facilities even more, and eventually incentivising the ship owners 
to opt for HKC-approved recycling facilities over EU listed ones. For this reason, the vast 
majority of them would not recommend including the HKC-approved facilities in the list of 
EU listed recycling facilities, also in light of the fact that the actual standards of the HKC-
approved facilities may vary depending on local conditions. 

In  general,  the  respondents  to  the  survey  questionnaire  agree  that  a  financial  incentive 
would be still relevant with the HKC in force and that including the beneficial ownership in 
the  SRR’s  scope  would  have  a  cumulative  effect  when  it  comes  to  the  impacts  thereof. 
Nevertheless, the representatives of the classification societies agree that the ship owners 

57   See Figure A.22 for more detail. Out of 50 responses provided to this question, 19 respondents (i.e. 38%) strongly agreed 
and 20 respondents (i.e. 40%) agreed, respectively, with the need to introduce a financial instrument to stimulate safe 
and environmentally sound ship recycling. The detailed analysis of the responses by stakeholder category shows that 
there exist divergent views between the representatives of the recycling yards and the representatives of the ship owners. 

45 

 
 
would continue to prefer their vessels being dismantled at HKC-compliant facilities, primarily 
because the EU listed recycling facilities purchase end-of-life vessels at a lower price. 

2.5  Possible legal implications for future implementation of the SRL 

Before the SRL could be introduced, an assessment of the legal implications thereof needs 
to be carried out. Waste disposal legislation, including legislation concerning the recycling 
of vessels, has its legal basis in Articles 174-175 TFEU, which in conjunction with Article 
95(1) TFEU aims to ensure smooth functioning of the internal market and avoid distortion 
of  competition.  Several EU  Directives  on  handling  of  waste58  have  been adopted  setting 
basic principles of financing the management of waste disposal at the EU level. Producers 
generally  pass  the  costs  of  waste  disposal  to  the  consumers  by  applying  a  waste 
management  or  recycling  fee.  The  recycling  of  vessels  is  affected  by  these  legal  acts; 
however, due to the way the maritime market functions, some issues may arise. Introducing 
an  SRL  that  would  create  a  financial  incentive  for  both  ship  owners  of  EU  and  non-EU-
flagged  vessels  calling  at  EU  ports  raise  a  number  of    legal  questions.  These  legal 
considerations are discussed in more detail below.  

As noted in the study of 2016, a Regulation imposing a financial contribution on non-EU 
companies  was  held  to  be  lawful  by  the  European  Court  of  Justice  in  a  decision  of  21 
December 2011 (Case 366/10) on the obligation of non-EU aviation companies to pay for 
the emission of GHG under the ETS. Analogy can be found for the SRL, which uses EU 
ports of call as the main design factor of the financial incentive, provided that the monies 
which  are  built  up  not  only  benefit  EU-flagged  vessels,  but  are  equally  accessible  to  all 
vessels that have contributed to the financial instrument.  This is how the SRL has been 
designed. 

In the case of an instrument applying to all vessels calling at EU ports, WTO compliance 
also needs to be considered. An issue related to this stems from the General Agreement 
on  Tariffs  and  Trade  (GATT)  1994,  especially  Article  V  which  regulates  the  freedom  of 
transit59 and Article 11 of the Trade Facilitation Agreement60 (TFA) which offers additional 
clarification.  Article  V  applies  to  vessels  passing  through  a  country,  without  that  country 
being the last destination,61 where no distinction shall be made on the basis of the flag or 
the  origin  of  the  vessel.62  Unnecessary  restrictions  on  traffic  in  transit  are  generally 
prohibited,63 with some exceptions. Insofar as the term ‘charge’ with respect to Article V:3 
has not been defined, it is important that the contributions under the SRL scheme are not 
seen as charges, but rather as premiums. The fact that the accrued rights might be forfeited 
remains a sensitive feature  of this  financial  instrument.64  However,  in case a  violation of 
Article  V  is  established,  the  measure  can  still  be  defended  on  the  basis  of  an  exception 
under  Article  XX  GATT  1994  which,  when  invoked  under  justified  and  non-arbitrary 
conditions,  allows  the  WTO  members  to  adopt  measures  for  the  protection  of  the 

58   See e.g. Directive 2006/12/EC of the European Parliament and of the Council of 5 April 2006 on waste, Official Journal 
of  the  European  Union,  L  114,  27.4.2006,  pages  9-21;  Directive  2008/98/EC  of  the  European  Parliament  and  of the 
Council of 19 November 2008 on waste and repealing certain Directives, Official Journal of the European Union, L 312, 
22.11.2008, pages 3-30; Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on 
end-of life vehicles, Official Journal of the European Union, L 269, 21.10.2000, pages 34-43; Directive 2006/66/EC of the 
European Parliament and of the Council of 6 September 2006 on batteries and accumulators and waste batteries and 
accumulators and repealing Directive 91/157/EEC, Official Journal of the European Union, L 266, 26.9.2006, pages 1-
14; Directive 2012/19/EU of the European Parliament and of the Council of 4 July 2012 on waste electrical and electronic 
equipment (WEEE), Official Journal of the European Union, L 197, 24.7.2012, pages 38-71. 

59   See Article V General Agreement on Tariffs and Trade on the Freedom of Transit here. 
60   See Article 11 of the Trade Facilitation Agreement on the Freedom of Transit here. 
61   See Article V:1 of GATT 1994. 
62   See Article V:2 of GATT 1994. 
63   See Article V:3 of GATT 1994 and Article 2 of TFA. 
64   Ecorys, DNV-GL and Erasmus School of Law (2016), Financial instrument to facilitate sound ship recycling, Final Report. 

46 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

environment,65 human health66 and the human rights of workers employed in the vessels’ 
recycling industry.67 

Article  V:4  further  stipulates  that  all  charges  or  regulations  imposed  on  traffic  in  transit 
should be reasonable. There is no clear definition as to what constitutes reasonableness, 
but when considering different alternatives, the one with least costs to the ship owner would 
appear to be the most reasonable. Even though other financial incentive measures may be 
further  considered,  from  previous  pre-feasibility  analyses  reviewed  via  desk  research 
analysis, it appears that the other alternatives to SRL would not be effective in preventing 
the circumvention of rules enshrined in the SRR or raise other substantial legal issues. 

The Most Favoured Nation (MFN) principle under Article V:5 obliges all WTO members not 
to discriminate between trading partners when it comes to their transit rights. It is therefore 
necessary to ascertain whether the fact that the accrued rights can be forfeited by way of a 
penalty is more advantageous to the ship owners of one or more countries than to the ship 
owners  of  other  countries.  If  this  is  the  case,  the  SRL  could  pose  the  risk  of  de  facto 
discrimination.  Nevertheless,  some  scholars68  believe  that  it  is  important  to  assess  the 
intent, and not merely the effect, of the measure when assessing non-discrimination.69 In 
this respect, it should also be considered that the penalty remains a choice of the ship owner 
that opts to recycle in a non-EU-listed facility and lose the funds accumulated, to eventually 
get more revenues. This analysis can be done only on the basis of empirical data that is not 
available at present. 

The  General  Agreement  on  Trade  in  Services  (GATS)  applies  to  all  measures  affecting 
trade in services,70 including maritime transport services and environmental services which 
are relevant for the assessment of the SRL. Although GATS’ Article II:1 requires that any 
‘advantage’ accorded by a WTO Member to services, or service providers, from any other 
country  must  be  accorded  immediately  and  unconditionally  to  the  like  service  or  service 
provider from any other WTO member (i.e. the MFN principle), this provision does not apply 
to  maritime  transport  services.71  The  EU,  however,  has  to  adhere  to  other  provisions  of 
GATS requiring transparency,72 possibility of legal remedies, and judicial review.73 

Ship  recycling  can  fall  under  two  categories  of  environmental  services,  namely  ‘refuse 
disposal services’74 and ‘metal waste and scrap recycling, on a fee or contractual basis.’75 
The SRL would grant an advantage to recycling facilities providing safe and environmentally 
sound recycling services in compliance with the SRR and which are included in the EU list 
to  the  detriment  of  services  and  service  providers  who  engage  in  less  safe  and 
environmentally sound recycling practices. This could be seen as contrary to Article II:1. In 
addition,  the  EU  has  made  full  commitments  in  Mode  2  (i.e.  Consumption  abroad)  with 
respect  to  the  refuse  disposal  services.76  It  is  thus  under  obligation  to  afford  no  less 
favourable treatment to like recycling services and service suppliers than the treatment it 
grants  to  its  own  like services  and  service suppliers.77  The SRL  could have the  effect  of 
modifying  the  conditions  of  competition  in  favour  of  EU  services  and  service  suppliers, 

65   See GATT 1994, Article XX: (g) measures relating to the conservation of exhaustible natural resources. 
66   See GATT 1994, Article XX: (b) measures necessary to protect human, animal or plant life or health. 
67   See GATT 1994, Article XX: (a) measures necessary to protect public morals. 
68   Pauwelyn, J. (2006), The Unbearable Lightness of Likeness: A Review of Mireille Cossy, Some Thoughts on The Concept 

of ‘Likeness’ in the GATS, WTO Staff Working Paper ERSD-2006-08. 

69   The intention is that the ship owners calling at EU ports are treated in the same way with the objective of dismantling 
vessels in a safe and sound environmental manner i.e. they get their money back when recycling their vessel in EU-
listed facilities. And it remains a choice of the ship owners both to use the EU market and to renounce to the accumulated 
fund.  

70   See Article I of GATS. 
71   See Decision of the Council for Trade in Services of 3 July 1996, S/L/24. 
72   Article III of GATS. 
73   Article VI of GATS. 
74   See 9402 of the United Nations Provisional Central Product Classification (CPC). 
75   See 88493 of the CPC. 
76   See here.  
77   Article XVII:1 GATS. 

47 

 
compared to those of other WTO Members.78 However, it is also important to assess how 
the SRL measure may alter the actual conditions of competition.  

Even if some can consider that the SRL would infringe on substantive commitments under 
GATS, the SRL measure may still be justified under Article XIV (b) GATS pertaining to the 
environmental protection, as long as there are no reasonably available alternative measures 
meeting the same objectives in a less trade restrictive manner. It should also be noted that, 
according to the established CJEU case law,79 a financial obligation to pay for the emission 
of  greenhouse  gases  under  the  European  Trading  Scheme  (ETS)  imposed  on  non-EU 
companies was considered to be lawful. 

78   Article XVII:3 GATS. 
79   Judgment of 21 December 2011, Air Transport Association of America and Others v Secretary of State for Energy and 

Climate Change, Case C-366/10, ECLI:EU:C:2011:864. 

48 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

3  Elaboration of a baseline 

3.1 

Introduction 

In order to expand on the 2016 study to assess the feasibility of a financial instrument to 
facilitate safe and environmentally sound ship recycling, and having established that such 
a  financial  instrument  would  still  be  considered  relevant  by  stakeholders,  even  after  the 
ratification  of  the  HKC,  the  next  step  of  this  study  is  to  elaborate  a  baseline  scenario. 
Notably,  the  baseline  scenario  is  an  elaboration  where  current  and  expected  trends  in 
shipping, ship recycling, and policy (including the entry into force of the HKC), are projected 
in  the  future  without  changes,80  in  order  to  be  able  to  assess  the  likely  impacts  of  the 
introduction  of  a  ship  recycling  licence  (SRL  henceforth)  in  quantitative  and  qualitative 
terms. 

Expanding on the logic behind the general need for a baseline, some specific informational 
needs have been identified. The main outputs provided in the baseline are the number of 
vessels that  would fall  under the  purview  of the proposed  SRL and  the number  of these 
vessels heading to recycling every year (both broken down by vessel size and type), as well 
as  their  destination  at  the  end  of  their  lifetimes.  These  outputs,  in  turn,  necessitate 
projections on the future fleet which consider the rate at which new constructions are added 
to  the  fleet  and  older  vessels  are  recycled.  In  addition  to  number  of  vessels,  these 
projections  should  also  be  done  in  terms  of  GTs  and  LDTs,  which  are  measurements 
commonly used in shipping and ship recycling, respectively. 

Giving that shipping and ship recycling are global markets, the evolution of the fleet is also 
projected  on  a  global  scale,  after  which  a  differentiation  is  made  based  on  whether  the 
vessels fly an EU flag or not. The SRR already covers most of the EU fleet, but given the 
requirement set out to consider making the SRL applicable to all vessels calling at a port or 
anchorage of a Member State, vessels from the rest of the world that call on EU ports are 
also relevant. 

These elaborations require a wealth of data and information. Firstly, figures about the size 
and  composition  of  the  current  global  merchant  fleet  are  needed;  combined  with  order 
books  for  vessel  construction  and  information  on  the  age  at  which  vessels  are  typically 
recycled, these can provide the initial projections. 

Secondly, being able to disaggregate the vessels that fly an EU flag from the global fleet 
requires data on the proportion of vessels that fly such flags, per type of vessel. Port call 
data from EU ports can reveal how much of the non-EU-flagged portion of the fleet calls on 
EU ports every year, and how frequently they do so.  

Lastly, the baseline needs to cover the expected impacts of the recently ratified HKC, which 
will  enter  into  force  on  26  June  2025,  and  thus  would  overlap  with  the  timeline  of 
implementation of a possible financial instrument.81 

This section will further describe the elaboration of this baseline scenario and the results 
that  are  obtained  from  it,  which  can  then  be  used  further  along for  the  estimation  of  the 
relevant impacts in Chapter 4. 

80   According to current policy, economic, and technology developments (which include the ratification of the HKC), in the 

81  

absence of a SRL being implemented. 
It is worth observing that other potential impacts on the rate of ship recycling might be caused by the onset of other 
legislation at IMO and in the EU. 

49 

 
 
3.2  Development of the global merchant fleet and recycling 

According to data from Equasis,82 which has been used as a basis for future projections of 
the world fleet, in 2023 the world merchant fleet was estimated to consist of 118,998 vessels 
which together amounted to 1,487 million GT. These vessels have been grouped according 
to their size and type as follows. 

The  vessel  size  categories  are  small,  for  vessels  under  500  GT;  medium,  for  vessels 
between 500 and 25,000 GT; large, for vessels between 25,000 GT and 60,000 GT; and 
very  large,  for  vessels  over  60,000  GT.83  The  vessel  types  are  bulk  carriers,  container 
vessels,  fishing  vessels,  general  cargo,  offshore  vessels,  oil  tankers,  and  other  types  of 
vessels. 

Only a relatively small fraction of vessels from the global fleet flies an EU flag. Elaborating 
on EMSA’s data, Table 3.1 shows the share of the world fleet that flies an EU flag per vessel 
type. The share of the world fleet that flies an EU flag goes from 1.7% for offshore vessels 
to  18.8%  for  container  vessels,  or  12.8%  overall.  This  compares  with  16.4%  of  vessels 
globally owned by nationals or companies of the EU (or 28.2% of the GT).84 

Table 3.1 Share of world fleet vessels by flag 

Vessel type 

Bulk carriers 
Container vessels 
Fishing vessels 
General cargo 
Offshore vessels 
Oil tankers 
Other types of vessels 

EU share of world fleet 
7.9% 
18.8% 
12.6% 
9.9% 
1.7% 
12.0% 
14.8% 

Non-EU share of world fleet 
92.1% 
81.2% 
87.4% 
90.1% 
98.3% 
88.0% 
85.2% 

Source: elaboration of the authors based on EMSA (2022). 

In general, container vessels, bulk carriers, and oil tankers tend to be less old (i.e. between 
12.5 and 17.7 years of age on average) than the rest of the fleet (i.e. between 21.6 and 33.5 
years of age on average) for both vessels that are flying EU flags or flags from the rest of 
the world. 

For most vessel types, the EU and the rest of the world tend to have similar average ages, 
but the EU’s general cargo vessels and oil tankers also tend to be significantly less old (21.6 
years versus 28.6 and 13.6 years as opposed to 17.7, respectively) than those found in the 
rest  of  the  world,  although  vessels  associated  with  offshore  operations  tend  to  be  older. 
Table 3.2 shows the average ages of the vessels by type and flag. 

Table 3.2 Average vessel age by vessel type (years)  

Vessel type 

Bulk carriers 
Container vessels 
Fishing vessels 
General cargo 
Offshore vessels 
Oil tankers 
Other types of vessels 

EU fleet 
12.5 
13.3 
29.0 
21.6 
30.4 
13.6 
26.7 

Source: elaboration of the authors based on EMSA (2022). 

non-EU fleet 
12.9 
14.2 
33.5 
28.6 
22.7 
17.7 
23.3 

82   The  European  Commission  and the  French  Maritime  Administration  developed  an  information  system  which  collates 
existing safety-related information on vessels from both public and private sources and makes it available on the Internet. 
The information we used is available here. 

83   This aggregation is determined by the available data, as it is the aggregation used in the Equasis dataset. 
84   EMSA (2023). The EU Maritime Profile – the maritime cluster in the EU. Available from here. 

50 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

According  to  literature  review,  the  vessel’s  age  is  the  main  factor  determining  decisions 
regarding vessel recycling.85 Comparing the age of the vessels currently in the fleet with the 
age at which these vessels are typically recycled generally allowed us to make projections 
on how many vessels (and their equivalent GT and LDT) are recycled every year.  

To  obtain these  ages of  recycling,  we  have  used historical recycling  data from  the  NGO 
Shipbreaking Platform86 and ship recycling data shared by EMSA, which were merged into 
a single comprehensive dataset that contains individual vessels that have been recycled 
since 2012, along with (i) the vessels’ characteristics, (ii) the year when they were recycled, 
and (iii) the location where they were recycled. This dataset allows us to obtain data about 
the age distribution of vessels at the time of recycling, broken down per type and size of 
vessel, to get an estimate of the age at which vessels are recycled. While there are some 
peaks  over  time  on  the  central  tendency  of  recycling,  the  trend  has  remained  relatively 
constant.  

Table 3.3 shows the median age at which a vessel is typically recycled, which can also be 
interpreted as the life expectancy of the vessel. These ages also have some variability or 
spread within each vessel size and type category, captured in the standard deviation. Table 
A.9 in Annex IV provides the information in more detail. 

Table 3.3 Median age at which vessels are recycled, broken down by vessel size and type   

Vessel size 

Vessel type 

Small 

Medium 

Large 

Very large 

General cargo 
Other types of vessels 
Fishing vessels 
Offshore vessels 
General cargo 
Container vessels 
Bulk carriers 
Oil tankers 
Other types of vessels 
Fishing vessels 
Offshore vessels 
General cargo 
Container vessels 
Bulk carriers 
Oil tankers 
Other types of vessels 
Fishing vessels 
Offshore vessels 
General cargo 
Container vessels 
Bulk carriers 
Oil tankers 
Other types of vessels 
Offshore vessels 

Median age of recycling 
49 
44 
28 
36 
33 
23 
30 
28 
34 
37 
36 
30 
20 
24 
23 
24 
25 
30.5 
30 
19 
22 
24 
20 
27 

Source: elaborations of the authors based on NGO Shipbreaking Platform and EMSA data. 

85   Stevens  and  Johannessen  (2020),  How  has  the  EU  Ship  Recycling  Regulation  affected  European  Shipbreaking? 

Available from here. 

86   Since  2012,  the  NGO  Shipbreaking  Platform  publishes  a  yearly  list  of  recycled  vessels  worldwide,  which  details  the 

characteristics of the vessels, their flags, and their destination for recycling. The lists are available online here. 

51 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
From these trends, we can already form some expectations for vessel recycling in the future. 
For example, given the relatively low average age of bulk carriers (i.e. 12.5 and 12.9 years 
for EU-flagged and non-EU-flagged vessels, respectively) compared to the historical trends 
for their median recycling ages (i.e. 30, 24, and 22 years of age for medium, large, and very 
large bulk carriers, respectively), we can expect that bulk carriers will take rather long to be 
recycled, especially medium-sized ones. 

On the other hand, a large proportion of container vessels could be expected to be recycled 
earlier, given that while this fleet segment is also not old (i.e. 13.3 and 14.2 years on average 
for EU-flagged and non-EU-flagged vessels, respectively), the mean age at which they get 
recycled is much lower as well (i.e. 23, 20, and 19 years for medium, large, and very large 
vessels, respectively). 

This principle is used to project vessel recycling in the future. From Equasis and UNCTAD87 
data, it is possible to obtain the global number of vessels and GT per fleet segment up until 
2021.  This  dataset  also  breaks  down  fleet  segments  by  age  cohorts  (and  thus  provides 
more detail than a simple average for a whole vessel category). This data, in combination 
with  the  recycling  age  distribution  obtained  previously,  allows  us  to  forecast  how  many 
vessels  would  be  recycled  every  year,  broken  down  by  vessel  size  and  type.  A  similar 
operation can be done to forecast the recycled GT, after which the historical recycling data 
will also allow us to estimate the equivalent LDT per GT, which is then also used to obtain 
the LDT recycled. 

On the other hand, new vessels are also expected to be added to the fleet in coming years. 
A  report  by  Danish Ship  Finance gives estimates  of the  rates  at  which  the  different fleet 
segments are expected to incorporate new constructions over the coming years based on 
the order book for new vessels. Assuming that these rates will also be similar in the future, 
it is possible to forecast the incorporation of newly-constructed vessels to the world fleet, 
which will also be recycled eventually and thus add up to the yearly recycling figures. 

The result of this forecasting exercise is that the expected recycling demand will grow from 
just under 18 million LDT currently88 to a peak of almost 25 million LDT by 2033. This peak 
is the result of the large expansion of the global merchant fleet in the 2000s, which is now 
starting to age and will likely be recycled within a decade, as also confirmed by industry 
stakeholders.89,90 Past this peak, there will be fewer vessels available for recycling based 
on their age, and because of this, it could be expected that recycling activity decreases to 
just over 22 million LDT per year in 2042. The lack of candidate vessels for recycling during 
this slowdown period is also noted on shipping market analyses performed by Danish Ship 
Finance.91 The overall result of the ship recycling forecast can be seen in Figure 3.1. 

87   Maritime statistics collected by the United Nations Conference on Trade and Development, available online here. 
88   This figure represents what would be expected for the current situation based on age. However, current recycling figures 
suggest  the  actual  recycling  is  much  lower,  possibly  explained  by  favourable  shipping  markets  leading  to  delayed 
recycling. We have chosen to still use this figure given that assigning the “delayed” recycling to a specific point in time is 
not a trivial exercise, nor is it to account for market conditions in the future projections. 

89   Targeted interviews also yielded as a conclusion that an ageing fleet would produce a peak in recycling in the medium-

term, and a similar conclusion is reached on analyses performed by BIMCO, available online here. 

90   A report from Sustainable Shipping Initiative (Sustainable Shipping Initiative, 2021) also mentions that the demand for 
recycling of the vessels will quadruple by 2033, based on estimates for the LDT recycled in 2021 that are lower than 
ours. It is possible that lower-than-expected recycling demand was observed in this period due to short-term favourable 
shipping market condition (more on the effect of market conditions is discussed in this section of the report). However, 
the  estimates  also  expect  about  27  million  LDT  recycled  by  2033,  which  seems  in  line  with  other  sources  and  the 
projections elaborated for this analysis. This also means that our forecast for the expected steel output for the period 
leading to 2032 is slightly higher than what is proposed in a more recent research paper (Bleischwitz, 2023), who uses 
the analysis in the report from the Sustainable Shipping Initiative as a basis (100 million tonnes compared with 126-178 
million tonnes). The report from Sustainable Shipping Initiative is available here.  
91   Danish Ship Finance (2021). November Shipping Market Review. Available here. 

52 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Figure 3.1 Forecasted yearly recycled LDT from world fleet 

Source: elaborations of the authors based on Equasis database, ship recycling data, and Danish Ship Finance report. 

For further detail, Figure 3.2 shows that most of the fleet currently being recycled are from 
the oldest age segments (i.e. between 15 and 24 years of age, as well as those of 25 years 
and over). The share of vessels between 5 and 14 years of age being recycled is, however, 
increasing, as they also start to age in comparison to their life expectancy; they will drive 
the peak in 2033. Also contributing to this peak is the fact that this point in time matches the 
time when the recycling of vessels which are currently under 5 years of age is expected to 
begin, as well as the recycling of some vessels that will be newly constructed in the coming 
years. 

Figure 3.2 Forecasted yearly recycled LDTs from world fleet by vessel age group 

Source: elaborations of the authors based on Equasis database, ship recycling data, and Danish Ship Finance report. 

53 

 
 
To further elaborate on the basis of vessel size, while the recycling of LDT from medium 
and small vessels will remain relatively stable until 2055, Figure 3.3 shows that large (i.e. 
between 25,000 and 60,000 GT) and very large (i.e. over 60,000 GT) vessels would have 
the  largest  influence  on  the  aggregate  result  previously  shown  (simply  due  the  sizes  of 
these segments), especially the latter which peaks in 2032, while recycling of large vessels 
will peak some years later, in 2036. It is worth mentioning that small vessels (i.e. under 500 
GT) are not currently covered by the SRR. 

Figure 3.3 Forecasted yearly recycled LDT from world fleet by vessel size category  

Source: elaborations of the authors based on Equasis database, ship recycling data, and Danish Ship Finance report. 

In  terms  of  vessel  types,  three  main  ones  are  of  interest  in  Figure  3.4,  given  that  they 
represent the largest segments of the fleet: bulk carriers, container vessels, and oil tankers. 
The first group, bulk carriers, currently represent just under 4 million LDT recycled, which 
will  increase  until  2035  to  more  than  twice  that  value,  to  just  over  8  million  LDT,  before 
stabilising at around 6 million LDT per year by 2044. Once again, this is because the vessels 
from this fleet segment are expected to reach the end of their life expectancies by 2035. 

The second group, container vessels, will oscillate between 5 and 7 million LDT per year 
up to 2030, after which it decreases to just over 4 million LDT in 2037; beyond this point, 
the recycling  of  container vessels  increases  again and  will  reach  6 million  LDT  by  2055. 
This late increase in the recycling of container vessels can be explained due to the fact that 
this segment has had a particularly large expansion in recent times and accounts for a large 
part of the order books, so this accounts for the recycling of vessels that are new or are yet 
to be constructed or finished.92 

Finally, oil tankers represent a large fraction of the LDTs that will be recycled in the coming 
years as they reach the end of their life expectancies, starting from around 5 million LDT 
currently  and  peaking  at  7 million  LDT in 2035  before  slowly  decreasing and  reaching  6 
million LDT in 2055.  

As for fishing vessels, general cargo vessels, offshore vessels, and other vessels, they will 
represent a comparatively smaller share of the total LDT being recycled until 2055, in part 

92   As described in Danish Ship Finance reports. 

54 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

due to their relatively small size and their limited numbers, but they will still contribute to the 
total figures. 

Figure 3.4 Forecasted yearly recycled LDTs from world fleet by vessel type 

Source: elaborations of the authors based on Equasis database, ship recycling data, and Danish Ship Finance report. 

It is worth noting that while, as mentioned before, age is the main factor in decisions for 
recycling  vessels,  other  factors  can  also  come  into  play.  One  such  factor  is  simply  the 
market’s  conditions  for  shipping,93  as  vessel  owners  are  more  likely  to  delay  sending  a 
vessel to a recycling facility when there is high demand for shipping (and shipping rates are 
equally high), since it is still possible to operate an old vessel profitably, as was discussed 
with several industry stakeholders. Conversely, when shipping rates are low, it is possible 
for  vessel  owners  to  move  forward  with  recycling  vessels  earlier  than  their  expected 
economic lifetimes to get rid of the excess of capacity. 

Order  books  for  the  construction  of  new  vessels  face  a  similar  phenomenon,94  with  new 
orders increasing with good market conditions and slowing down when shipping markets 
face  low  demand.  It  could  be  possible  that  the  recent  boom  in  shipping  markets  which 
produced an increase in orders for new vessel construction could lead to an oversupply of 
vessels  if  market  demand  slows  down,  after  which,  due  to  a  lack  of  obvious  candidate 
vessels to send to recycling based on age, newer ships would need to be recycled. 

Another  important  factor  that  may  affect  decisions  for  recycling  in  the  medium  term, 
especially for the EU fleet and vessels sailing to and from EU ports, is related to regulatory 
constraints  imposed  on  the  fleet  to  address  emissions  from  maritime  transport,  such  as 
FuelEU Maritime and EU ETS. It is expected that in the transition to a greener fleet, some 
of the non-complying vessels will need to be recycled and replaced by new builds, although 
interviewed industry stakeholders were unable to say with certainty the scale of this impact 
nor when it would take place. 

In practice, these additional factors (market conditions influencing recycling and new build 
decisions,  as  well  as regulatory  constraints)  mean  that  reality  can  differ  slightly  from the 
projections shown above. The possible differences stemming from ship owners accelerating 

93   Lloyd’s List (2023). Ship recycling market outlook up to 2030. Available here. 
94   Refer again to Danish Ship Finance reports. 

55 

 
 
or delaying decisions regarding their fleets could mean that the expected peak for recycling 
happens at another point in time (albeit one not too distant from the projected year), that 
the  peak  is  more  (or  less)  pronounced  than  expected,  or  even  that  other  smaller  peaks 
appear in recycling. 

3.3  Trends in recycling of vessels 

When a decision to recycle an EU-flagged vessel is reached, very often the vessel will be 
reflagged. In fact, while EU-flagged vessels account for 14.9% of the current world fleet in 
terms of GT according to EMSA data, EU-flagged vessels only accounted to  barely over 
2.8% of recycled LDT worldwide in 2022 (down from 10.9% in 2013), as can be seen in 
Figure 3.5. In the absence of intervention, it is likely that the situation will remain similar, 
with a large majority of the EU-flagged vessels reflagging and being recycled in recycling 
facilities located in South Asia. 

Figure 3.5 LDT volume recycled per year (thousand of tonnes, 2013-2022) 

 12.000

 10.000

 8.000

 6.000

 4.000

 2.000

 -

12,0%

10,0%

8,0%

6,0%

4,0%

2,0%

0,0%

2013

2014

2015

2016

2017

2018

2019

EU Flagged LDT recycled

NON EU Flagged LDT recycled

2020
% of EU flagged LDT from the total

2021

2022

Source: elaboration based on EMSA data. 

To offer a more comprehensive understanding of the re-flagging phenomenon, Figure 3.6 
illustrates the re-flagging data from EMSA of EU-flagged vessels.95 The data incorporated 
in the visual representation spans from 2013 to 2022 and reveals a consistent pattern of 
reflagging  (see  middle  column)  and  location  of  recycling  activities  (see  right  hand  side 
column). In this practice, EU-flagged vessels change their flags from an EU flag to another, 
often to nations such as Palau, St Kitts and Nevis, or the Union of the Comoros, up to 30  
days prior to recycling. 

95   Comparable  analysis  has  been carried  out  in  a  recent  paper  (Bleischwitz,  2023).  Although the  analysis  of this  paper 

covers a shorter period of time (i.e. 2017-2022) the visualisation of the results shows similar patterns. 

56 

 
 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Figure 3.6 EU vessels flag change and recycling locations before recycling (2013- 2022) 

Source: Consortium elaboration based on EMSA data. 

After  reflagging,  these  vessels  often  reach  the  end  of  their  service  life  in  South  Asian 
countries like Bangladesh, India, and Pakistan, as Figure 3.6 illustrates. In fact, according 
to  EMSA  data,  the  percentage  of  EU  re-flagged  vessels  recycled  in  substandard  South 
Asian  facilities  has  consistently  remained  above  65%  of  the  total.  Only  a  mere  3%  of 
reflagged vessels are known with certainty to have been recycled by recycling facilities that 
are included on the EU list (meaning that the recycling facility is known according to the 
data and that this facility was part of the list at the time of recycling).96 

There  is  likely  a  cost-saving  driver  for  this  behaviour,97  given  that  recycling  facilities  in 
Bangladesh,  India,  and  Pakistan  offer  significantly  more  money  per  LDT  than  their 
counterparts  in  the  EU  and  even  Türkiye.  While  the  demolition  rates  in  those  recycling 
facilities average € 470 per LDT in 2024,98 the rates offered by recycling facilities in the EU 
were in the order of € 100, resulting in a price gap of € 370 per LDT (see also section 1.2.1 
for more details). It is not possible to accurately estimate the magnitude of this gap in future 
years, and consulted stakeholders revealed that they face a similar issue, pointing out that 
these rates depend on steel and recycling markets, as well as the operating costs of the 
recycling facility. Since stakeholders also cannot provide any forecasts, in the absence of 
authoritative data, the value of € 370 per LDT has been assumed to remain constant until 

96   There are instances where it is not known for certain the recycling facility to which a vessel was destined even after 
consulting EMSA and NGO Shipbreaking Platform data, making it impossible to determine if the vessel went to an EU 
listed yard or not. 

97   Lin et al (2022). Unexpected side effects of the EU Ship Recycling Regulation call for global cooperation on greening the 

shipbreaking industry. 

98   Data collected in 2024 until September 1 2024.  

57 

                                                                                                                                                                                                                                                                         
 
 
2055.  It  is  worth  noting  that  this  gap  is  significantly  different  from  the  one  used  in  the 
previous study in 2016, which looked at the additional investments and expenditures that 
facilities in Türkiye would need to make to comply with EU requirements, whereas this study 
focuses on the existing price gap between facilities in the EU and facilities in Bangladesh, 
India, and Pakistan (please see Annex VI for more details). Vessel owners insist, however, 
that  another  factor  to  consider  beyond  the  price  offered  is  the  capacity  of  the  recycling 
facilities in the EU list, defined not only by the total output of the recycling facilities in GT or 
LDT, but also in terms of  maximum vessel length and draught that they are able to handle. 

Figure  3.7  below  shows  the  expected  demand  for  recycling  from  the  EU-flagged  fleet 
(without end-of-life reflagging), which follows the same trend as the global fleet. Demand 
currently sits just over 2 million LDT per year and is expected to peak at almost 2.5 million 
LDT in 2032, before it falls back to over 2.2 million LDT from 2039 onwards. 

Figure 3.7 Forecasted yearly recycled LDTs from the EU-flagged fleet 

Source: elaboration of the authors based on Equasis database, ship recycling data, and Danish Ship Finance report. 

That  said,  our  analysis  reveals  that  in  the  European  list  of  recycling  facilities,  there  is 
currently  sufficient  capacity  for  EU-flagged  vessels  to  be  recycled  in  a  safe  and 
environmentally sound manner: the number of listed recycling facilities has nearly doubled, 
going from 25 in 2018 to 45 as of December 2023.99 The European list records a maximum 
annual output of 1.2 million LDT (achieved in 2013)100 and an active recycling capacity101 of 
2.3 million LDT. The EU list has exceeded the existing recycling needs for EU-flagged and 
EU re-flagged vessels (1 year prior to dismantling) for the period analysed between 2018-
2022.  As  for  the  dimensions  of  the  vessels,  a  third  of  the  facilities  in  the  list  are  able  to 
recycle vessels with over 48 meters in width, and lengths over 350 meters, meaning that 
very large vessels can reasonably be recycled within the facilities in the list as well.102 The 

99   The European Commission adopted a new list of approved recycling facilities on 6 December 2023, where three yards 
were removed due to inactivity in the recycling business (in Denmark, the Netherlands, and Norway), bringing down the 
number of approved facilities from 48 to 45. 

100   According to a note shared by the European Commission on the latest available scrapping data. 
101   The theoretical recycling capacity of the list is of 2.7 million LDT, however, not all facilities in the list are active in recycling. 
The evaluation of the Regulation introduced the concept of active capacity, to account for the theoretical capacity of only 
the facilities that are active. 

102   For reference purposes, the Panama Canal Authority sets limits of 370.33 meters in length, 51.25 meters in width, and 
15.24 meters in draft for Neopanamax size vessels, expected to cover 96.8% of the world’s fleet of container ships. 

58 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

EU List has increased the capacity to recycle large vessels, with dimensions being suitable 
for  recycling  even  some  of  the  largest  vessels  currently  in  existence.  The  current  active 
capacity is however less than the expected peak in demand for recycling, revealing possible 
constraints during this peak, with difficulties to find a recycling facility that is not fully booked, 
especially  if,  as  discussed  before,  other  market factors  in shipping make  this  peak more 
pronounced.  

The  situation  around  reflagging  is  not  expected  to  improve,  although  a  real  constraint  in 
recycling capacity during peak demand could legitimise the position of the ship owners to 
recycle outside of the list of approved recycling facilities. There is a consensus on the need 
to  keep  expanding  the  EU  list  to  accommodate  the  shipping  industry's  future  recycling 
needs.  As  concerns  the  forecasted  needs,  most  stakeholders  agree  that  the  EU  listed 
recycling facilities do not have sufficient capacity to meet future demand for recycling. Out 
of 28 respondents to a consultation launched for this study, 16 strongly disagree that the 
EU list of recycling facilities has sufficient capacity to cover future needs. When it comes to 
forecasting  future  needs,  the  consensus  expressed  in  the  public  consultation  also  leans 
more towards an expected lack of sufficient future recycling capacity. This is especially the 
case if the EU has the ambition of including non-EU flagged vessels that call on EU ports103 
under the purview of its ship recycling policies to disincentivise reflagging. 

3.4  Port calls in the EU 

Regarding the number of vessels that call on EU ports every year, collected AIS104 port calls 
data suggest that there were about 1.4 million port calls of sea-going merchant vessels of 
100 GT and above in EU ports in 2019.105 From these port calls, 83% were done by vessels 
flying the flag of an EU Member State, and 17% were from non-EU-flagged vessels. This 
highlights that the majority of the activity in EU ports comes from vessels within the EU, in 
line with estimates from EMSA for 2022. 

These port calls were made by 22,146 individual vessels, of which 43% are EU-flagged, 
and 57% are not, which is in contrast with the proportion of calls done by EU-flagged vessels 
(i.e.  83%  of  the  port  calls  are  done  by  only  43%  of  the  vessels,  which  are  EU-flagged 
vessels).  This  contrast  indicates  that  EU-flagged  vessels  call  in  EU  ports  much  more 
frequently  than  vessels  with  third  flags  do.  Figure  3.8  confirms  that  EU-flagged  vessels 
dominate the group of vessels with a high frequency of port calls (i.e. over 12 port calls in 
the EU over a year).106 In general, a large majority of port calls are made by roughly half of 
all the vessels that call in EU ports, of which the majority are vessels flying the flag of an 
EU Member State. 

103   As can be evidenced in the following section on port calls, 57% of the vessels calling in EU ports do not fly an EU flag, 
although these vessels also call less frequently. For illustrative purposes, non-EU flagged vessels calling in EU ports in 
2019 amounted to a total of over 139 million LDT. These vessels could amount to an additional 6.7 million LDT recycled 
in the expected recycling peak in 2032 (corresponding to recycled vessels without an EU flag but which have called in 
EU ports and could be subjected to the licence). 2.0 million of these recycled non-EU flagged vessels call in EU ports 
with a high frequency. 

104   AIS vessel data is captured by land-based and satellite receivers, and it includes the position of the vessel. The position 
is  then  cross-referenced  with  the  location  of  seaports  to  produce  port  calls  information  and  is  made  commercially 
available by AIS data providers. 

105   The data for 2019 was used given that it was the most recent year for which data is available that had no major disruptions 

in shipping activities (e.g. COVID-19 related disruptions). 

106   This figure corresponds with the median number of port calls made by vessels calling at EU ports in 2019. 

59 

 
 
Figure 3.8 Frequency of port calls for vessels calling in EU ports by vessel flag (2019 data)  

Source: elaboration based on 2019 AIS port calls data. 

The fleet that calls on EU ports with high frequency (above the median) also mostly consists 
of small and medium-sized vessels, while larger vessels tend to call in EU ports less often, 
as can be seen in Figure 3.9. This is possibly a result of small and medium-sized vessels 
focussing more on regional and short distance maritime trade (i.e. short-sea shipping), while 
the larger vessels are used more efficiently for transport over long distances and across 
oceans (i.e. deep-sea shipping),107 which in turn means that the voyages of large and very 
large  vessels  take  longer  and  thus  constrains  how  often  these  vessels  can  travel  to  EU 
ports. 

Figure 3.9 Frequency of port calls for vessels calling in EU ports by vessel size (2019 data)  

Source: elaboration based on 2019 AIS port calls data. 

The  Commission’s  EU  Reference  Scenario  contains  projections  for  port  calls  in  the  EU, 
including the impact of the COVID-19 pandemic. EU port calls in 2023 are expected to have 
largely recovered to 2019 levels after the COVID-19 pandemic,108 and they are expected to 
grow  around  13%  by  2030  and  34%  in  2055  compared  to  current  levels.  While  we  can 
expect increased activity in EU ports in the future, in the absence of detailed projections, it 
is  assumed  that  the  trends  regarding the  distribution  of  port calls  and their  frequency  by 
vessel size and flag will remain comparable to the data shown in this section, and as such 

107   ECSA (2016). Short Sea Shipping: The potential yet to be unleashed. Available here. 
108   The EU Reference Scenario provides figures in intervals of 5 years. For intermediate years such as 2023 the figures 

have been interpolated between the provided values. 

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are projected in the baseline. Estimates for the number of port calls over time are presented 
in Table 3.4. 

Table 3.4 Estimates for the number of port calls in EU ports over time 

2019 
1,354,232 

2020 
1,106,618 

2023 
1,271,903 

2030 
1,432,488 

2050 
1,700,229 

2055109 
1,700,229 

Source: elaboration of the authors based on AIS data and EU Reference Scenario. 

3.5  Preliminary considerations on the impact of the ratification of the Hong 
Kong Convention in the baseline (absence of a financial instrument)  

In addition to the trends in shipping and recycling, it is also important to note  trends and 
developments on the recycling industry. In this regard, the HKC comes into play as it relies 
on  a  system  of  surveys  and  certificates  for  vessels  and  authorisations for  ship recycling 
facilities  granted  by  the  competent  authorities  of  the  recycling  states  to  ensure  that  a 
minimum set of standards is met when recycling an end-of-life vessel. The ratification of the 
HKC represents a step towards safer and more environmentally sound working practices, 
although it does not explicitly address the ‘beaching’ method which is the main dismantling 
method utilised in recycling facilities located in South Asia. 

Still, the increased standards from the HKC, compared to the current situation, would mean 
that  there  are  some  benefits  that  can  be  obtained  even  in  the  absence  of  a  financial 
instrument, in the same areas that the financial instrument would aim to tackle, as well as 
some increased costs for compliance for HKC approved facilities which would be expected 
to reflect on the prices offered by these facilities. In practice, this means that the financial 
instrument’s additional benefit on these areas would be reduced proportionally to the benefit 
achieved by the  HKC  directly,  as  well  as  the  difference in the  prices offered  by yards in 
South Asia and Europe. As such, it is important to consider these expected changes, and 
benefits, originating from the HKC to calibrate the baseline. 

However, given the short time that elapsed since the ratification conditions for the entry into 
force  of  the  HKC  were  met  and  influence  of  other  multiple  external  factors,  quantitative 
analyses could not be elaborated in relation to it for this study. Some qualitative analysis 
instead allows for the highlighting of potential impacts that might stem from it, as well as the 
stakeholders that are likely to be affected.110  

Firstly, the ratification of the HKC is not expected to produce significant effects on the future 
development  of  the  size  and  composition  of  the  fleet,  on  the  capacity  of  the  recycling 
facilities to recycle end-of-life vessels on a global level or on the choice of the destination 
for  recycling  EU  flagged  vessels  since  the  EU  legislation  remains  unchanged  in  the 
baseline.111 

Instead,  the  most  important  effect  originating  from  the  ratification  of  the  HKC  should  be 
related to the improvement of the recycling facilities that are no yet certified “HKC compliant” 
and which are expected to be upgraded to meet the requirements.112 Substandard recycling 
facilities  in  States  that  are  party  to  the  HKC  are  required  to  prepare  the  necessary 

109   The EU Reference Scenario outputs made available to the consortium only contains results until 2050. For 2055 it has 

been assumed that port calls stay at the same level as 2050. 

110   A quantitative analysis on the ratification of the HKC in the absence of a financial instrument being implemented should 
still be recommended in case of a future impact assessment concerning the revision of the SRR, including information 
on the characteristics of HKC authorised facilities in South Asia, and the rates offered by them. It is worth noting that two 
recycling facilities in the region that are close to SRR compliance have preliminarily claimed that the difference on the 
rates offered by them and (local) HKC certified facilities is around $ 100 per LDT (HKC compliant facilities offering higher 
rates), which could become even larger with full SRR compliance. 

111   Since the EU SRR and WSR continue to be applicable; as well as the re-flagging. 
112   See Chapter 3 of the Annex to the HKC. 

61 

 
 
 
 
investments, and be compliant presumably by the time the HKC enters into force in 2025 to 
receive authorisation to operate from the State party to the HKC. Although it is difficult to 
assess whether this timeline for compliance will be achieved. It is also worth noting that (i) 
some  administrative  costs  will  arise  in  relation  to  the  new  obligations  and  (ii)  the  costs 
necessary to meet the requirements of the HKC will be passed on to the shipowners at the 
time of recycling an end-of-life vessel,113 eventually reducing the demolition rates that can 
be offered to a shipowner and the expected revenues. To estimate at this stage (a priori) 
the effect of the entry into force of the HKC on the prices offered to shipowners a quantitative 
analysis of the investment and operational cost that could be borne by the recycling facilities 
should  be  determined.  This  would  need  to  be  based  on  bespoke  analysis  of  the  current 
situation  (which  was  not  possible  to  cover  in  this  study),  also  taking  into  account  other 
market conditions that determine the level of the demolition rates offered.114 Lastly, it is also 
worth noting that the HKC compliance certification of recycling facilities is currently done by 
classification societies, which does not necessarily reflect an active process of compliance 
monitoring (and thus it is unclear if this certification reflects actual compliance or merely the 
capability  of  being  compliant),  nor  is  it  entirely  clear  that  this  certification  will  satisfy  the 
requirements of the HKC. 

For  classification  societies,  the  entry  into  force  of  the  HKC  will  provide  increased 
opportunities,  notably  for  (i)  establishing  the  IHM115  for  certifying  vessels  (as  recognised 
organisations on behalf of flag States) or (ii) recycling facilities (as recognised organisations 
on behalf of recycling states or if asked by the facilities themselves on a voluntary basis). 
Specifically, on the establishment of the IHM, the effect of the entry into force should be 
expected by 2030, as the deadline for compliance with the IHM has been set 5 years after 
entry into force of the HKC for the existing vessels. This requirement for an IHM is a first 
and  necessary  step  towards  the  proper  handling  of  hazardous  materials  on  recycling 
facilities and is expected to enable a positive social and environmental impact. 

Further on the social impacts, the entry into force of the HKC will result in the implementation 
of  health  and  safety  standards,  monitoring  and  reporting,  a  situation  that  makes  it  is 
foreseeable that  the  number  of  both  injuries  and  fatal  accidents  could be  reduced  when 
compared  with the  current  situation,  even  in the absence of  a financial  instrument  being 
implemented. However, the social impacts stemming from the ratification of the HKC cannot 
be quantified at this stage. 

In relation to the environmental impacts, it is worth noting that the HKC is applicable to the 
ship recycling facilities and is expected to have a positive impact through its standards and 
procedures aimed to protect the environment. It should however be noted that HKC contains 
an obligation for recycling facilities to identify those to which hazardous waste will be sent 
for treatment. However, it does not ensure that the waste will actually be treated by these 
downstream waste management facilities in an environmentally sound and safe manner. 

113   For illustrative purposes, some initial estimates shared by some facilities in South Asia suggest that the investments 
needed to become HKC certified are in the order of € 1.2 to € 2.0 million, while the investments needed to make a facility 
SRR compliant are between € 3.5 to € 8 million. These estimates however have not been verified by the study team, due 
to them only being provided in the later stages of the study. 

114   The  2010  study  from  the  World  Bank  about  ship  recycling  in  Pakistan  and  Bangladesh  listed  and  quantified  the 
investments  needed  to  ensure compliance  with  the  HKC.  The  investments  were  identified  in  relation  to setting  up  of 
hazardous waste treatment facilities, waste reception facilities in ports, access roads and infrastructure, of developing 
laboratory  facilities  for  environmental  monitoring,  technical  training  programmes  for  occupational  safety  and  health, 
health care, management of hazardous waste, investment in on-site equipment (weighbridge, impermeable surfaces, 
drainage, hazardous waste storage). See Sarraf, M. et al., 2010. Ship Breaking and Recycling Industry in Bangladesh 
and Pakistan, Report No 58275-SAS: the World Bank. The 2012 impact assessment accompanying the SRR estimated 
that compliance with the HKC would have implied that substandard facilities located in Bangladesh and Pakistan would 
have to invest around $ 10 per LDT in 10 years after the ratification of the HKC. The impact assessment concluded that 
the costs linked with the HKC’s implementation over the lifetime of the vessel would have been negligible. See European 
Commission  (2012),  Commission  Staff  Impact  Assessment  Accompanying  the  document  for  a  Regulation  of  the 
European Parliament and of the Council on ship recycling. Brussels, 23.2.2012 SWD(2012) 47 final. 

115   See Article 8 of the HKC on the inspection of vessels. 

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The entry into force of the HKC is not expected to have an impact on the level of EU/EEA 
Member State enforcement of the SRR.  

63 

 
4  Assessment of the impacts 

4.1 

Introduction 

Despite the SRR being in force, vessels flying EU flags are often reflagged at the end of 
their  economic  life  in order  to  be  recycled  at  a  non-EU-listed  recycling  facility.  The main 
determinant  of  this  decision  is  the  price  gap  of  recycled  steel  between  the  regions  as 
presented in Chapter 1. Between 2014 and 2023, the price offered by the recycling facilities 
in South Asia was 30% to 90% higher than the price offered by recycling facilities located 
in Türkiye, with an even bigger price difference for recycling facilities located in the EU.  

The  current  SRR  is  an  important  step  towards  the  establishment  of  safe  and 
environmentally  sound  recycling  practices.  However,  the  costs  of  changing  the  flag  of  a 
vessel to a flag of convenience are low compared to the expected loss of revenue for ship 
owners  resulting  from  compliance  with  the  stricter  recycling  rules  under  the  SRR.116 
Anticipating  this  problem,  the  SRR  required  the  Commission  to  assess  the  feasibility  of 
establishing a financial mechanism applicable to all vessels calling at a port or anchorage 
of  a  Member  State.  This  instrument  would  provide  an  incentive  that  might  prevent  the 
practice of changing the flag flown by the vessels and circumvent the provisions of the SRR, 
by covering the recycling price gap within the economic life of the vessel. 

The  overall  objective  of  the  possible  financial  instrument  to  facilitate  safe  and 
environmentally sound ship recycling is, in short, to change undesired behaviours of ship 
owners. The aim is to induce a change in ship owners’ conduct towards the recycling  of 
their vessels in compliance with the SRR and to avoid re-flagging behaviour to circumvent 
the SRR. In order to achieve the desired behavioural change in ship owners who recycle 
their vessels in non-EU listed facilities and re-flag their vessels at the end of life, a financial 
incentive needs to be created which makes it more financially attractive for ship owners to 
comply with the SRR standards for safe and environmentally sound ship recycling.  

This chapter will introduce the safe and environmentally sound recycling prediction model 
that, based on an annual fee through the proposed Ship Recycling Licence (i.e. the SRL, 
see also section 2.3), provides a financial incentive to bridge the recycling price gap within 
the  economic  life  of  the  vessel.  According  to  the  SRR’s  provisions,  EU-flagged  vessels 
above the size of 500 GT would be under this financial instrument’s scope. 

The  safe  and  environmentally  sound  recycling  prediction  model  further  builds  on  the 
baseline projections as presented in the previous chapter and the building blocks that have 
been used will be explained in more detail in the next paragraph. Furthermore, based on 
the  outcomes  of  the  safe  and  environmentally  sound  recycling  prediction  model,  the 
economic, social, and environmental impacts can be assessed based on the ship owners’ 
predicted behavioural change when it comes to taking the recycling decision. 

The impacts that we asses are as follows. 

•  Economic: 

−  Level of the SRL fee; 

116   End-of-life registries such as St Kitts and Nevis, Comoros and Tuvalu compete with each other by offering low-cost “last 
voyage” packages and expressly state that no nationality requirements need to be fulfilled in order to register under their 
flags – not even the setting up of a shell company. The registry of St Vincent and the Grenadines, for instance, offers 
short term registration for $ 0.15 per GT instead of $ 0.60 per GT for normal registration.  Source: NGO Ship Breaking 
Platform, What a difference a flag makes, Why ship owners’ responsibility to ensure sustainable ship recycling needs to 
go beyond flag state jurisdiction, 2015.  

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−  Percentage of the fleet recycled in a safe and environmentally sound manner; 

− 

Impact of accumulated ship recycling revenue on vessels choosing safe and 
environmentally sound recycling method;  

−  Volume of vessels recycled in a safe and environmentally sound manner over 

time;  

−  Ship Recycling Fund cashflow;  

− 

Impacts on the position of EU-listed recycling facilities; 

−  The impact of the SRL on the operational costs of the vessels; 

−  The costs of verification of safe and environmentally sound recycling. 

•  Social: 

−  Expected variation of accidents at recycling facilities induced by the SRL. 

•  Environmental: 

−  Expected (minimum) environmental effect of environmentally sound recycling. 

To assess the impacts of the financial instrument in the form of the SRL, a dedicated model 
has been designed which allows for an assessment of (i) the funds required for safe and 
environmentally  sound  recycling,  (ii)  impact  on  premiums/licence  costs,  (iii)  the  resulting 
recycling behaviour of ship owners, and (iv) the development of the fund’s size over time. 
The main assumptions and variables of this model will be presented in section 4.2, 4.3, and 
4.4. In sections 4.5, 4.6, and 4.7, the economic, social, and environmental impacts will be 
assessed,  building  upon  the  results  of  the  safe  and  environmentally  sound  recycling 
prediction model.  

Figure 4.1 summarises the stepwise process that links the elaboration of the baseline with 
the  prediction  model  for  safe  and  environmentally  sound  recycling  and  the  subsequent 
assessment of economic, social, and environmental impacts. 

Figure 4.1 Stepwise process between the baseline, the safe and sound recycling prediction 
model, and the impacts 

Source: elaboration of the authors. 

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4.2  Elements  of  the  safe  and  environmentally  sound  recycling  prediction 

model 

4.2.1  Building  blocks  of  the safe  and environmentally  sound recycling  prediction 

model 

A key element for the safe and environmentally sound recycling prediction model and the 
assessment  of  the  impacts  is  the  establishment  of  the  baseline.  Primary,  the  baseline 
provides the likely future projections of the size of the current world fleet over the coming 
decades, the characteristics of future port calls and price differences between recycling in 
a sound or unsound manner, which is a building block to assess the behavioural change of 
introducing a financial instrument. Namely, the model has been set up in a way that it follows 
the  baseline  projections  as  described  in  the  previous  chapter.  Secondly,  the  baseline 
projections  provide  the  benchmark  against  which  the  outcomes  of  the  safe  and 
environmentally sound recycling prediction model can be compared. 

For the primary use of the baseline projection, four important building blocks for the model 
are provided. They are as follows. 

•  The projection of the number of vessels in the fleet (i) per vessel type (i.e. bulk carriers, 
container ships, fishing vessels, oil tankers, general cargo, offshore vessels, and other 
types of vessels), per vessel size (i.e. small, medium, large, and very large), (ii) per age 
group (i.e. 0-4 years old, 5-14 years old, 15-24 years old and > 25 years old) and (iii) 
the frequency of the port calls (i.e. low and high); 

• 

• 

• 

the projection of the number of vessels that are predicted to be recycled based on vessel 
type, size, age group, and frequency; 

the  projection  of  the  total  LDT  that  is  recycled  per  vessel  type,  size,  age  group,  and 
frequency; 

the projection of the total GT of the fleet per vessel type, size, age group, and frequency. 

Furthermore, two other key elements are used for the outcomes in the prediction model, 
which are outside of the baseline projections. Firstly,  the difference in the recycling prices 
between the regions where the facilities are located and the vessels’ operational costs. The 
recycling prices have been introduced in chapter 1.2.1 and for the model, a recycling price 
gap of € 370 per LDT is used.  

Desk  research  shows  that  for  the  period  between  2014  and  2023,  the  price  offered  by 
recycling  facilities  located  in  South  Asia,  using  the  ‘beaching’  method,  was  30%  to  90% 
higher  than the  price  offered  by  recycling  facilities  located  in  Türkiye,  using  the  ‘landing’ 
method. The price difference is even bigger for recycling facilities located in the EU, often 
using the ‘alongside’ method. The stakeholders reported a value of about € 100 per LDT in 
the EU,117 namely approximately 30% of the recycling quotation observed in Türkiye and 
approximately 18% of the price offered in South Asia.  

117   See also data reported in (Mosconi & Tola, 2023). The research authors reported the end-of-life value of vessels recycled 
in facilities in the EU as equal to $ 110 for bulk carriers, $ 115 for oil tankers and $ 120 for container ships, respectively. 
Assuming the official exchange rate between $ and € recommended by the European Central Bank for 2023, we found 
the value reported in this research consistent with the value from the field research carried out in the context of this study. 

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The analysis of the prices offered by recycling facilities118 shows an average price of € 470 
in 2024119 for Bangladesh, India, and Pakistan per LDT, resulting in a price gap of € 370 per 
LDT that has to be covered by the financial instrument.120  

The second element (i.e. the operational costs of the vessels) will be used for the outcomes 
of the economic impacts to benchmark the SRL’s fee level against the yearly operational 
costs of the vessel. Table 4.1 presents the operational cost of three vessel types based on 
the  literature  review.  On  average,  the  tankers  have  the  highest  yearly  operational  cost, 
followed by bulk carriers and container ships.  

Table 4.1 Operational costs per vessel type and size 

Vessel type 

Vessel size 

Operational cost  €         
per year) 

Container ship 

Bulk carriers 

Tankers 

Feeder (100-1,000 TEU)121 
Medium (1,000-2,000 TEU) 
Main liner (2,000-6,000 TEU) 
Panamax 
Handy-size 
Cape-size 
Handymax 
Product 
Handysize Product 
Panamax 
Aframax 
Suezmax 
VLCC 

1.7 
1.7 
2.3 
2.3 
2.1 
2.7 
2.3 
2.8 
2.8 
3.0 
3.0 
3.4 
3.8 

Source: R. Greiner and M, Stephens, Ship operating costs: Current and future trends, December 2017. 

4.2.2 

Impacts of introducing a licence 

Taking the baseline projections into account, the SRL is modelled on a yearly basis for the 
fleet    calling  at  EU  ports  for  each  vessel  type  and  size.  That  is,  the  SRL  fee  and  the 
prediction of the behavioural change have been done at a group level (i.e. per vessel size 
and type, as described in section 4.5.1). 

Figure  4.2  on the  next  page shows  how  the  impacts  originate from  introducing  the  SRL. 
With a SRL being introduced, the ship owner would pay a recurring premium for the vessel, 
of  which  the  fee  is  determined  by  the  needed  funds  to  bridge  the  recycling  price  gap. 
Introducing  the  SRL  entitles  adjustment,  administrative,  and  enforcement  costs  of  the 
entities that are involved in charging and monitoring the applied scheme (see also section 
5.2). Introducing the SRL will ultimately be paid by the ship owner, which in turns lead to 
two possible reactions from ship owners regarding to the cost of the premium: the price of 
the SRL may be included in the maritime transport costs which will increases, and/or, the 
ship owners will reduce their profit to cover the costs of safe and environmentally recycling. 
A significant increase in maritime transport price could consequently have an impact on ship 
owners’  behaviour  in  the  recycling  decision  impacting  the  second-hand  market  (i.e.  ship 
owners can choose to renew their fleet earlier or later based on the maritime transport price) 

118   Obtained via weekly updates of GMS (Leading cash buyer of ships for recycling | GMS Leadership. (gmsinc.net) on the prices of 

dry bulk carriers, tankers and container vessels in $/LDT. 

119   Up until September 1st of 2024.  
120   Becoming compliant to HKC could lead to that the costs necessary to meet the requirements of the HKC will be passed 
on to the shipowners at the time of recycling an end-of-life vessel, eventually reducing the demolition rates that can be 
offered to a shipowner and the expected revenues. In the main report we consider the current price gap of € 370, in 
Annex V two possible scenarios are described for the impacts if the price gap reduces.  

121   TEU is the designation for the dimensions of containers. The abbreviation stands for Twenty-foot Equivalent Unit. 1 TEU 
is a container of 20 feet long, 8'0" wide and usually 8'6" high. In metric terms, a TEU is 6.10 metres long, 2.44 metres 
wide and 2.59 metres high. A 40-foot container is equivalent to 2 TEU. 

67 

 
 
(more elaboration in section 4.5.5) and the market position of EU-listed recycling facilities 
(more elaboration in section 4.5.6). 

Regarding  the  ultimate decision  to  recycle  in  a safe  and environmentally  sound manner, 
two options remain for the ship owners with different impacts. Firstly, a ship owner can opt 
to  recycle  in  a  safe  and  environmentally  sound  manner  at  an  EU  listed  recycling  facility 
because of the financial instrument, which means that, compared to the baseline scenario, 
the impact will be a reduction of the adverse effects of ship recycling, as a vessel would be 
recycled  in  an  EU-listed  recycling  facility  instead  of  a  non-EU  listed  recycling  facility. 
Secondly, despite the financial instrument in place, a ship owner can still opt to recycle in a 
non-EU-listed  recycling  facility.  Should  they  do  so,  the  ship  owner  would  lose  the  funds 
accumulated through the SRL (see also section 5.3). 

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Figure 4.2 Visualisation of the impacts of introducing a financial instrument in the form of a SRL 

Source: elaboration of the authors. 

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4.3  Elements of the safe and sound recycling prediction model 

Taking  into  account  the  projection  of  the  fleet,  we  have  developed  the  safe  and 
environmentally  sound  recycling  prediction  model  to determine  the  expected  outcome  of 
introducing  the  financial  instrument  in  the  form  of  the  SRL.  Before  we  elaborate  on  the 
outcomes of the prediction model, we will introduce the input variables and the main design 
assumptions.  Figure  4.3  shows  an  overview  of  the  inputs  and  outputs  of  the  prediction 
model. 

The main outcome of the prediction model is the estimated number of vessels that will be 
recycled  in  a  safe and  environmentally  sound  manner,  based on the  SRL’s  fee,  and  the 
following individual recycling decision. That means that based on the recycling price gap 
per category, a vessel will be recycled in a safe and environmentally sound manner when, 
over  the  lifetime  of  the  vessel,  enough  funds  have  been  gathered  to  bridge  the  gap  in 
recycling prices.  

The first main element that has to be modelled is the required licence fee per vessel type 
and size to bridge the gap between the scrapping cost price in EU-listed recycling facilities 
and non-EU listed recycling facilities (i.e. the standard gap of € 370 per LDT used for all 
vessels). If the accumulated funds over the lifetime, by the time of recycling, is sufficient to 
bridge  this  price  gap,  the  ship  owner  will,  based  on  the  individual  vessel  decision,  be 
indifferent about whether to choose recycling at an EU-listed recycling facility or a non-EU 
listed recycling facility, and is assumed to make the individual recycling decision to recycle 
in an EU-listed recycling facility.  

The licence fee122 has been determined by the projections of the current world fleet’s size 
over the coming decades, the characteristics of future port calls, and the price gap between 
recycling  in  a  sound  or  unsound  manner.  The  main  input  variables  that  determine  the 
required licence fee are the average GT per vessel type and size category that originates 
from the baseline projections.123 It is the average GT per vessel type and size in combination 
with the recycling price gap and the payment duration that determines the required amount 
per vessel that has to be generated over the lifetime of the vessel.  

By combining the recycling price gap with the average GT per vessel category, it is possible 
to determine the total required amount of capital per vessel size that has to be covered in 
the considered period; in other words, the yearly funds required to overcome the revenue 
gap stemming from safe and environmentally sound recycling. 

The gathered information allows for the optimised calculation of the necessary licence fee 
to satisfy the following design conditions:  

•  A  vessel  (in  any  size  class  and  in  at  least  one  ship  type  category),  with  a  typical 
frequency of EU port calls (in its size class) to be able to collect enough funds over a 
period of 20 years to cover the revenue gap when recycling in EU listed facilities; 

122   The fee that is paid by the ship owner under the SRL categorised on the size category of the vessel (i.e. small, medium, 

123  

large, and very large). 
In the prediction model itself the average LDT is used instead of the average GT, which is determined via conversion 
factors.  

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•  The design of the financial instrument allows for vessels visiting EU ports less frequently 

to choose a monthly licence too.   

Finally, to complete the analysis of the SRL, a charge needs to be added to compensate 
the administrative costs for issuing the licence, plus the (net) return on capital accumulated 
in the fund. The following key figures have been taken from the previous study on a potential 
financial instrument (Ecorys, DNV-GL and Erasmus School of Law, 2016):  

•  Administrative costs of annual licence for vessels firstly equal to 0.5%; 

•  Administrative costs for a monthly licence equal to 5%;124 

•  Return on capital (the interest gathered by the ship’s recycling fund) equal to 1.5% in 

real terms. 

The licence fee is collected at the end of the specific period (i.e. at the end of the month for 
monthly fees and at the end of the year for annual fees). The actual validity of the licence 
can be differentiated, offering the ship owners the choice to apply for a SRL with different 
durations (e.g. a month or a year) and adjust the money paid accordingly.125 

With  the  licence  fee  and  the  initial  age  category  in  the  fleet,  the  likelihood  of  safe  and 
environmentally sound recycling can be determined per vessel category. Lastly, based on 
the  individual  vessel  decision  and  the  likelihood  of  sound  recycling,  as  outcomes,  the 
prediction model generates the aggregate fund position, the total volume of LDT recycled, 
and  the  number  of  SRLs.  Those  outcomes  are  used  in  assessing  the  social  and 
environmental impacts. 

We  will  elaborate  on  the  prediction  model’s  different  elements  in more  detail  in  the  next 
sections. 

124   We assume that the administrative effort for processing monthly licences will not significantly differ from that of yearly 
licences, which means that the relative cost increases by a factor of 12. However, users purchasing a monthly licence 
will not do so 12 times per year. 
In a parallel with the road sector, it would be like buying a time-based permission to use a motorway, with annual stickers 
or stickers that are only valid for a week. 

125  

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Figure 4.3 Visualisation of the safe and environmentally sound recycling prediction model 

Source: elaboration of the authors. 

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4.4  The  design  assumptions  of  the  safe  and  sound  recycling  prediction 

model 

This  section  elaborates  in  detail  the  design  assumptions  of  the  prediction  model  as 
displayed in Figure 4.3.  

4.4.1  Basic design assumption  

The prediction model and the results that will be presented in subsequent sections build 
under design assumptions. At the end of the subchapter of the economic impacts, we will 
show the results when some of these design assumptions are changed within the model 
and how the changes result in terms of vessels opting for safe and environmentally sound 
recycling,  the  LDT  soundly  recycled  and  the  cumulative  size  of  the  fund.  Table  4.2 
summarises the basic design assumptions and the variable used.  

Table 4.2 Basic design assumptions and variables used 

Design assumption 
Payment duration 
Financial accumulation period 
Administrative costs 
Return on capital 
Percentage of the recycling price gap that needs to be covered 
Decision to opt for safe and sound recycling 
Extension to vessels under 500 GT 

Source: elaboration of the authors. 

Variable used 
15 years 
20 years 
0.5% 
1.5% 
100% 
90% 
No 

4.4.2  Fee of licence 

As indicated above, the licence fee is a key element of the prediction model. In order to 
achieve  the  required  aims,  we  have  used  various  design  conditions  to find  the  optimum 
licence fee level.126 

The main determinant factors for the fee of the SRL are as follows: 

•  The period in which the accumulated capital is gathered. We assume a 20-year period 
for accumulating the capital necessary to ensure that a sufficiently large share of the 
fleet is able to accumulate the required basic amount. Furthermore, it is assumed that 
payments (i.e. SRL fees) are paid over this entire period of 15 years; 

•  The  recycling  price  gap  between  an  EU-listed  recycling  facility  and  a  non-EU-listed 
recycling  facility  per  LDT.  Figure  1.4  on  the  trend  of  the  recycling  prices  in  facilities 
located in South Asia has been used to determine the recycling price gap that needs to 
be bridged by the SRL (i.e. € 370 per LDT); 

126   The level of licence fee that is needed for each type of vessel within each size category to cover the price gap. 

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•  The characteristics of the fleet for the period 2030-2055. The characteristics of the fleet, 
mainly  the  average  GT  per  vessel  type  for  each  size  category  also  determines  the 
required amount of capital that is needed to recycle in a safe and environmentally sound 
manner.  

Based  on  the  above  data  what  is  considered  as  the  revenue  gap  between  sound  and 
unsound recycling for a particular vessel type and vessel size is determined, which forms 
the basis for the total necessary amount to accumulate in order to recycle in a safe and 
environmentally sound manner.  

The licence fee (per year) has then been determined based on the following formulas: 

𝐴𝑐𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑒𝑑 𝑐𝑎𝑝𝑖𝑡𝑎𝑙𝑠ℎ𝑖𝑝 𝑡𝑦𝑝𝑒 𝑎𝑛𝑑 𝑠𝑖𝑧𝑒

𝑡=20

= 𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑎𝑚𝑜𝑢𝑛𝑡 𝑠ℎ𝑖𝑝 𝑡𝑦𝑝𝑒 𝑎𝑛𝑑 𝑠𝑖𝑧𝑒 

Where the required amount is as follows: 

𝑆𝑐𝑟𝑎𝑝𝑝𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 𝑔𝑎𝑝 ∗ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐿𝐷𝑇𝑠ℎ𝑖𝑝 𝑡𝑦𝑝𝑒 𝑎𝑛𝑑 𝑠𝑖𝑧𝑒 

The licence fee is determined by setting the licence at the amount so that the accumulated 
capital  after  20  years  is  100%  of  the  required  amount  to  recycle  in  a  safe  and 
environmentally sound manner.  

The license fee is designed to reach the necessary amount in 20 years (including interest), 
which  is  a  conservative  estimate  as  often  the  vessels  are  recycled  at  a  later  stage.  The 
licence can either permit its holder access to EU ports for a year (annual) or for a month 
(monthly), allowing small businesses with frequent EU port calls (i.e. ≥ 7 per year) the option 
to spread out the licence fees over the year.  The modalities of the payment would actually 
set by the designated European entity. The entity might consider to allow flexibility for the 
payments  and  adjust  the  frequency  of  the  payment  at  the  request  of  the  ship  owner 
depending on the port calls’ frequency and fluctuation of the reference scrapping cost gap. 

As an example, a vessel between 500 DWT and 25,000 DWT (i.e. medium sized category 
whatever the type of vessel) frequently calling at EU ports will have to pay € 108,835 yearly 
fee  (based  on  Table  4.4  plus  0.5%  administrative  costs)  over  20  years  to  bridge  the 
scrapping  cost  gap  for that  vessel.  With  a  frequency  of  EU  port calls  higher than  7 calls 
throughout the year, the ship owner could opt for instalment payments (a monthly fee of € 
9,069 plus 5% administrative costs). 

For a similar vessel calling at EU ports, for example, only 6 months per year, she would 
also have the option of a yearly or monthly fee but the monthly licence fee for this vessel 
will be spread out over 6 months (i.e. € 18,139) to allow to spread the amount per month 
but still reach the necessary accumulated amount to bridge the gap.  

4.4.3 

Individual vessel decision 

With the yearly licence fee and the projection of the fleet, the projection model determines 
the  rational  behaviour  of  ship  owners  per  vessel  type.  For  each  year  of  operation,  the 
individual vessel gathers funds and, with that, a financial accumulation over its lifetime. By 
the time a vessel will be recycled, the model estimates the likelihood of an individual vessel 
being sent for sound recycling as a result of the financial product.127  

127   Paying attention to different sizes, types, age of vessel and frequency of calls to EU ports. 

75 

 
 
 
4.4.4  Financial accumulation per vessel  

By combining the licence fee for the vessel’s size category and the administrative costs, the 
prediction model calculates the financial accumulation of funds over the vessel’s lifetime. 
The underlying equation of the prediction model is as follows. 

𝑓𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑎𝑐𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑜𝑛𝑣𝑒𝑠𝑠𝑒𝑙 𝑡𝑦𝑝𝑒 𝑎𝑛𝑑 𝑠𝑖𝑧𝑒
2030

=   ∑ (𝑎𝑛𝑛𝑢𝑎𝑙 𝑙𝑖𝑐𝑒𝑛𝑐𝑒 𝑐𝑜𝑠𝑡 − 𝑎𝑑𝑚𝑖𝑛 𝑐𝑜𝑠𝑡𝑠) ∗ 𝑅𝑂𝐶

25 𝑦𝑒𝑎𝑟𝑠

where ROC is the Return on Capital. 

4.4.5  Likelihood of sound vessel recycling  

In  order  to  quantify  if  the  financial  instrument  will  work  and  incentivise  a  ship  owner  to 
recycle in a safe and environmentally sound manner, it is assumed as a rule that vessels 
which have built up at least 90% of the required funds for sound recycling will indeed be 
sent for sound recycling.128 This assumption is adjustable to assess the sensitivity of the 
outcome  of  the  prediction  model.  The  results  indicate  the  “success  rate”  level  that  the 
financial  instrument  could  have  in  encouraging  the  ship  owners  to  opt  for  safe  and 
environmentally sound ship recycling on the aggregate level.  

We assume that depending on this level, ship owners may or may not actually opt for sound 
recycling.129 If they have accumulated the full amount, they likely will; if they have hardly 
built up any capital, they will not; in between, a number of vessels will probably still be sent 
for sound recycling – this number is likely to be higher for vessels for which the accumulated 
capital  is  closer  to  the  required  amount  (i.e.  a  small  remaining  price  gap).  Hence,  the 
prediction  model  delivers  an  estimate  of  the  share  of  the  fleet  opting  for  safe  and 
environmentally sound recycling, per year. 

4.5  Economic impacts 

In this section, we present the assessment of the economic impacts that would result from 
a  safe  and  environmentally  sound  recycling  prediction  model.  Table  4.3  presents  the 
detailed overview of the economic impacts and their elements. The first five impacts will be 
described  quantitatively  on  the  basis  of  the  prediction  model,  notably  based  on  the  four 
aspects described above, and the projections elaborated for the baseline. The impacts on 
the position of EU-listed recycling facilities and the second-hand market will be described 
qualitatively. The outcomes of the prediction model, about the number of vessels that would 
be recycled in a sound and environmentally safe manner and the number of SRLs issued, 
will  be  used  in  subsequent  elaborations  in  chapter  5  to  estimate the  costs  related to the 
management of the licence by a designated European entity.  

128  

129  

In the survey questionnaire, we have asked whether the financial instrument, in the form of a SRL, should completely 
cover the revenue gap between sound and unsound recycling for a certain type of vessels. Of the stakeholders that are 
in favour of the SRL most indicate that it should completely cover the price gap.  
It is worth observing that there exists a possibility that ship owners may decide to delay the ship recycling until they have 
saved enough to offset the costs of recycling at EU-listed recycling facilities. 

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Table 4.3 Economic impacts 

Economic impact 

Element 

Level of Ship Recycling 
Licence fee 
Percentage and volume 
recycled in a safe and sound 
manner (fund expenditures) 
Cashflow of the Ship 
Recycling Fund 

Licence costs vs shipping 
costs 
Impacts on competitiveness 
for  EU-listed recycling 
facilities 
Impact on the second-hand 
market 

Behavioural change 
Adjustment costs 

Administrative costs 

Enforcement costs 

Source: elaboration of the authors. 

The amount needed to cover safe and sound ship recycling 
practices, per vessel type and size 
Proportion of the fleet that at the end of the expected lifecycle 
(and calling at EU ports) may accumulate sufficient funds to 
choose safe and sound ship recycling 
Evolution of the cash flow in  taking into account the flow or 
revenues and expenses (i.e. sizable fund that could be forfeited 
by ship owners) 
Ratio of licence costs over operating costs with respect to the 
vessel size 
The evolution of the competitive advantage of EU-listed 
recycling facilities vis-à-vis other ship recycling facilities 

How the reduction of revenue for the ship owners will differ 
depending on the age of the sale as well as the intended 
operating profile of the buyer 
Change for specific vessel of whether it calls to EU or not 
Incremental costs for investments, material, and equipment, as 
well as costs of additional personnel for performing the 
additional functions, which are aimed at by establishing the ship 
recycling licence 
Costs associated to the assessment of the requests for a SRL, 
collecting the related contribution and fees and 
monitoring/modelling the financial instrument (see also section 
5.2.2) 
Cost of verification if a vessel hold the licence when calling at 
EU ports and, at the time of claiming accumulated funds back, if 
the vessel was recycled in an EU-listed facility 

4.5.1  Level of the Ship Recycling Licence fee 

The level of the licence fee is an average of the optimised licence cost per vessel type and 
size based on the equilibrium formula above.130 Resulting figures for the four vessel size 
categories are presented in Table 4.4.  

Table 4.4 Amounts to accumulate per vessel size and the annual licence fee 

Vessel size category131  Total amount to accumulate over the economic 

                    € 132 

Small 
Medium 
Large 
Very large 

Minimum 

€ 43,311 
€ 421,565 
€ 4,330,840 
€ 9,594,552 

Average 

€ 61,987 
€ 1,316,705 
€ 5,315,778 
€ 12,144,454 

Maximum 

€ 90,512 
€ 2,343,508 
€ 7,003,684 
€ 17,870,372 

License fee 
 €          133 

Not applicable 
€ 108,835 
€ 307,325  
€ 756,215  

130   For the average licence cost per category, two exceptions have been made. The offshore vessels in both the large and 
the very large category are considered as an outlier in terms of the average GT of the fleet in the category. The average 
GT of the offshore vessels are respectively 3.4 and 2.7 times the average of the other ships in the size category and only 
consists of a few ships that dictates the average.  

131   Vessel size categories should  be  read  as  follows:  small  0-500  GT  (not  in  the scope), medium  500-25,000  GT,  large 

25,000-60,000 GT and very large if larger than 60,000 GT. 

132   The total amount to accumulate over the economic life of the vessel (€) shows the range of the amount to be accumulated 
to cover the price gap for the size category, based on amount to be accumulated of each type of vessel within the size 
category.   

133   The license fee € annual is the result of optimizing the license fee for each vessel type within the size category. This also 
takes into account the interest and administrative costs. Therefore, it deviates from the displayed average amount to 
accumulate over the lifetime of the vessel.  

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Source: elaboration of the authors. 

The table shows per size category how much accumulated funds have to be obtained to 
bridge the recycling cost between EU listed and non-EU listed recycling facilities during the 
lifetime  of  the  vessel  in  that  category.  It  is  clear  that  when  the  size  increases,  the  total 
amount that needs to be accumulated increases, as there is more volume of recycled steel 
on board of the vessel.  

For the licence fee scheme, we have opted for a differentiation between the licence fee on 
the basis of the vessel size category only, instead of a licence fee differentiation between 
vessel size and vessel type. The latter would mean 22 different licence fees for the licence 
scheme, which would therefore be more difficult to monitor in practice.134 As such, for the 
licence fee, we opt for a licence fee per vessel size category, which results in three unique 
licence  fees135  to  assess  the  potential  impacts.  These  licence  fees  originate  from  the 
optimised required licence fee per vessel type within the specific category.  

The estimated level of the licence fee varies, on annual basis, between € 108.835 for the 
smallest vessel category and € 756.215 for the largest category. The basis of the fee per 
category is the optimised fee that is needed to bridge the gap per vessel type within the 
time period to accumulate the funds (i.e. 20 years). Then, the licence fee per size category 
is  the  average  of  the  optimised  licence  fees  per  vessel  type  in  the  category  (excluding 
outliers,  see  also footnote  135).  That  means  that  for  the  vessel  types,  the  licence fee  is 
generic and either too low or too high based on the characteristics of the fleet within the 
category.  

Table 4.5 shows the optimised licence fee in detail, based on the design assumptions per 
vessel type and size, in order to accumulate enough funds over the economic lifetime of the 
vessel (in the fourth column from the left) and the (annual) licence fee used for the financial 
instrument (in the last column on the right hand side). Table 4.5 also shows that the average 
licence  fee  is  insufficient  for  some  vessel  types  and  overly  excessive  for  others.  That 
situation results in a difference in the expected percentage of the fleet per vessel type that 
would opt for safe and environmentally sound recycling.  

For example, a container ship of medium size has to accumulate almost € 2.2 million over 
the assumed economic life of the vessel (i.e. 20 years) which would result in a yearly fee of 
€ 137,080,  while the yearly fee for this  category  is  € 108,835,  resulting  in  that container 
ships are less likely to cover the gap. On the other hand, for medium sized general cargo 
vessels, the optimised fee is € 100,182, so the yearly fee is overly excessive, resulting in 
that more vessels of this type will accumulate enough funds and therefore will be recycled 
in a safe and sound manner (see for example the figures in Table 4.6). 

Table 4.5 Amounts to accumulate and costs of the licence per vessel type 

Vessel size 
category 

Vessel type 

Small 

Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 

Total amount to 
accumulate 
over economic 
life of the 
vessel 
Not applicable 
Not applicable 
€ 67,201  
€ 43,311  
€ 52,139  

             €  
(optimized per 
vessel) 

             €  
(annual) 

Not applicable 
Not applicable 
€ 3,169  
€ 2,042  
€ 2,458  

Not applicable 
Not applicable 
Not applicable 
Not applicable 
Not applicable 

134   When implementing the SRL when the size of the vessel (i.e. GT or LDT) is known, it is manageable to set the SRL on 
the basis of the actual size of the vessel in its category, making the SRL closer to the reality of the vessel owner. From 
the model in this study the optimum fee to cover the recycling gap, based on the design assumptions is € 23 per LDT for 
small, large and very large vessels for each vessel type and € 33 per LDT for medium vessels. 

135   The smallest category is under 500 GT, which is not in the scope of the SRR.  

78 

 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Vessel size 
category 

Vessel type 

Medium 

Large 

Very large 

Offshore vessels 
Other types of ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of ships 

Source: elaboration of the authors. 

Total amount to 
accumulate 
over economic 
life of the 
vessel 
€ 90,512  
€ 56,772  
€ 2,343,508  
€ 2,220,487  
€ 421,565  
€ 1,466,652  
€ 1,121,886  
€ 974,013  
€ 668,826  
€ 4,330,840  
€ 5,243,730  
€ -  
€ 4,432,655  
€ 5,960,652  
€ 7,003,684  
€ 4,923,110  
€ 9,643,365  
€ 17,870,372  
€ -  
€ 13,545,277  
€ 10,594,202  
€ 11,618,955  
€ 9,594,552  

             €  
(optimized per 
vessel) 

             €  
(annual) 

€ 4,270  
€ 2,677  
€ 209,270  
€ 137,080  
€ 37,645  
€ 130,969  
€ 100,182  
€ 86,977  
€ 59,725  
 € 267,361  
 € 323,717  

 € 273,646  
 € 367,976  

 € 303,924  
 € 595,325  
 € 1,103,212  

 € 836,206  
 € 654,024  

 € 592,311  

Not applicable 
Not applicable 
€ 108,835 
€ 108,835 
€ 108,835 
€ 108,835 
€ 108,835 
€ 108,835 
€ 108,835 
€ 307,325 
€ 307,325 
€ 307,325 
€ 307,325 
€ 307,325 
€ 307,325 
€ 307,325 
€ 756,215  
€ 756,215  
€ 756,215  
€ 756,215  
€ 756,215  
€ 756,215  
€ 756,215  

4.5.2  Percentage of the fleet recycled in a safe and environmentally sound manner 

This section presents the estimated number of vessels that would be recycled in a safe and 
environmentally  sound  manner  over  time,  given  the  design  assumption of  the  prediction 
model. During the initial years of the SRL’s implementation, only a minor fraction of the fleet 
will  opt  for  safe  and  environmentally  sound  recycling  as  insufficient  funds  would  be 
accumulated  to  cover  the  recycling  price  gap.  After  around  15  years  since  the  SRL’s 
introduction, when most of the vessel types will have accumulated sufficient funds, a big 
increase in the percentage of the fleet opting for safe and environmentally sound recycling 
may be expected.  

Figure  4.4  shows  the  development  of  the  percentage  of  the  fleet  that  is  expected  to  be 
recycled in a safe and environmentally sound manner, out of the total number of the vessels 
that will be recycled in a given year.136 For example, in 2045 (i.e. 15 years after introducing 
the SRL), because of the financial instrument, the model predicts that around 82% of the 
fleet will be recycled in a safe and environmentally sound manner. When the whole time 
period 2030-2055 is considered, this accumulates to an average of 56% of the entire fleet 
that would be recycled in a safe and environmentally sound manner.137  

136   Currently, despite the price cap there are ships already being recycled in EU-listed recycling facilities due to reasons 

other than price. Our model does not take that into consideration. 

137   This percentage is the total amount of the fleet that will recycle in a safe and sound manner divided by the total amount 

of the fleet in the period 2030-2055 within the scope of the licence (i.e. EU-flagged and > 500 GT). 

79 

 
 
 
 
 
 
 
 
Figure  4.4  Percentage  of  fleet  opting  for  safe  and  environmentally  sound  recycling  (2030-
2055) 

Source: elaboration of the authors. 

The percentage of the fleet that will be recycled in a safe and environmentally sound manner 
differs by vessel type as, based on the design assumptions and the SRL cost per category, 
some types of vessels will accumulate sufficient funds at an earlier stage. Table 4.6 shows 
that by 2045 the majority of vessel types would be recycled in a safe and environmentally 
sound manner. In 2055, the model predicts all the vessels would be recycled in a safe and 
environmentally sound manner. The column of the table on the right hand side shows the 
average percentage that would be recycled in a safe and environmentally sound manner 
over the period 2030-2055.138 

Table 4.6 Percentage of fleet opting for safe and environmentally sound recycling, by vessel 
type 

Vessel type 

Recycled in a safe and sound manner at 
year 
in 2045 

in 2055 

Average percentage 
recycled in a safe and 
sound manner 2030-
2055 

General cargo 
Container ships 
Bulk carriers 
Oil tankers 
Other types of vessels 
Fishing vessels 
Offshore vessels 

Source: elaboration of the authors. 

100% 
40% 
50% 
100% 
100% 
100% 
100% 

100% 
100% 
100% 
100% 
100% 
100% 
100% 

57% 
40% 
49% 
54% 
67% 
88% 
72% 

The differences between the categories arise because of the distribution within the vessel 
size category in respect to the average that is used for the licence fee.139 If we look at the 
size category, as shown in Table 4.7, then in 2045, only the large category will be recycled 
in a safe and environmentally sound manner to a smaller extent compared with the other 

138   This percentage is the total amount of the fleet that will recycle in a safe and environmentally sound manner divided by 
the total amount of the recycled fleet in the period 2030-2055 within the scope of the licence (i.e. EU-flagged and > 500 
GT) for the respective category. 
In the medium size category, the deviation from the average fee is between -66% and +89%, for the large size category 
the deviation is between -13% and +20% and for the very large category between -22% and +46%. The deviations are 
provided in relation to the estimated average fee level. 

139  

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

categories (i.e. 43% compared with 77% and 50%, respectively). In 2055, all size categories 
will be recycled in a safe and environmentally sound manner. 

Table  4.7  Percentage  of  fleet  opting  for  safe  and  environmentally  sound  recycling,  by  size 
category 

Vessel size 

Recycled in a safe and sound manner 
In 2045 

In 2055 

Average percentage 
recycled in a safe and 
sound manner 2030-
2055 

Small 
Medium 
Large  
Very large 

Source: elaboration of the authors. 

Not applicable 
77% 
100% 
75% 

Not applicable 
100% 
100% 
100% 

Not applicable 
65% 
52% 
48% 

4.5.3  Volume of vessels recycled in a safe and sound manner over time  

Building on the previous analysis, it is elaborated on how individual ship owner behaviour 
will develop over time. Typically, as the accumulation of capital takes time, the effectiveness 
of  the  mechanism  in  terms  of  the  volume  of  safe  and  environmentally  sound  recycling 
achieved also evolves over time. The safe and environmentally sound recycling prediction 
model is used to estimate the vessels’ volume, measured in total LDT opting for safe and 
environmentally sound recycling as a result of the introduction of the licence, over a period 
of 25 years. This is the expected percentage of the recycled number of vessels in a given 
year per vessel type, multiplied by the projection of the total LDT that will be recycled until 
2055 per vessel type.140  

Figure 4.5 shows the results of the prediction model. Compared to the percentage of the 
fleet that will be recycled in the period from 2030 to 2055, for the LDT, there is a delayed 
effect  as  the  model  predicts  that  the  largest  vessels  would  be  recycled  in  a  safe  and 
environmentally sound manner at a later stage than the smaller ones. 

Figure 4.5 Volume of vessels opting for safe and sound recycling over time (LDT million) 

Source: elaboration of the authors. 

140   The projection of the total LDT recycled in the next 25 years originates from the baseline projections as described in 

chapter 3.  

81 

 
 
 
 
4.5.4  Aggregate fund position and cashflow of the Ship Recycling Fund  

Using the modelling implemented on ship owners’ behaviour and the financial accumulation 
of  the  SRL  for  each  of  the  vessel  types,  it  is  expected  that  some  27,800  SRLs  will  be 
requested per year. The number of SRLs is also based on the number of unique vessels 
that are expected to call at EU ports. 

With the information about the change in recycling behaviour for ship owners (i.e. whether 
a vessel will be recycled safely and in an environmentally sound manner), the prediction 
model also considers the cash flow implications for the recycling fund, taking into account 
both  the  revenue  streams  (from  SRL  payments)  and  cash  expenses  (when  vessels  are 
recycled in a safe and sound way and funds are withdrawn). To indicate the full operational 
nature of the proposed financial instrument, the prediction model considers the fund as a 
whole. Given that the revenues from the collection of licences and the payments from the 
funds (i.e. the expenses) when vessels are recycled in a sound manner will not always be 
equal, it is important to calculate the cash flow and the overall financial position of the fund 
until 2055. 

Fund revenues  

From the calculation of each vessel’s annual licence cost, the fund’s revenue is calculated 
as the sum of those contributions each year, and the return on capital realised. The annual 
licence cost takes into consideration earmarked interest of the annual fee paid per vessel.  

Fund expenses  

The fund’s  expenses  will  consist  of  (i)  administrative  costs  on  an  annual  basis  (financed 
from the  SRL fees  paid and from  which  a percentage is  deducted)  and (ii)  annual  funds 
released for vessels that have been recycled in a safe and environmentally sound manner.  

In  practice,  the  prediction  model  calculates  the  number  of  vessels  which  are  ready  for 
recycling  within  the  categories  each  year,  under  the  condition  they  have  accumulated 
enough  financial  capital  to  incentivise  the  ship  owners  to  recycle  them  in  a  safe  and 
environmentally sound manner. The incentive originates from the likelihood of sound ship 
recycling  as  displayed  above.  The  prediction  model  also  incorporates  the  fact  that  the 
vessels  that  have  not  accumulated  enough  capital  will  not  make  use  of  it  as  they  are 
recycled at substandard facilities. This will create excess funds (in particular, in the early 
stages of the fund), which can be used for other purposes related to the promotion of safe 
and environmentally sound recycling. We elaborated on the possible options for the forfeited 
funds in more detail in section 5.3.  

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Figure  4.6  The  fund  expenditure  of  vessels  opting  for  safe  and  sound  recycling  over  time 
(million) 

Source: elaboration of the authors. 

Net fund position  

By analysing the cash-flow of the fund, the prediction model will also be used to calculate 
the fund’s net position over time (i.e. deficit or reserves). This primarily indicates whether 
the fund is financially self-sustainable and what could be the size of reserves available for 
other activities.  

While it takes time to accumulate sufficient funds to fully cover the recycling price gap, some 
vessels  are  expected  to  be  recycled  in  safe  and  environmentally  sound  manner,  as  the 
accumulated  funds  up  to  that  point  can  incentivise  the  ship  owner  to  opt  for  a  safe  and 
environmentally sound recycling facility. There is a delayed effect to be expected, as shown 
in Figure 4.7, where in the first 10 to 15 years most vessels will not be recycled in a safe 
and  environmentally  sound  manner,  while  all  the  vessels  calling  EU  ports  will  purchase 
SRLs from the very first year, as the instrument will be in place. In other words, the money 
is paid out to the ultimate owners of the same vessel offered for safe and environmentally 
sound recycling at a later stage, but the funds are accumulated from the start. The results 
are that, especially in the early years of the fund, a lot of leftover capital would be acquired 
for  the  SRL,  which  could  be  used  for  other  activities,  such  as  research  to  promote  a 
sustainable shipping sector (see also section 5.3). 

Figure 4.7 Fund revenue and expenditure (left axis) and accumulated size of the fund (right 
axis) 

Source: elaboration of the authors. 

Moreover, for the early years, large parts of the accumulated funds are not released to the 
ultimate ship owners, as they are assumed not to opt for safe and environmentally sound 
recycling and that they would accept forfeiture of their funds, as they have not accumulated 

83 

 
 
sufficient  funds  to  recycle  in  a  safe  and  environmentally  sound  manner.  This  has  some 
cash-flow implications for the fund, which are estimated in the prediction model. The results 
show a diminishing decrease of the fund revenues, as the fleet decreases in size and less 
funds  would  be  accumulated,  although  it  would  remain  relatively  stable  from  2050 
onwards.141 On the other hand, as mentioned earlier, the expenditure of the fund remains 
rather limited for the first 15 years, but then climbs to around € 1.36 billion in 2052, with an 
accumulated size of the fund of around € 13 billion in 2055.  

During  the  intermediate  period,  when  the  revenues  would  be  larger  than  the  expenses, 
there would be a sizable amount of capital that would be forfeited by the ship owners, as a 
result of their choice to opt for unsafe and environmentally unsound recycling, due to not 
having  accumulated  enough  financial  capital.  The  prediction  model  estimates  that  this 
cumulative fund will continue to increase but will also remain relatively stable after 20 years, 
when a big part of the fleet will stop contributing. This capital could be either used elsewhere 
(as the fund allows) or function as a temporary fund to help smooth the transition period 
during the first 20 years. We will discuss the options in more detail in section 5.3. 

As consideration for the period up to about year 15, it would be useful to use the excess 
funds to support a larger part of sound recycling, i.e. for those vessels that have not yet 
accumulated  the  required  amount  due  to  shortage  of  accumulation  time.  Those  are  the 
ageing vessels which are predicted to be recycled within 10 years. 

4.5.5 

Impacts on the competitiveness of EU-listed recycling facilities 

An expected direct implication of the financial instrument is that the competitive advantage 
of EU-listed recycling facilities, vis-à-vis non-EU listed recycling facilities would improve. In 
other words, their current disadvantage would be reduced. It can be noted that under the 
baseline, the entry into force of the HKC is expected to have some positive, though much 
more limited, impact on the future evolution of the actual competitiveness gap, as the HKC 
would reduce the gap due to predicted upgrades of substandard recycling facilities and with 
that  a  lower  price  gap  of  scrap  vessel  per  LDT.  The  results  from  the  prediction  model 
presented above provide an estimate of the number of vessels likely to opt for recycling in 
EU listed yards, thus showing the growth of demand for sound recycling. This demand will 
gradually  increase,  as  the  number  of  vessels  that  have  accumulated  sufficient  funds  to 
cover the price gap rises. 

The  baseline  analysis  showed  that  the  current  capacity  for  EU-flagged  vessels  to  be 
recycled in a safe and environmentally sound manner is sufficient for the demand, but during 
the expected peak in demand for recycling, it could be harder for the ship owner to find, on 
the basis of the present list, a recycling facility that is not fully booked. With the financial 
instrument in place there will be more demand for recycling in a safe and environmentally 
sound manner, but mainly after 15 years after the introduction of the licence (i.e. in 2045), 
when  enough  accumulated  funds  would  be  gathered.  As  shown  earlier  in  Figure  3.7,  we 
estimated  that  the  peak  for  recycling  for  the  EU-flagged  fleet  will  occur  in  2032.  While 
accounting for the EU-flagged fleet, the financial instrument should not lead to a significant 
constraint  of  the  recycling  demand  and  capacity  of  the  EU  listed  recycling  facilities,  the 
inclusion of non-EU flagged vessels that call in EU ports within the purview of the SRL could 
increase  demand  also  during  this  period,  which  can  then  constraint  capacity.  While  the 
capacity of the EU-listed recycling facilities is expected to expand (due to new investment 
in the  EU  and/or  new  recycling  facilities  located in third countries facilities that  would be 
included in the EU list), there are currently no estimates on how much this would represent, 

141   After 20 years the vessels that have contributed from the beginning of the licence will stop contributing.  

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

and  it  is  not  possible  to  conclude  whether  the  expansion  would  be  enough  to  also 
accommodate the non-EU flagged fleet. 

4.5.6 

Impact on the second-hand market  

The capital accumulated during the operating life of the vessel is tied to the vessel. That 
means that upon sale to a second owner, the first owner transfers the future rights to the 
second owner, and so on until the ultimate owner opts for safe and environmentally sound 
recycling.  If  all  subsequent  owners  operate  in  Europe,  they  will  continue  applying  for 
licences and paying fees into the fund. However, if subsequent ship owners operate mainly 
or exclusively outside the EU, they will purchase fewer, or no, licences after the moment of 
sale, and the capital accumulation could eventually be insufficient to cover the revenue gap 
of sound recycling.  

In an ideal case, the value of the capital accumulated is fully taken into account in the sales 
price. In practice, however, this may not be the case, implying a loss to the first owner. The 
level of loss will differ depending on the age of the sale as well as the intended operating 
profile of the new ship owner. 

The impact on the second-hand market is difficult to assess quantitatively, as many external 
variables play a role in relation to it. As regards the  accumulated funds, it will be taken into 
account by the time of the sale of the vessel and it is likely that it will be among the elements 
considered by the new ship owner.  

4.5.7  The impact of the licence on the vessels’ operating costs 

The SRL’s level is assumed to be linear with vessel size (as the cost gap to be covered is 
measured in € per LDT). However, the vessels’ operating costs are not linear, with bigger 
vessels having economies of scale over smaller vessels. This means that the ratio of licence 
costs over operating costs increases with vessel size. Using daily operating costs identified 
in the literature142 for a number of vessel types,143 this results in ratios varying between 5% 
to  32%  of  the  yearly  operating  cost.  However,  it  should  also  be  noted  that  the  vessels’ 
operating costs can be extremely volatile over the years, as a result of fluctuating fuel prices 
as well as changing operating profiles (e.g. under weak market conditions, vessels may be 
laid up for a period of time).  

Table  4.8  shows  the  estimates  of  the  impact  of  introducing  a  licence  on  the  operational 
costs of the vessels, by size and type. The results suggest that introducing the licence fee 
for the size category very large might have significant impacts on the operational costs, as 
the yearly licence fee to cover the scrapping gap is relatively high (i.e. € 756.215). 

Table 4.8 Licence fee as percentage of yearly operational costs per vessel type and size 

Vessel 
type 

Container 
ship 

Vessel size 

Size category in model  Licence fee as 

percentage of yearly 
operational cost  

Feeder (100-1,000 TEU)144 
Medium (1,000-2,000 TEU) 
Main liner (2,000-6,000 TEU)  Medium/large 

Small 
Medium 

6% 
5% 

142   R. Greiner and M, Stephens, Ship operating costs: Current and future trends, December 2017. 
143   Containers, tankers, and bulk carriers. 
144   TEU is the designation for the dimensions of containers. The abbreviation stands for Twenty-foot Equivalent Unit. 1 TEU 
is a container of 20 feet long, 8'0" wide and usually 8'6" high. In metric terms, a TEU is 6.10 metres long, 2.44 metres 
wide and 2.59 metres high. A 40-foot container is equivalent to 2 TEU. 

85 

 
 
 
 
Vessel 
type 

Bulk 
carriers 

Tankers 

Vessel size 

Size category in model  Licence fee as 

Panamax 
Handysize 
Capesize 
Handymax 
Product 
Handysize Product 
Panamax 
Aframax 
Suezmax 
VLCC 

Very large 
Large 
Very large 
Large 
n. a. 
Large 
n. a. 
Very large 
Very large 
Very large 

percentage of yearly 
operational cost  
32% 
15% 
27% 
14% 

11% 

25% 
22% 
20% 

Source: elaboration of the authors based on R. Greiner and M, Stephens, Ship operating costs: Current and future trends, 
December 2017. 

On the link between transport cost and maritime trade, the literature indicates that a strong 
correlation  exists  between  the  two  (Ferrari,  Christidis,  &  Bolsi,  2023).  However,  such 
correlation relates to the total transport costs and not just the component related to maritime 
transport and its variations. The impact of the licence on the operating costs of the vessel 
should be therefore further assessed in terms of the impact on the total costs of transport 
and for the extent to which the ship owners would transfer the additional cost of the licence 
to the end user (i.e. transport operator or passenger). Although a quantitative assessment 
of this impact is beyond the scope of this study, on a qualitative plane further considerations 
may help to foresee possible effects on the level of competitiveness of maritime transport 
and trade.  

The cost changes induce by the implementation of the SRL may indeed cause shifts in the 
EU’s maritime transport market. However, the complexity of the current geopolitical situation 
and the revision of the European legislative framework relevant for maritime transport also 
make a qualitative assessment very difficult. The war of aggression of Russia in Ukraine 
and the conflicts in the Middle East and Red Sea have heavily influenced the patterns of 
the international maritime trades and impacted on the operating costs of the vessels. These 
effects  should  be  cumulated  with  the  foreseen  impacts  of  the  legislative  texts  of  the 
Commission’s ‘Fit for 55’ package that are relevant for the maritime transport sector. The 
extension of the EU ETS to maritime transport and the provisions of the alternative fuels 
infrastructure  Regulation  will  produce  other  economic  impacts  on  maritime  trade.  In 
principle, also the revision of the Energy Taxation Directive could produce other economic 
impacts  for  the  shipowners  (i.e.  increase  of  bunkering  cost  in  EU  ports)  and  therefore 
originate other reorganisations of maritime transport activities and routes. 

Generally, measures like the SRL raising the access costs to the European ports impact on 
port business, with shipping operators trying to avoid the new regime through shifting their 
routeing to neighbouring non-EU ports. For most of the market segment this is not a realistic 
option  as  cargoes  need  to  be  delivered  at  their  ultimate  destination  anyhow.  The 
transhipment  of  containers  is  an  exemption,  being  primarily  designed  for  hub-and-spoke 
operations. Typically, mainline routes between Asia and Europe call both at Mediterranean 
transhipment ports (e.g. Marsaxlokk, Gioia Tauro or Algeciras) and at Northern European 
ports (e.g. Antwerp, Hamburg, Le Havre or Rotterdam). In a regime where the vessels have 
to pay for port calls, they may consider shifting the Mediterranean calls to non-EU ports in 
north Africa or in the UK. However, for a regime where the vessels pay a time-based fee, 
there is no actual benefit of shifting to non-EU ports.145 Since the financial instrument has 
been designed to cover EU’s ports in an equal way, it will cause shifts for the extent to which 

145   For intercontinental routes not including northern European port calls but only Mediterranean calls, such as round-the-
world and pendulum services connecting the Far East with the Mediterranean and North America routes, such shift may 
provide advantages. This segment is however, only a small part of the transhipment volumes handled in Mediterranean 
ports. 

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the cost increase will be transferred to the end customer, depending on the market segment 
and level of competition with other transport modes. It is likely to expect that the elasticity 
to price variations will be higher for maritime routes having road alternatives, such as Ro-
Ro and Ro-pax routes.  

4.5.8  The costs of verification of sound recycling 

Besides verifying whether the vessels calling at EU ports have a licence indicating that they 
are  accumulating  the  capital  for  future  safe  and  environmentally  sound  recycling,  the 
designated  European  entity  enforcing  the  rules  also  has  to  verify  if  the  vessel  will  be 
recycled in accordance with the SSR at an accredited recycling facility, by requesting proof 
thereof. The financial instrument would not necessarily bring significant extra enforcement 
costs as ready for recycling certificates and statement of completion could be transmitted 
to the designated European entity by the flag state, for example. Additional checks through 
the  use  of  AIS  and  satellite  images  could  be  considered,  possibly  extended  with  on-site 
verification in cases needed. 

4.5.9  Sensitivity analysis of the outcomes of the prediction model 

The results shown in this chapter for the economic impacts have been elaborated under the 
basic design assumption displayed in Table 4.2. In this section, we will show how the results 
of the safe and environmentally sound prediction model would change by modifying some 
of those design assumptions.  

In  particular,  Table  4.9  presents  how  the  outcomes  would  change  by  modifying  the 
assumptions on (i) the change of the recycling decision, (ii) the licence fee, (iii) the payment 
duration, and (iv) the recycling price gap. It is worth observing that the latter is an exogenous 
variable, as it is a result of exogenous market dynamics (e.g. price of recycled steel and 
operating costs of the recycling facilities) and cannot be directly and immediately designed 
via policy measure related to the SRL. The sensitivity analysis is ‘ceteris paribus’, meaning 
that  besides  the  changed  design  assumption,  the  other  parameters  are  unchanged  with 
respect to the original design assumption. 

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Table 4.9 Sensitivity analysis of the impact of the financial incentive under changes of the various assumptions 

Design assumptions 

Percentage 
increase of 
the fee 

Percentage of 
vessels 
opting for 
sound 
recycling 

Original (15 years payment, 
90% recycling decision, 
recycling price gap € 370) 

Recycling decision 

Recycling decision at 70% 
of accumulated funds 

Recycling decision at 50% 
of accumulated funds 

56% 

66% 

76% 

Licence fee 

50% higher fees 

50% 

71% 

100% higher fees 

100% 

78% 

Payment duration 

Lowest and 
highest % of 
vessels going 
for sound 
recycling by age 
category146 
35% (15-25 years 
old) 
80% (0-4 years 
old) 

45% (15-25 years 
old) 
89% (0-4 years 
old) 
56% (15-25 years 
old) 
94% (0-4 years 
old) 

50% (15-25 years 
old) 
92% (0-4 years 
old) 
58% (15-25 years 
old) 
94% (0-4 years 
old) 

Lowest and 
highest % of 
vessels going 
for sound 
recycling by 
size category 
44% (Very 
large) 
61% (Medium) 

56% (Very 
large) 
70% (Medium) 

67% (Very 
large) 
80% (Medium) 

75% (Very 
large) 
63% (Medium) 

71% (Very 
large) 
81% (Medium) 

146   The age category shows the age group by the time of implementation of the SRL (i.e. 2030).  

Cumulative 
soundly 
recycled volume 
at year 25 of the 
licence (LDT 
million) 
29.0 

Cumulative size 
of the fund at 
year 25 of the 
         €          

13.0 

35.3 

11.5 

41.5 

10.3 

38.4 

24.8 

42.9 

38.0 

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Design assumptions 

20 years payment and 20 
years of financial 
accumulation 

10 years payment and 20 
years of financial 
accumulation 

Recycling price gap 

Recycling price cost gap to 
€ 300 per LDT (19% lower) 

Recycling price cost gap to 
€ 250 per LDT (32% lower) 

Source: elaboration of the authors. 

Percentage 
increase of 
the fee 

Percentage of 
vessels 
opting for 
sound 
recycling 

-24% 

42% 

49% 

73% 

63% 

70% 

Lowest and 
highest % of 
vessels going 
for sound 
recycling by age 
category146 
25% (15-25 years 
old) 
63% (0-4 years 
old) 
54% (15-25 years 
old) 
92% (0-4 years 
old) 

41% (15-25 years 
old) 
87% (0-4 years 
old) 
50% (15-25 years 
old) 
92% (0-4 years 
old) 

Lowest and 
highest % of 
vessels going 
for sound 
recycling by 
size category 
27% (Very 
large) 
48% (Medium) 

60% (Very 
large) 
80% (Medium) 

55% (Very 
large) 
67% (Medium) 

61% (Very 
large) 
75% (Medium) 

Cumulative 
soundly 
recycled volume 
at year 25 of the 
licence (LDT 
million) 
19.5 

Cumulative size 
of the fund at 
year 25 of the 
         €          

14.9 

38.6 

6.8 

34.1 

11.7 

37.9 

10.9 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

The above figures provide some information on adjusted market behaviours, in response to 
variations of the SRL’s basic design assumptions. The main findings are as follows: 

• 

• 

• 

• 

If  the  recycling  decision  is  less  restrictive  (i.e.  50%  of  the  accumulated  fund),  the 
percentage of safe and environmentally sound recycling increases to 76%; 

If  the  licence  fee  rates  are  increased  up  to  100%,  the  percentage  of  safe  and 
environmentally sound recycling can go up to 78%; 

If  the  duration  of  capital  accumulation  is  shortened  to  10  years’  payment,  this 
percentage will increase up to 73%; 

finally,  if  the  price  gap  is  lower,  up  to  70%  are  expected  to  recycle  in  a  safe  and 
environmentally sound manner. 

The licence can also be determined based on expected outcomes that would be desirable 
to  involved  parties.  For  example,  if  the  aim  is  to  have  90%  of  the  EU-flagged  vessels 
recycled in a safe and environmentally sound manner at 25 years after entry into force, the 
recycling  price  gap  between  an  EU-listed  recycling  facility  and  a  non-EU  listed  recycling 
facility in average has to be € 90 per LDT ceteris paribus, which means the recycling price 
gap has to be reduced by 76% compared to the currently estimated gap of € 370 per LDT. 
The same can be applied to the licence fee, albeit keeping the recycling price gap at € 370 
per LDT. Keeping the other design assumptions, the price of the licence per category has 
to be a factor 4.5 higher in order to achieve that 90% of the fleet is recycled in a safe and 
sound manner. For example, this would imply that the yearly licence cost for the medium 
size category would be € 494,705 instead of the current € 108,835. 

The results of the sensitivity analysis show that changing the design assumptions will only 
have  a  minor  impact  on  the  percentage  of  the  fleet  that  will  be  recycled  in  a  safe  and 
environmentally sound manner, as the development of the fleet both in terms of numbers 
as well as the recycled percentage of the fleet also plays a determining role. The results 
show that changing the design assumptions mainly impacts on the percentage of the fleet 
that  will  be  recycled  in an earlier  stage after  introducing  the  SRL  compared  to the  basic 
design assumption.  

4.6  Social impacts 

4.6.1 

Introduction 

One  of  the  main  objectives  of  the  SRR,  which  the  financial  instrument  is  aimed  to  help 
achieving, is to improve worker conditions in the ship recycling industry by requiring proper 
health  and  safety  conditions  in  the  recycling  facilities.  The  expected  social  impacts  of  a 
financial  instrument  for  safe  and  environmentally  sound  ship  recycling  should  mainly 
concern changes in the mid/long term (i.e. when the cumulated payments for the SRL will 
represent  a  financial  incentive  high  enough  to  no  longer  re-flag,  10  to  15  years  after 
implementation). The employment level in EU listed facilities, especially those located in the 
EU, should slightly increase as a result of higher activities. It should also have a positive 
impact  on  the  health  and  safety  conditions  of  new  facilities  joining  the  EU  list  and 
implementing  its  higher  health  and  safety  standards.  For  those  yards  the  access  to  the 
market of EU flagged vessels will otherwise be reducing at the same time as the financial 
instrument increases in effectiveness.   

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

The majority of vessel recycling operations historically took place outside the EU.147 While 
introducing the SRL will shift recycling of vessels from non-EU-listed recycling facilities to 
EU  listed  recycling  facilities,  new  employment  opportunities  in  the  EU  are  expected  to 
remain very limited. Most EU-listed yards in EU are already largely mechanical orientated 
and, based on the stakeholder consultation conducted in this study, the increased LDT that 
will be recycled in a safe and sound manner due to the SRL, will likely only slightly increase 
labour demand.  

The market development of more mechanical oriented work is not taken into account in the 
assessment of the impacts. The health and safety requirements currently applicable in the 
EU are strict, thus resulting in practically no fatal or non-fatal accidents for adult workers. 
The employment of child workers is prohibited.  

Recycling  facilities  located  in India,  Pakistan,  and Bangladesh  are more labour  intensive 
than  those  located  in  the  EU,  Türkiye,  and  China.  The  current  insufficiency  of  proper 
protective  measures  for  workers  and  the  possibility  of  employed  children  in  recycling 
facilities (in Bangladesh), however, implies that the workers in facilities not implementing 
effectively  international  standards  will  continue  suffering  from  high  numbers  of  fatal  and 
non-fatal accidents. The entry into force of the HKC in 2025 is however expected to lead to 
a reduced number of fatal and non-fatal accidents compared to the current situation. 

4.6.2  Assessing the social impacts 

The 2012 impact assessment study for the SRR has been used as a methodological base 
to  assess  the  impacts  of  introducing  a  financial  instrument  as  well.  In  that  impact 
assessment study, the authors used a three-levelled compliance system, as proposed in 
the 2008 EMSA study.148 This three-levelled system operates with three quality levels as 
follows: 

•  The bottom ‘A’ level indicates implementation of IMO minimum levels – in the adopted 

Convention text and guidelines this includes the ‘beaching’; 

• 

• 

the intermediate level ‘AA’, comprising the existing pier and slipway breaking as often 
carried out in Europe; 

the top level ‘AAA’ is indicative of the full standard with double containment in dry dock 
facilities. 

In the table below, in addition to the three categories above, substandard facilities, facilities 
that are below the IMO minimum levels, are included. In recent years, many Turkish yards 
became  part  of  the  EU  list  of  approved  recycling  facilities  and  with  that  have  higher 
standards and less accidents. While no precise data on the number of accidents per specific 
recycling facility could be gathered, those recycling facilities in Türkiye that became part of 
the EU list are expected to have the same characteristics as the AA EU facilities indicated 
in the table below.  

Social impacts primarily relate to the effectiveness of the financial instrument to promote 
safe and environmentally sound ship recycling. In order to calculate social impacts of the 
financial instrument, assumptions on the location of the recycling facilities are necessary. 

147  

In the period 2000-2022, only 1% of the recycled LDT has been in the EU. While after the introduction of SRR in 2013 it 
has increased in absolute terms, the relative amount stays rather stable. Therefore, in the coming period, without policy 
intervention, no major changes are expected to occur.  

148   Study by COWI/Litehauz for EMSA on the Certification of Ship Recycling Facilities. September 2008. 

91 

 
 
The  2012  impact  assessment  provides  employment  and  working  condition  factors  by 
region, for various performance levels of the recycling facility.149 

Table 4.10 Labour needed per recycling location 

.
c
t
e

i

a
n
h
C
A
A
138 

e
y
i
k
r
ü
T
A
138 

a
i
d
n

I

d
e
d
a
r
g
p
U
A
455 

a
i
d
n

I

d
r
a
d
n
a
t
s
b
u
S
455 

n
a
t
s
i
k
h
a
s
P
e
d
d
a
e
l
g
d
n
a
r
a
g
B
p
d
U
n
A
a
455 

n
a
t
s
i
k
h
a
s
P
e
d
d
r
a
a
l
g
d
n
n
a
a
B
t
s
b
d
u
n
S
a
455 

U
E
A
A
A
73 

U
E
A
A
73 

6,000   6,000   12,000   18,000   31,450  55,723   31,450   55,723 

200 

13 

39 

13 

26 

200 

113 

113 

Workers needed per 
100,000 LDT 
Adult - fatal accidents  
(Number of 
persons/100,000 man-
years) 
Adult - non-fatal accidents 
(Number of 
persons/100,000 man-
years) 
Children - fatal accidents 
(Number of 
persons/100,000 man-
years) 
Children - non- fatal 
accidents 
(Number of 
persons/100,000 man-
years) 
Source: compilation based on (European Commission, 2012). Updated with figures from NGO Ship Breaking Platform. 

23 

41 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

5 

9 

By  taking  the  scenario  for  long-run  market  shares  by  recycling  region,  assuming  that 
competition between sound recycling from all regions has developed (see Table 4.11) and 
the impact of SRL on shifting the recycling of vessels towards EU-listed recycling facilities, 
there is an improvement expected in terms of social impacts. Because of the increase in 
the LDT that will be recycled in a safe and sound manner (increasing up to 2.21 million in 
2055), less LDT will be recycled in non-EU-listed recycling facilities, where labour conditions 
are at a lower standard. 

In  particular,  after  introducing  the  financial  instrument,  more  LDT  will  be  recycled  in 
recycling facilities where the fatal accidents are lower (13 in EU recycling yards) instead of 
recycling  facilities  where  the  fatal  incidents  are  higher  (113  in  A  upgraded  Pakistan  or 
Bangladesh facilities).150 The minimum number accidents per year would then be avoided 
in  the  countries  where  safety  conditions  are  currently  the  lowest  (e.g.  Bangladesh  and 
Pakistan according to the SRR impact assessment (European Commission, 2012)). That 
is, the LDT that will be recycled in a safe and environmentally sound manner will not be 
recycled  in  recycling  facilities  with  a  higher  rate  of  accidents  (i.e.  fatal  and  non-fatal) 
resulting in less accidents in the global recycling market.  

149   More recent figures could not be obtained in this study. These numbers have been verified with stakeholders and there 

has not been an indication that these numbers have changed up until this point.  

150   Due to the entry into force of HKC, the substandard yards in Pakistan and Bangladesh will be expected to upgrade soon 
to  a  minimum  level  of  A  Upgraded.  Therefore,  the  numbers  displayed  in  the  column  ‘Substandard  Pakistan  and 
Bangladesh’ is no longer applicable in the analysis.  

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

Table 4.11 shows the recycling capacity for the five main regions based on the average of 
the total amount of LDT that has been recycled in the period 2000-2017 and 2018-2022. 
The table shows that in recent years there has been a shift in recycling between the regions, 
mainly more towards Türkiye and Bangladesh and less in China, as, since 1 January 2019, 
it has closed the market for recycling foreign flagged vessels.151 

Table 4.11 Percentage of capacity in LDT per region 

Region 

Europe 

Türkiye 

Pakistan 

China 

Bangladesh 

India 

Percentage of capacity in 
LDT (2000-2017) 

Percentage of capacity in 
LDT (2018-2022) 

1% 

5% 

13% 

24% 

26% 

31% 

1% 

12% 

13% 

6% 

38% 

29% 

Source: elaboration of the authors. 

Combining  the  figures  of  the  two  tables  above,  the  casualties  without  any  financial 
instrument being implemented and the number of casualties with the improvements in place 
can be calculated, resulting in the number of saved casualties 25 years after introducing the 
licence. Table 4.12 presents the estimated impact of the SRL on the number of accidents 
in recycling facilities for two scenarios. The first scenario assumes that China will lift its ban 
and will recycle foreign-flagged vessels too (i.e. based on share of capacity of the period 
2000-2017), while the second scenario assumes that China will continue applying its current 
policy. 

Table 4.12 Impact of the SRL on the number of accidents in recycling facilities 

Element 

Without Chinese Ban 

With Chinese Ban 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation (2030-
2055) 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation (2055) 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation (2030-
2055) 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation (2055) 

53 

4 

67 

5 

13,487 

1,027 

17,173 

1,308 

12 

2,848 

1 

217 

16 

3,626 

1 

276 

Fatal accidents 
(adults, yearly) 
Non-fatal accidents 
(adults, yearly) 
Fatal accidents 
(children, yearly) 
Non-fatal accidents 
(children, yearly) 

Source: elaboration of the authors. 

The  estimates  presented  in  Table  4.12,  includes  the  substandard  recycling  facilities  to 
effectively comply with the recently-ratified HKC. By complying with HKC requirements, the 
substandard recycling facilities are likely to upgrade to an A standard rating (see Table 4.10) 
in a short time, leading to no fatal and non-fatal incidents for children on those recycling 
facilities. The scenario with the Chinese ban still in place shows higher results, as in that 
scenario more LDT will have been scrapped in Pakistan and Bangladesh resulting in more 
impacts when a financial instrument is introduced. 

These estimated reductions would be achieved when the financial instrument has reached 
its full effectiveness and large number of vessels will opt for safe and environmentally sound 

151   See NGO Shipbreaking platform website here.  

93 

 
recycling.  In  earlier  years  of  its  introduction,  the  impacts  on  the  social  conditions  of  the 
workers will be smaller as lower volumes of vessels will be recycled soundly. With the HKC 
being ratified, the relative difference between regions in terms of recycling standards will to 
some extent decrease in the future. This would imply that the difference in the accidents 
and  number  of  workers  needed,  as  displayed  in  Table  4.10,  will  be  smaller  too  (from 
substandard to A standard). 

4.7  Environmental impacts 

The environmental impacts primarily relate to the effectiveness of the financial instrument 
to ultimately ensure environmentally sound recycling of the vessels. Notably, the purpose 
of the financial instrument is to increase the number of vessels opting for sound instead of 
unsound recycling. An estimate of this number emerges from the projection model, resulting 
in a growing number of vessels over time. Especially after 15 years, more vessels would be 
able to accumulate the full amount required to cover the price gap, and the majority of the 
vessels would also be able to accumulate sufficient funds to bridge the revenue gap. 

In this study, we collected data on the estimated amounts of wasted hazardous materials 
per  vessel,152  an  indicator  which  serves  as  starting  point  to  calculate  the  environmental 
impact  that  a  financial  instrument  would  have,  when  it  comes  to  incentivising  the  ship 
owners  to  recycle  a  larger  number  of  vessels  in  an  environmentally  sound  manner.  The 
data from the literature has been complemented with more specific figures collected via a 
bespoke survey on the quantities of hazardous materials on board of vessels (per LDT) for 
eight different types of hazardous materials.  

On the methodology to assess the environmental impacts, we follow the same approach as 
for the social impacts; namely, the EU listed recycling facilities performing at the level of A-
upgraded  recycling  facilities,  whereas  recycling  facilities  operating  unsound  recycling  do 
not. That means that the environmental gains would be achieved in all recycling facilities 
located  in  countries  improving  from  unsound  to  sound  recycling  methods  and  that  the 
largest potential gains would be expected for the vessels that are currently recycled in the 
recycling facilities located in India, Bangladesh, and Pakistan. That is the pollution reduction 
as the vessel will be recycled in an A-upgraded EU listed facility instead of a substandard 
recycling facility.  

Table 4.13 presents the potential pollution reduction against the baseline situation in India 
and in Bangladesh/Pakistan, if a financial instrument would be in place and sound recycling 
would take  place  at  A-rated  recycling  facilities  in  these countries.  This  will  be used as a 
proxy for vessels that normally are recycled in facilities operating unsound recycling instead 
of an EU-listed recycling facilities. The waste management standards of SRR go beyond 
that  of  HKC,  via  the  Environmentally  Sound  Management  (ESM)  and  therefore  the 
estimated figures should be considered as a minimum benefit that could be generated.  

We  elaborated  the  analysis  of  the  estimated  environmental  impacts  taking  into  account 
situations  without  and  with the  Chinese  ban  in  place,  as  shown in  Table 4.13  and  Table 
4.14, respectively.  

152   With that we have updated the numbers that have been used in Ecorys (2016) that had been derived from the impact 

assessment for the SRR (2012).  

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

Table  4.13  Potential  pollution  reduction  against  the  baseline  from  environmentally  sound 
recycling (without Chinese ban) 

Hazardous 
material 

Unit 

Asbestos 

PCB 

Heavy metals 

Oil 

Oil sludges 

Tri butyl tin 

Mercury 

Ozone depleting 
substances 

Tonnes 

Kg 

Tonnes 

Tonnes 

Tonnes 

Tonnes 

Kg 

Tonnes 

Source: elaboration of the authors. 

India 
(2055) 

95  

0.255  

1.18  

-  

Bangladesh 
and 
Pakistan 
(2055) 
82  

0.164  

1.0  

-  

India 
(2030-2055) 

1,252  

3,3  

15.44  

 -  

Bangladesh 
and 
Pakistan 
(2030-2055) 
1,068  

2.1  

13.2  

-  

14,068  

9,052  

184,358  

118,285  

-  

0.27  

16.37  

-  

0.18  

11.41  

-  

3.58  

214.14  

- 

2.29  

148.99  

Table  4.14  Potential  pollution  reduction  against  the  baseline  from  environmentally  sound 
recycling (with Chinese ban) 

Hazardous 
material 

Unit 

Asbestos 

PCB 

Heavy metals 

Oil 

Oil sludges 

Tri butyl tin 

Mercury 

Ozone depleting 
substances 

Tonnes 

Kg 

Tonnes 

Tonnes 

Tonnes 

Tonnes 

Kg 

Tonnes 

Source: elaboration of the authors. 

India 
(2055) 

91  

0.242  

1.1  

-  

Bangladesh 
and 
Pakistan 
(2055) 
117  

0.235  

1.5  

-  

India 
(2030-2055) 

1,190 

3.2 

14.7 

- 

Bangladesh 
and 
Pakistan 
(2030-2055) 
1,529 

3.1 

19.0 

- 

13,375  

12,958  

175,264 

169,326 

-  

0.26  

15.56  

-  

0.25  

16.33  

- 

3.40 

- 

3.28 

203.58 

213.29 

Meanwhile, the shipbuilding industry aims to build cleaner vessels. Vessels built today are 
substantially  cleaner  than  vessels  built  30  years  ago,  and  it  is  likely  that  this  trend  will 
continue. In addition, the SSR introduces the obligation for each vessel entering an EU port 
to have an IHM on board. Both elements will probably lead to even cleaner vessels. Once 
these vessels are recycled, less hazardous waste will occur, and the overall environmental 
impact of ship recycling will likely be reduced. In the projection of the baseline up to 2055, 
the increased greenness of the vessels has been taken into account. An extra impulse from 
a financial instrument, mainly originating from a policy option of using the forfeited funds, is 
not taken into account. 

4.8  Conclusion 

The assessment of impacts shows that a financial instrument involves annual payments of 
fees into earmarked funds in the order of € 1.05 billion, contributing to the building up of a 
fund sized € 13 billion in 2055. Depending on the design of the mechanism (level of licence 
and duration of capital accumulation), this will eventually result, over the whole period 2030-
2055, on average around 56% of the fleet calling at EU ports being dismantled in EU listed 
facilities. In the first 10 years of the implementation of the SRL the impact is minor, with less 
than  one-third  of  the  fleet  opting  for  safe  and  sound  recycling.  Fifteen  years  after  the 
implementation of the SRL, the majority of the vessels (82%) is expected to opt for safe and 

95 

 
sound recycling, gradually increasing to 100% of the fleet in 2048 due to a sufficient amount 
of accumulated funds.  

This result provides impacts in terms of environmental benefits (i.e. better management of 
vessel’s waste and less pollutants ending up in the environment untreated) as well as social 
benefits (i.e. reduction of accidents and fatalities). 

Meanwhile,  the  financial  incentive  also  generates  (partly  intended)  economic  impacts, 
notably: 

•  A rise in operating costs for the ship owners, who are forced by the instrument to set 
aside funds to accumulate the capital required. This rise is estimated to be between 3% 
and 25%; 

•  The cost changes induce by the implementation of the SRL could cause shifts in the 
EU’s maritime transport market, but the impact is considered as limited. Other initiatives 
such as the extension of the EU ETS to maritime transport and the provisions of the 
alternative  fuels  infrastructure  Regulation  will  likely  generate  higher  impacts  on  the 
industry; 

•  The  competitive  advantage  of  EU-listed  recycling  facilities,  vis-à-vis  non-EU-listed 
facilities will improve, and the impact of the licence is not expected to lead to a significant 
constraint on the recycling demand and capacity of the EU-listed recycling facilities. 

For all impacts, it should be understood that the year-on-year behaviour of ship owners is 
also  influenced  by  other  factors.  The  shipping  market  itself  and  the  steel  prices  play  an 
important  role in  overall recycling  values  and decisions,  but the  decision  by ship  owners 
could  also  be  impacted  by  other  aspects.  Non-EU  listed  facilities  could  still  attract  ship 
owners even if a large amount of the needed funds is covered. Other uncertainties include 
the exact pattern of port calls of vessels over their lifetime, the revenue gap itself, and the 
return  on  capital,  for  which  sensitivity  analyses  have  been  conducted  to  show  the 
robustness of the prediction mechanism. 

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5  Important  elements  for  implementation  of  the  Ship 

Recycling Licence 

5.1 

Introduction 

This chapter will further elaborate on and explore  options in relation to specific elements 
and  aspects  which  were  identified  by    2016’s  study.153  They  have  been  identified  as 
important  elements  for  the  SRL’s  future  implementation.  In  particular,  if  the  European 
Commission will decide to adopt the SRL, the results stemming from the other important 
elements may support the definition of the proper format for the financial incentive, identify 
potential uses of the funds forfeited, and tailor its scope of application. 

5.2  Options for a European entity 

5.2.1 

Introduction 

Decentralised public entities play an important role within the EU, particularly in the context 
of implementing policies. Notably, European public entities such as agencies, institutions, 
or  joint  undertakings  support  the  decision-making  processes  by  providing  technical 
expertise and enhancing the cooperation between the Member States and the EU in various 
policy areas. The literature review154 showed that these European entities are established 
case-by-case  and  characterised  by  sectoral  regulations.  These  public  entities,  while  not 
having  regulatory  powers,  provide  decisions  based  on  technical  expertise,  under  clearly 
defined  conditions.  Their  goal  is  to  lend  credibility  and  authority  to  decisions,  grounding 
them on technical and scientific expertise. Funding for these decentralised entities comes 
from the EU budget and other administrative revenues from services they provide. 

A  European  public  entity  would  be  tasked  with  implementing  and  monitoring  the  SRR’s 
provisions  on  the  SRL;  such  a  public  entity  would  operate  at    EU  level  and  would  be 
responsible for activities such as review of licence applications, licence issuance, premium 
collection managing the fund (release of money accumulated for recycling a specific vessel 
and forfeited amounts),  and monitoring parameters necessary for establishing the licence 
fee.155 As illustrated in section 2.3, the idea with the SRL is that all vessels calling at EU 
ports obtain one licence. The SRL includes (i) a ‘contribution’ covering costs to issues and 
manage the SRL and (ii) a ‘premium’, which accumulates as a credit for future payments if 
the vessel is recycled in a EU listed yard. Overall, the European public entity would oversee 
the payment process, ensuring compliance with SRL requirements. 

In this section, we present high-level estimations of administrative costs originating from the 
SRL. The estimates provide insights into the resources that would be required for adding a 
ship recycling pillar to an existing European public entity or creating a dedicated public entity 
to  support  an  existing  Directorate-General.  The  analysis  and  estimates  (i)  build  on  the 
methodological approach recommended in the Better Regulation Guidelines,156 (ii) rely on 
relevant outputs of the model assessing the impacts (i.e. the number of SRL and vessels 
recycled  in  a  safe  and  environmentally  sound  manner)  and  (iii)  assume  other 
complementary inputs from desk research. Given the fact that there is still some level of 
uncertainty surrounding the actual implementation scenario of the European public entity, 
the high-level estimates should be read as a first step paving the way for further follow-up 

153   See (Ecorys, DNV-GL and Erasmus School of Law, 2016). 
154   See  EPRS  (2018).  EU  Agencies,  Common  Approach  and  Parliamentary  Scrutiny,  European  Implementation 

Assessment, Study, Editor Ron Korver, European Parliament Research Service, Ex-Post Evaluation Unit.  
155   Some of these activities can be performed with the assistance of third parties, such as asset management firms. 
156   See European Commission (2023), Better Regulation Toolbox. 
97 

 
 
validation work. As general assumption, we assume that in order to carry out the activities 
related to the SRL, the European public entity would need to use the expertise and data 
from EMSA, and when it comes to handling large payments and reinvesting the  monies, 
third-party (private firms) asset managers will be involved against a fee payment.  Annex VI 
presents the methodological approach and the calculations carried out in detail. 

5.2.2  Activities and approach to the estimation of resources and costs 

The  administrative  costs  associated  with  the  implementation  of  the  SRL  focus  on  the 
'contribution'  and  'premium'  elements  administered  by  the  European  public  entity.  They 
would arise from the activities for: 

•  verification  that  an  applicant  meets  the  requirements  for  receiving  the  SRL  and 
collecting the contribution to be paid by the ship owner for this activity, as well as setting 
up and maintaining the needed IT systems for it; 

•  collection of information and data to set the appropriate licence premium. This task could 
be  managed  by  a  third-party  commercial  provider  and  it  also  involves  keeping  the 
information regularly updated and ensuring a properly adjusted value of the premium 
through time; 

•  actual collection of the premium and management of the Ship Recycling Fund, which is 

also performed by a third party (asset management firm); 

•  verification that the SRL is in place for vessels calling at EU ports; 

•  administrative verification of sound recycling, as a basis for paying out the accumulated 

amount. 

To estimate the administrative costs, we employed the Commission’s Standard Cost Model 
(SCM).  The  SCM  provides  the  approach  to  estimate  the  total  administrative  cost  by 
multiplying the average unit cost of an activity by the total number of activities performed 
and subtracting any removed administrative costs. In this case, there are no administrative 
activities  removed,  because  those  identified  will  originate  from  a  new  administrative 
obligation. The estimates of the administrative costs are based on the assessment period 
2030-2055  and  use  a  3%  social  discount  factor  to  calculate  the  total  present  values,  as 
recommended by the Commission for EU policy analysis. 

5.2.3  Additional resources and costs for a self-standing body or dedicated agency 

to support a Directorate-General of the Commission 

Activity 1 – Licence verification 

The time required for processing the applications for the SRL and handling the ‘contribution’ 
payments from ship owners is estimated to be at 1 hour per application, based on the study 
of 2016.157 While this is an average, variations may occur for the frequency of vessels calling 
at EU ports. It is proper to assume that this activity will require expertise coming from the 
EMSA for the SRL’s application process, and that an IT system is provided to handle the 
application process and that in addition to a one-off cost to set up it will also need to be 
maintained, 158  which can require expertise coming from EMSA for the needed information 

157   See Ecorys, DNV-GL and Erasmus School of Law (2016). 
158   Estimates for the costs of the IT system are based in the costs for the FuelEU database and the EU ETS registry 

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(port calls, and linkages with related systems).159 To reduce stress on the IT system and the 
application process, it is assumed that in the case of a last-minute application for a vessel 
entering an EU port, proof of the application and a preliminary payment (made under the 
assumption that only that port call would take place in a calendar year, or on the port calls 
from the last calendar year, if any)  is sufficient for compliance on a temporary basis, before 
a licence is verified, eliminating the need for instant approval of the licence. The average 
yearly administrative costs are estimated at € 1.15 million, which would result in a total of € 
18.29 million, expressed in present values, over the period 2030-2055. 

Activity 2 – Set the appropriate SRL licence premium 

Establishing the appropriate SRL premium involves creating and maintaining an estimation 
model, with indicators describing the fleet and vessel characteristics, and the revenue gap 
between recycling in EU-listed facilities and in other facilities. It is reasonable to assume 
that  while  EMSA  has  specific  expertise  and  data  needed  for  some  aspects  of  this  task, 
commercially  available  data  still  needs  to  be  procured,  and  a  third  party  may  be  better 
placed to perform the modelling that leads to the SRL premium calculations. The associated 
costs are considered additional to the baseline without SRL implementation. For setting up 
the model, it is estimated that the public entity would have to disburse a one-off cost of € 
16,717 in 2030 (the beginning of the implementation), based on the study team's time and 
costs for a similar task. For the annual maintenance of the model, a recurring workload of 
80 hours per year is assumed for the third party, resulting in € 10,887 from 2030 to 2055 
yearly.  Expressed  in  present  values,  the  total  administrative  costs  for  setting  the  SRL 
premium are estimated at € 177,947 for the period 2030-2055. 

Activity 3 – Collection of the premium and management of the Ship Recycling Fund 

This activity is also given to a third party, namely third-party asset managers, who will be 
responsible for collecting the premium and managing the fund, subject to payment of a fee, 
which has been assumed to be calculated on top of the Assets Under Management (AUM, 
in this case the size of the Fund) as is common practice in the industry. Based on the size 
of the fund, and an estimated 0.34% average AUM fee,160 this is expected to cost the public 
entity  a  yearly  average  of  €  37.2  million.  Expressed  in  present  values,  the  total 
administrative  costs  for  the  collection  of  the  premium  and  management  of  the  Ship 
Recycling Fund are estimated at € 534.2 million for the period 2030-2055.161 

Activity 4 – Verification that the SRL is in place for vessels calling at EU ports 

According to the SRL’s design, the vessels intending to enter EU ports must obtain it. The 
verification  process  would  be  facilitated  for  the  European  public  entity  relying  on  the 
information gathered from THETIS, a system for maritime traffic monitoring. This activity, 
integrated into regular control activities, is likely to be streamlined with minimal extra effort 
of the staff, leveraging on the accessible information. It is reasonable to assume that this 
activity  will  need  specific  expertise  primarily  coming  from  the  EMSA.  The  activity  is 
estimated  to  require  0.5  FTE  for  information  collection  and  verifications.  Expressed  in 
present values, the total administrative costs for ensuring SRL compliance of vessels at EU 
ports are projected at € 0.6 million for the period 2030-2055. 

159  

It is assumed that most of the system, which is set by EMSA, is automated, but ultimately remains a  responsibility of 
EMSA to review the applications. 

160   Average revenue margins of third-party asset management in western Europe (2008-2022). See European Fund and 

Asset Management Association (2023). 

161   The  cost  of  the  AUM  fee  could  be  funded  from  the  profits  obtained  from  the  investment  of  the  funds  by  the  asset 
management firm, as is the basic assumption of the AUM fee model. While it can reasonably be expected that these 
profits are enough to outweigh the cost and inflation, the potential profits (to be paid to shipowners upon recycling) have 
been disregarded due to the complexity of such forecasting. 

99 

 
Activity 5 – Verification of sound recycling 

The European public entity responsible for the SRL’s implementation could also be tasked 
with verifying whether the vessels calling at EU ports will be recycled according to the SRR 
at EU-approved recycling facilities. This involves requesting proof of delivery (statement of 
completion), which is estimated to take an average of 0.25 hours per vessel to staff of the 
public  entity.  Expressed  in  present  values,  the  administrative  costs  for  this  verification 
process are projected at € 15,031 for the 2030-2055 period.  

5.2.4  Conclusions 

The  results  of  the  estimates  carried  out  for  running  a  designated  European  entity 
responsible of implementing the tasks and functions of the SRL show that between 16 and 
17 FTE would be necessary for the period 2030-2055. Considering the activities assigned 
to the European public entity, two additional costs would arise on top of the other estimated 
administrative  costs.  Firstly,  for  administrative  and  technical  roles;  assuming  that  2  FTE 
would  be  necessary  for  each  profile,  the  total  annual  cost  for  these  full-time  positions  is 
estimated at € 0.3 million. Secondly, the cost for the facility, although this will depend on the 
Member  State  (and  city)  selected  to  host  the  public  entity;  as  it  is  not  known  where  the 
public  entity  would  be  located,  we  recommend  to  carry  out  necessary  and  detailed 
estimates in a follow up impact assessment study. Table 5.1 shows the estimated costs for 
the  SRL  regulatory  requirements.  According  to  assumptions,  and  expressed  in  present 
values, they would be equal to € 4.5 million in 2030 and € 22.1 million in 2055. The total 
present value is estimated at € 560.4 million for the period 2030-2055. 

Table 5.1 Estimated costs for implementing the regulatory requirements of the SRL (€ million, 
present values) 

Item 

Administrative 
Management 
Total 

2030 
4.2 
0.3 
4.5 

Source: elaboration of the authors. 

2040 
23.6 
0.3 
23.8 

2050 
26.6 
0.3 
26.9 

2055 
21.8 
0.3 
22.1 

Overall, the estimates suggest that the designated European entity would require between 
20 and 21 FTE for the period 2030-2055. Additional benchmark analysis with respect to the 
size of the agencies established for other transport modes (i.e. EMSA, ERA, and EASA) 
suggests  that  the  additional  human  resources  should  not  justify  the  incremental  costs 
associated with creating a self-standing body or dedicated public entity (see also Annex VI). 

5.3  Use of forfeited funds 

5.3.1 

Introduction 

As a result of introducing the SRL significant accumulated funds should be expected from 
the vessels that contributed to the scheme but were not dismantled in EU-listed recycling 
facilities. Those forfeited funds can be used to further promote safe and environmentally 
sound recycling. According to the projection model, the total estimated amount of forfeited 
funds  would  be  equal  to  approximately  €  2.1  billion,  expressed  in  present  value  for  the 
period 2030-2055. That also means that, on average, the forfeited funds would be equal to 
about € 83 million on annual basis. 

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The  survey  questionnaire  provided  stakeholders’  opinions  on  the  possible  uses  of  these 
forfeited funds. Figure 5.1 shows that a fair share of the respondents (i.e. 11 out of 41 or 
27%) would be in favour of cross-subsidising EU recycling facilities, an option that would 
involve  careful  consideration  of  the  State  aid  requirements.162  The  forfeited  funds  made 
available to EU recycling facilities not in the Commission’s list of approved facilities would 
allow  to  assisting  them  for  reaching  the  required  level  of  standards  and/or  extend  their 
business activities into the ship recycling industry, thereby increasing the recycling options 
and available capacity in the EU. Forfeited funds could also be made available to already 
EU-listed recycling facilities to expand capacity, support investment in new technologies or 
support partnership with other EU actors with the view to improve the life-cycle value chain. 
The financial incentive might also be seen as an instrument to correct the inefficiency of the 
recycling  process  or  to  alleviate  market  discrepancies,  insofar  as  the  list  of  approved 
recycling facilities contains inefficient but sustainable recycling facilities. Equally important 
to  consider  in  relation  to  the  EU’s  ship  recycling  sector  is  the  fact  that  the  availability  of 
forfeited  funds  would  allow  to  creating  an  incentive  for  EU-listed  recycling  facilities  to 
increase the purchase price they are able to offer to the ship owners. The incentive would 
work in such a way that if they purchased an end-of-life vessel, they would receive a certain 
amount  per  GT  for  it  (i.e.  a  subsidy).  The  subsidy  would  allow  to  increase  the  level  of 
competitiveness of the EU-listed recycling facilities by stimulating the recycling demand of 
end-of-life vessels. 

In summary, the first possible use of the forfeited funds would target the EU’s ship recycling 
sector  with  the  objective  to  promote  technological  innovation,  operational  efficiency,  life-
cycle value and its competitiveness. 

The responses to the consultation also show another use of the forfeited funds put forward 
by  the  stakeholders  and  consisting  of  investing  in  research  and  development  to  further 
promote  a  sustainable  shipping  sector.  How  this  option  should  be  implemented  will  be 
discussed in more detail in the following sections. 

Figure 5.1                    p             q        ‘Based on your experience, what would 
be the best use of the forfeited funds?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

162  

In this respect, it is worth observing that if the money was used to provide a subsidy to recycling facilities, it would be 
difficult to administer it without distorting the ship recycling market. The subsidy would have a significant impact on the 
demolition rates offered in the EU and hence it would become financially more advantageous to recycle a vessel in the 
EU. 

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5.3.2  Research to promote a sustainable shipping sector 

Some stakeholders suggested that a certain portion of the forfeited funds could be allocated 
to promote the research in sustainable shipping, such as design and construction of greener 
vessels and vessels’ pre-cleaning, i.e. the systematic removal of hazardous and pollutant 
substances  from  an  end-of-life  vessel  before  its  final  breaking.163  This  use  would  be 
particularly important when it comes to the circular economy aspects of the Commission’s 
Circular Economy Action Plan,164 as it would be helpful to (i) prevent the use of hazardous 
materials in building new vessels and (ii) help reducing the quantity already onboard of the 
operating vessels.165 The desk research carried out on the purchase cost of new vessels 
shows that the estimated (present) average annual amount of the forfeited funds would be 
roughly  comparable to  the  cost  of  some  of  the  vessel  types  included  in  the  assessment 
model. This result would means that, theoretically, the (present) average annual amount of 
forfeited  funds  would  allow  to  provide  funds  for  a  project  to  design  and  build  a  vessel 
prototype, for example, equipped with technologies for alternative fuels. The same project 
would also provide the opportunity to foresee the activities that will be necessary to recycle 
a vessel using an alternative fuel or other technological innovations (see also Figure A.18 
and Table A.30 in Annex VI). 

Along  these  lines,  the  stakeholders  that  identified  other  uses  of  the  forfeited  funds 
suggested  that  that  they  should  be  earmarked  for  research  and  development  in  ship 
recycling, notably for waste management of the vessels and in relation to the green steel 
sector. Specifically for the vessels’ recycling methods, the stakeholders that contributed to 
the  consultation  remarked  that  there  is  a  high  potential  also  for  optimising  the  recycling 
activities  via  innovation,  automation,  and  creation  of  circular  economy  hubs,  including 
increased competitiveness of cradle-to-cradle vessel design and green steel production. In 
this regard, the desk research shows that there are other instances of funds that are partially 
used  to  promote  innovations  and  modernisation,  such  as  the  revenues  generated  from 
auctioning EU ETS allowances.166 

As  the  financial  incentive  is  based  on  the  ship  owners’  individual  responsibility  (and 
ultimately on their behaviour), the decision to opt for green design and vessel pre-cleaning 
rests with the ship owner and not with the recycling facility. Thus, the pay-out of any forfeited 
fund used to foster green design and construction of new vessels needs to benefit a ship 
owner  on  the  condition  that  an  end-of-life  vessel  will  be  recycled  in  EU-listed  recycling 
facilities. 

5.3.3  Support to non-EU-listed recycling facilities to upgrade their standards 

During the consultation process, some stakeholders mentioned that the funds could also be 
used  for capacity building in non-EU-listed recycling facilities to raise their standards, in 
particular through strengthening the current skills and knowledge of the workers in relation 
to the recycling methods and safety and environmental risks associated to them. Moreover, 
substandard recycling facilities would be facilitated in organising trainings to increase the 

163   The pre-leaning process includes the extraction of residual fuels, oils, lubricants, and sludges from tanks and pipelines 
to  prevent spills; the safe  removal  of  asbestos,  polychlorinated  biphenyls  (PCBs),  and  heavy  metals  from  insulation, 
paint,  and  electrical  systems;  and  the  neutralisation  of  other  toxic  substances  like  ozone-depleting  refrigerants  and 
biocides. 

164   See (European Commission, 2020). See also (NGO Shipbreaking Platform, 2022). 
165   Research outcomes can contribute to the development of regulations and guidelines for the vessels recycling industry, 

notably promoting compliance with international standards and best practices. 

166   The auctioning revenues generated under the ETS went mainly to the Member States and a portion of these went to the 

Innovation Fund and the Modernisation Fund. See (EEA, 2023). 

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level  of  knowledge  and  awareness  on  better  ship  recycling  methods,  which  would  also 
enable local authorities to improve on the detection of risky working environments.  

5.3.4  Promotion of awareness campaigns 

Another the use of forfeited funds could be directed towards the promotion of campaigns 
sharing knowledge about the actual practices in substandard recycling facilities. A portion 
of  the  forfeited  funds  should  be  allocated  to  support,  in  particular,  initiatives  aiming  at 
improving  community  engagement  and  awareness  about  the  impact  of  the  release  of 
hazardous materials into the environment and downstream negative effects on the marine 
ecosystems.  The  desk  research  carried  out  shows  that  there  is  little  literature  explicitly 
exploring this avenue, and therefore, awareness campaigns funded by forfeited funds would 
represent an innovative approach when it comes to addressing societal issues in relation to 
vessels’ recycling. In general, studies on public awareness campaigns suggest they have 
a potential impact in shaping future attitudes and behaviours.167 

5.4  Applying the certification and notification scheme 

The 2016’s study recommended further examination of the possibilities of creating a parallel 
certification and notification scheme for non-EU flagged vessels. To also encourage non-
EU  flagged  vessels  to  use  an  EU-listed  recycling  facility  under  the  proposed  financial 
instrument, it would be indeed necessary to introduce a parallel certification and notification 
regime  for  non-EU  flag  State,  similar  to  the  one  which  currently  applies  to  EU-flagged 
vessels under Articles 6 and 7 of the SRR. In this study, we looked further into the legal 
implications of this recommendation.  

When  an  EU-flagged  vessel  goes  for  recycling,  the  ship  owner  is  obliged  to  follow  the 
requirements laid down in Article 6 of the SRR. For instance, the ship owner needs to submit 
all relevant information required under Article 7 of the SRR to the recycling facility, as well 
as  informing  the relevant  administration of their  intention to recycle the  vessel.  Also, the 
ship  owner  needs  to  send  a  copy  of  the  ready  for  recycling  certificate  to  the  relevant 
recycling facility. Similarly, the recycling facility needs to draw up the recycling plan for the 
vessel,  following  the  requirements  of  Article  7.  As  the  SRR,  except  for  Article  12,  only 
applies to EU flagged vessels, Articles 6 and 7 do not apply to non-EU flagged vessels.  

This  could  lead  to  challenges  when  an  SRL  is  introduced,  as  it  would  apply  to  non-EU 
flagged vessels  as  well.  However, for  those  ship owners  of  non-EU  flagged vessels  that 
wish  to  use  their  accumulated  capital  and  recycle  their  vessel  in  an  EU-listed  recycling 
facility  challenges  might occur,  as currently,  Articles 6 and 7 do  not  apply  to  them.  As  a 
result, they are not required to have a ready for recycling certificate, do not have to notify 
the relevant administration, or fulfil any of the other requirements laid down in Article 6. This 
would lead to diverging rules between EU-flagged vessels and non-EU flagged vessels. As 
such, it can be argued to introduce a parallel system, whereby ship owners, irrespective of 
the flag of the vessels, need to notify the flag State of their intent to recycle the vessel in a 
specified  recycling  facility  and  need  to  have  a  ready-for-recycling  certificate  prior  to  any 
recycling of the vessel.  

Although extending the SRR’s application could be considered, some elements need to be 
solved first. The ready for recycling certificate is issued by the flag State or the recognised 
organisation appointed by that flag State. Currently, this applies to all EU Member States 

167   For instance, (Kotler, et al., 2002) highlighted the importance of well-designed campaigns in influencing social change, 

emphasising the need for clear messaging and targeted dissemination.  

103 

 
 
 
acting as flag States. However, if vessels with a non-EU flag would also need to have a 
ready for recycling certificate, their flag State administration should issue such a document. 
It is important to check whether posing such an obligation on non-EU flag States is possible.  

Possible  parallels  could  be  drawn  with  the  Inventory  of  Hazardous  Materials  (IHM).  The 
SRR has introduced such an obligation for the IHM. According to Article 12, vessels flying 
a non-EU flag are required to have an IHM on board meeting the requirements set by the 
SRR. To show that they are compliant with this requirement, they should ask their flag State 
administration to issue a so called ‘certificate of compliance’. Through Port State Control 
(i.e.  Article  11  SRR), Member  States  can check  whether the requirements  regarding the 
IHM have indeed been fulfilled. Under the SRR, EU Member States can verify that such a 
document is available on board of non-EU vessels calling at an EU port.  

A  similar  setup  to  the  IHM  could  somewhat  be  introduced  in  the  SRR  for  the  ready  for 
recycling certificate. However, there are also some significant differences due to the fact 
that the obligation cannot be linked to a control on the EU territory, since the vessel (i) can 
be anywhere when the decision on its recycling is taken and (ii) it is very likely it will not be 
recycled in the EU. It could however be imposed to EU-listed recycling facilities to accept 
only vessels for dismantling that hold a ready for recycling certificate in compliance of the 
EU SRR. The shipowner of a non-EU flagged vessels calling at EU ports and purchasing 
the  SRL  would  also  be  made  aware  of  the  whole  functioning  of  the  SRL,  including  the 
requirement to obtain a ready for recycling certificate in compliance with SRR at the time of 
dismantling.  In  a  similar  way  as  for  the  IHM,  the  SRR  could  mention  that  a  ready  for 
recycling certificate for non-EU flagged vessels must be issued after a final survey (i) by the 
relevant  authorities  of  the  third  country  whose  the  vessel  is  flying  the  flag  or  (ii)  by  an 
organisation  authorised  by  them,  in  accordance  with  the  national  requirements.  The 
certificate could be modelled on the basis of the Appendix 4 to the HKC. The IHM and the 
approved  ship  recycling  plan  that  are  the  basis  and  supplement  the  certificate  should, 
however, fulfil the requirements of the SRR.   

It is also worth noting that the HKC provides for the ship owner to notify the administration 
of the flag State of its intention to recycle the vessel (see Article 24 (1), Chapter 2 of the 
Annex) and send the ready for recycling certificate to the relevant recycling facility in one of 
the States party to the HKC. With the HKC entering into force in 2025, the mutual recognition 
of the ready for recycling certificates issued for vessels flying the flag of one of the States 
party to the HKC shall also apply.  

If a SRL will be implemented, the SRR should require that the EU-listed facilities recycling 
non-EU  vessels  report  about  the  start  and  completion  of  the  activities  to  the  competent 
authorities  and the  designated  European  entity  in  charge  of  implementing  the  provisions 
related to the SRL, if requested by the owner of the vessel.  

5.5 

Integration into Port State control 

In case the SRL will be introduced, the ship owners would need to provide proof that they 
are  compliant  with  the  new  obligation.  More  specifically,  they  would  need  to  have  a 
certificate  onboard  which  shows  that  the  required  payments  have  been  made.  Such  a 
certificate  needs  to  be  issued  by  a  competent  authority.  To  check  whether  a  vessel  is 
compliant (i.e. for both vessels flying the flag of an EU Member State and those flying the 
flag of a third country), Port State Control (PSC) can be used, as laid down in the Port State 
Control Directive.  

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The basis for Port State Control  

According to the United Nations Convention on the Law of the Sea (UNCLOS), coastal 
states can impose regulations on ships that (voluntarily) sail into their exclusive economic 
zone or enter one of their ports. This mechanism is reflected in Directive 2009/16/EC168 
on  Port  State  Control.  The  Directive  introduces  an  instrument  to  enforce  and  control 
existing  regulations  that  are  relevant  to  vessels  entering  EU  ports  and  allows  for  the 
possibility  of  introducing  the  necessity  of  having  a  licence,  i.e.  to  show  that  financial 
requirements  under  a  financial  instrument  have  been  met.  Based  on  the  Port  State 
Control  regime,  non-EU  vessels  entering  an  EU  port  could  also  be  subject  to  an 
inspection. 

5.5.1  Possibilities and issues to include the SRL licence into the PSC regime 

On  1  June  2023,  the  European  Commission  presented  a  new  legislative  package  which 
aims to modernise and reinforce the maritime rules on safety and pollution.169 As part of the 
package, the Port State Control Directive is to be revised as well. One of the changes added 
during the negotiation process is that the HKC is added to the list of conventions that fall 
within the scope of the European PSC regime (as a revised Article 2 (1)). This will mean 
that  requirements  resulting  from  the  HKC  can  be  inspected  during  European  Port  State 
Control inspections. During European Port State Control inspections not only is compliance 
with a set of international conventions checked; compliance with relevant Community law 
may be as well. If enforcement of a specific Regulation or Directive is to be carried out in 
the EU by means of PSC inspection, such an obligation is laid down in a specific Regulation 
or  Directive.  As  regards ship recycling,  the  SRR does this  for  the IHM  and the  ready for 
recycling  certificate  (see  Article  11  of the  SRR). As,  and  when, the  SRL is  introduced,  a 
similar  obligation  can  be  included  in  the  SRR  and  then  the  PSC  Directive  will  apply  it 
automatically to all PSC inspections carried out in EU ports.  

It is worth observing that an area where issues may arise between the SRR and the PSC 
Directive  relates to larger fishing  vessels.  Such  vessels  are  covered  by  the  SRR  and,  in 
case  a SRL  would be  introduced,  it  would fall  under the financial  incentive  regime.  As  a 
result, they should be issued with and carry on board a certificate. However, it would not be 
possible to use the PSC as an instrument to check whether a certificate is on board of the 
vessel,  as  the  PSC  Directive  does  not  cover  fishing  vessels.  The  revised  PSC  Directive 
provides  the  possibility  for  Member  States  to  extend  the  PSC  regime to fishing  vessels; 
however, the choice to do so is voluntary. How many Member States will opt for such an 
extension is currently unknown. 

Another  possible  issue  might  arise  in  case  it  is  decided  to  extend  the  SRR’s  scope  to 
vessels smaller than 500 GT (see also section 5.7). These vessels are excluded from the 
scope of the PSC Directive (Article 3 (4)). As mentioned in previous paragraph, in the case 
of a small fishing vessel, a Member State might have opted for the voluntary inclusion in 
PSC.  

168   Official Journal of the European Union (2009). Directive 2009/16/EC of the European Parliament and of the Council of 

23 April 2009 on port State control (Recast), 28.5.2009 L 131/57. 

169   See also here.  

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5.5.2  Procedure for inspecting the SRL certificate 

The  SRR  currently  requires  two  documents,  the  inventory  certificate  (Article  5)  and  the 
ready  for  recycling  certificate  (Article  6),  which  should  be  inspected  during  the  PSC 
inspections  (Article  11  (1)).  These  documents  should  be  kept  on  board  and  ready  for 
inspection when needed. During such an inspection,170 an inspector from the relevant port 
state only needs to check whether one of the two documents is available.171 In case the 
document is on board and still valid, no further action is required. In case the document is 
not present or is no longer valid, the inspector from the relevant port state may decide to 
carry out a detailed inspection under the SRR regime; however, it is not obliged to do so 
(Article 11 (2)).172 Once the SRL is introduced, it seems likely that the same procedure will 
be adopted for this certificate as well. 

As the main check done by the inspector of the relevant port state is to check whether the 
certificate is present or not, the additional effort required is very limited. Per vessel, only a 
few seconds will be added to the current procedure. 

Within  the  revision  of  the  PSC  Directive,  the  digitalisation  of  the  certificate  has  been 
proposed by the Commission, whereby flag States and the ROs acting on their behalf can 
pre-load the certificates related to vessels to the THETIS database.173 In such a system, it 
is envisioned that the inspector of the relevant port state will have access to the statutory 
and  other  certificates  related  to  the  vessels  to  be  inspected  prior  to  the  inspection,  and 
therefore, will be able to check beforehand whether all requested information is available. 
Based on the outcome of the assessment the inspector of the relevant port state can better 
prepare  and  focus  their  inspection.  When  these  checks  are  already  done,  onboard  time 
could be saved. Especially as regards the certificates that are simply required to be there, 
the inspector of the relevant port state could see a box containing a ‘yes’ or ‘no’. In case of 
a ‘yes’, the check for that document is complete. The system could be constructed in such 
a way that the inspector has the information available in one view. Efforts to check would 
be minimal. Although digitalisation has many advantages, it has not yet become compulsory 
under the new PSC regime (digitalisation of full certificates is voluntary). Member States 
can decide for themselves whether or not the sharing of documents will be done digitally. 
Some,  like Denmark,  have  introduced  a  digitalised  system,  while others are  carrying  out 
pilot actions such as Malta, Cyprus, and Italy. However, as there is no obligation to issue or 
to accept digital shipping documents, each vessel still typically carries a paper set as well.  

5.6  Setting up a monitoring and evaluation regime 

Taking  stock  of  the  results  presented  in  the  previous  chapter  on  the  assessment  of  the 
SRL’s impacts as financial incentive for future implementation according to Article 29 of the 
SRR,  we  will  describe  in  this  section  how  the  revenue  gap  is  to  be  covered  by  the 
mechanism,  and  the  associated  fee  levels,  will  be  verified  and  adjusted.  Firstly,  we 
introduce the operational objectives, derived from the SRL’s specific objectives. Secondly, 

Inspections would be carried out by inspectors acting under the PSC regime and the SRR regime. 

170  
171   Article 11 (1) states that ‘any such inspection shall be limited to checking that either an inventory certificate or a ready 
for recycling certificate is kept on board, which, if valid, shall be considered sufficient for the inspection to be approved.’ 
172   Article 11 (2) states that ‘a detailed inspection may be carried out.’ The use of the word ‘may’ leaves it to the discretion 

of the inspector of the relevant port state to take further action or not.  

173   THETIS is hosted, maintained, and operated by EMSA. The system is available to all relevant authorities in the Paris 
Memorandum of Understanding area, and provides functionalities for reporting, consulting, correction and publication of 
inspection reports. THETIS stores and processes ship call information; calculates the Ship Risk Profile and Priority for 
each vessel in the database on a daily basis; organises the workflow from call to inspection, report and follow up action; 
and provides and publishes information. 

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we  describe  the  monitoring  framework.  Thirdly,  we  analyse  the  SRL  with  respect  to  the 
proportionality and subsidiarity principles. 

A  set  of  operational  objectives  is  directly  derived  from  the  analysis  of  the  problems  that 
identified  the  SRL  as  potential  financial  incentive  to  facilitate  safe  and  environmentally 
sound ship recycling. The operational objectives reflect the nature and design of the SRL. 
As  such,  the  operational  objectives  are  specific  to  the  SRL  and  linked  with  bespoke 
indicators  to  allow  future  monitoring  and  evaluation  of  the  legal  documents  (i.e.  policy 
instrument), as well as implementation of other non-legal documents originating from this 
initiative. 

The operational objectives and related monitoring indicators have been set to be concrete, 
precise  enough,  and  not  open  to  different  interpretations  by  the  stakeholders  that  this 
initiative  is  targeting;  namely,  the  key  actors  involved  in  maritime  transport  and  ship 
recycling  activities.  The  indicators  have  been  designed  to  follow  the  future  state  of  ship 
recycling in measurable terms in view of allowing, as far as possible, quantitative verification 
of the SRL’s achievements being implemented when compared to the situation without the 
initiative being implemented. The list of operational objectives and monitoring indicators in 
presented in Table 5.2. 

On the basis of operational objectives and indicators, the monitoring framework related to 
the  SRL  should  also  cover  aspects  that  are  specific  for  its  implementation.  In  turn,  they 
should  be  linked  to  the  changes  that  might  be  necessary  to  (i)  adjust  the  current  legal 
framework  and  (ii)  adopt  other  measures  to  enable  the  SRL’s  full  implementation  in  the 
future. Because the objective of the overall study covers a number of innovative aspects 
that  do  not  exist  in  the  current  situation,  the  monitoring framework  shall  look  at  how  the 
changes stemming from the implementation of the SRL will unfold with respect to: 

• 

• 

• 

• 

the fleet to which the potential financial incentives apply and the evolution of the main 
characteristics  thereof  in  the  future  (i.e.  age  of  retirement,  size,  type,  and  operating 
profile); 

the scope of application, when it comes to the flags flown by vessels calling at EU ports; 

the recycling capacity and quality of the facilities, in terms of number of active facilities, 
dismantling  methods,  social  and  environmental  standards,  and  effective  recycling 
capacity; 

the likely evolution of the scrap steel’s price in the regions where the recycling facilities 
are  located  and  external  factors  that  influence  the  changes  thereof  (e.g.  change  of 
technologies to produce steel from recycled metals). 

Besides  the  innovative  technical  aspect  and  operational  ramifications  above,  the 
implementation  of  the  SRL  also envisages  to  allocate  the responsibility for  implementing 
the  new  regulatory  requirements  to  a  designated  European  entity.  The  monitoring  and 
implementation  regime  shall  also  take  into  account  its  tasks  and  functions,  and 
subsequently  any  downstream  adjustment  and  recurrent  costs  related  to  them  (see  also 
section 5.2). 

Taking stock of the innovative elements and centralised functions that we linked to the future 
implementation of the SRL, the monitoring framework needs to be fed with information and 
data  gathered  on  regular  basis  (preferably  on  a  yearly  basis)  to  closely  follow  how  the 
implementation and application thereof will bring about changes over the next years.  

The relevant data and information on the fleet composition and port calls should be available 
from  EMSA,  EQUASIS  and  UNCTAD.  Relevant  data  should  also  be  available  from  the 
European Commission’s services through its periodic reporting about the list of approved 
recycling facilities. Other relevant data could be provided by the designated European entity 
on  the  basis  of the  actual  tasks  and functions thereof  (and  their  evolution through time). 

107 

Table 5.2 shows in detail the sources of information from which to gather information and 
data to analyse the future changes. 

Table 5.2 Proposed operational objectives and monitoring framework for the SRL 

Operational objective 
Monitoring of the evolution of 
the fleet and characteristics 
thereof 

Monitoring of the evolution of 
the calls at EU ports 

Monitoring of the evolution of 
the recycling capacity 

Monitoring of the evolution of 
the price of the end-of-life 
vessels sold for scraping and 
of the scrap steel on local 
markets 

Indicator 

Source of the information 

•  Type of the vessel 
•  Size of the vessel 

(measured in GT, LDT 
and DWT) 

•  Type and quantity of the 
hazardous materials on 
board 

•  Age of the vessel when 
sailed to a recycling 
facility 

•  Flag flown by a vessel at 
time t-X before sailing to 
a recycling facility 
•  Flag flown by a vessel 

when recycled 
•  Volume of port calls 

broken down by flags 
flow 

•  Number of EU-approved 

recycling facilities 
•  Maximum annual 

recycling output 
•  Theoretical recycling 

capacity 

•  Recycling methods  
•  Recycling costs (capital 

and operational) 
•  Price of end-of-life 

vessels in the countries 
where the recycling 
facilities are located 
•  Price of the steel on the 
local market (i.e. proxy 
indicator of the price of 
scrap steel for end-of-life 
vessels, if this indicator is 
not available) 
Import and export of 
scrap steel, in countries 
where recycling facilities 
are located 

• 

•  EMSA 
•  Equasis 
•  Other international 

organisations (i.e. IMO 
and UNCTAD) 

•  EMSA 
•  Private organisations 

monitoring maritime 
traffic, notably to 
complement information 
available by EMSA 
services data 

•  European Commission 
•  Recycling facilities 

(individual organisation 
and umbrella 
association)  

•  Steel industry (individual 

organisations and 
umbrella association), 
notably in relation to 
providing the price of the 
scrap steel purchased to 
the recycling facilities 

•  Recycling facilities, 

notably in relation to 
providing the price of the 
scrap steel sold to the 
steel industry 
•  Recycling rates of 

different types of vessels 
provided by cash buyers 
(e.g. GMS) 

Establish a designated 
European entity (or EIB/EIF?) 

•  List of tasks and 

•  Designated European 

functions 

•  Administrative costs (i.e. 
one-off and recurrent) 

entity, notably in relation 
to the costs, volume of 
revenues from the 
premium levied, volume 

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Operational objective 

Indicator 

Source of the information 

of capital returned to ship 
owners and volume of 
forfeited funds 

•  European Commission 

and relevant Directorate-
Generals (i.e. ENV, 
ECFIN and MOVE) 

•  Adjustment costs (i.e. 
one-off and recurrent) 

•  Enforcement costs (i.e. 

one-off and recurrent) 
•  Activity profiles related to 
the implementation of 
tasks and functions and 
sources of cost 
•  Fee and volume of 
revenues from the 
premium levied (i.e. ship 
recycling fund) 

•  Volume of the capital 

returned to ship owners 
for recycling in a safe 
and environmentally 
sound manner  

•  Volume of the forfeited 

funds 

Source: compilation of the authors. 

Another aspect that should be considered in setting up a monitoring and evaluation regime 
related  to  the  SRL’s  is  the  interaction  with  other  existing  or  potentially  emerging 
mechanisms  at  international  level.  The  interaction  of  the  SRL  with  other  instruments  is 
crucial, when it comes to the environmental policy and relevant to encourage ship recycling 
standards that are more ambitious than those established under HKC.174 

Assuming,  for  example,  that  another  large  regional  organisation  decided  to  implement  a 
similar  financial  incentive,  the  vessels  calling  at  ports  in  different  regions  would  have  to 
purchase two licences and  accumulate  twice the  premium  on  an  annual  basis.  A  similar 
issue  might  arise  with  other  financial  instruments  being  implemented  and  previously 
analysed, such as a port tax, a ship recycling guarantee, recycling accounts, and recycling 
insurance.  As  the  SRL  would  work  in  parallel  with  other  existing  financial  instruments, 
adjustments to the SRL’s functioning should be necessary. For example, if another financial 
instrument  was  based  on  a  centralised  list  of  approved  recycling  facilities,  it  would  be 
necessary to consider exemptions or financial deductions to reduce the costs borne by the 
ship owners. Eventually, different regimes working in parallel based on centralised lists of 
recycling  facilities  would  call  for  implementing  and  harmonising  the  facilities’  recycling 
standards in order to ensure full compatibility of the different financial incentives established 
at global scale.  

5.7 

Impacts of a possible extension of the SRL to small vessels (< 500 GT) 

5.7.1 

Introduction 

Currently, vessels smaller than 500 GT are excluded from the SRR. This group consists 
mainly of  smaller fishing vessels, but also includes recreational crafts. In this section, we 
will highlight the possible impacts of the SRL’s extension for the smaller vessels. The survey 
questionnaire provided stakeholders’ opinions on extending the SRL to vessels smaller than 
500  GT.  Figure  5.2  shows  that  there  are  mixed  opinions  of  the  stakeholders  on  this 
extension. 

174   See (Devaux & Nicolai, 2020). 

109 

 
 
The  stakeholders  that  are  in  favour  indicate  that  this  would  be  consistent  with  the 
broadening of the scope of the EU SRR and that the same rules should apply to all vessel 
types, including pleasure yachts. The stakeholders that disagree with the extension are also 
often  not  in  favour  of  the  financial  instrument  either.  The  other  arguments  against  the 
extension of under 500 GT vessels are that (i) it would cause market distortion, given that 
the scope of SRR would be wider than the one of the HKC and (ii) it would unreasonably 
add a disproportionate burden to small shipping companies, and thus it would not be in line 
with the principle of proportionality. Lastly, a stakeholder brought forward to be careful not 
to develop a complete system where too much time is spent on administration: if a small 
vessel  needs  IHM  reporting  and  the  recycling  facility  a  ship  recycling  plan,  it  might 
incentivise reflagging or sinking the vessel into the sea. 

Figure 5.2                    p             q        ‘The financial instrument in the form of 
a Ship Recycling Licence should apply to vessels smaller than 500 GT’ 

Source: consortium elaboration based on targeted survey questionnaire. 

5.7.2 

Impacts and implications of extending the Ship Recycling Licence to smaller 
vessels 

An  ageing  vessel  fleet,  especially  less  than  500  GT,  could  be  a  key  market  driver  for 
recycling. For these vessels there are other alternatives to vessel disposal, like deliberately 
sinking it (and converting it into a coral reef) or to convert it into a museum. However, every 
alternative has severe drawbacks. The deliberate sinking method calls for an exhaustive 
pre-cleaning process and removal of all toxic materials that make up the vessel, such as 
heavy metals, batteries, fuel, oils, etc., which may harm the environment. In this light, the 
extension of a financial incentive towards vessels smaller than 500 GT may increase the 
environmental  benefits for the society. On  the  other  hand, smaller  ship owners might  be 
less worried about their environmental reputation and might be more easily willing to reflag 
and use non-EU listed recycling facilities. The latter, however, could be of minor concern 
as, given the size of the vessels, the benefit of recycling at a non-EU listed facility is less 
profound than for larger vessels. For example, for a vessel of 500 GT, given the recycling 
price gap of € 370 per LDT, ranges for the vessel types between approximately € 43,311 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

and € 90,512.175 Ship owners, therefore, would likely refrain from recycling the vessel to a 
non-EU  listed  facility  given  the  minor  revenue  of  the  decision,  taking  into  account 
operational costs to transfer the vessel. 

For small vessels, the extension of the financial instrument implies that an IHM has to be 
present. According to the evaluation of the SRR (Objective A) the costs of an IHM can vary 
between € 3,800 and € 6,176 per vessel,176 depending on the type/size of the vessel and 
the quality of the inventory provided. In addition, the maintenance of the inventory ranges 
on average between € 475 and € 950 per vessel per year, depending on the amount and 
complexity of the information to update.  

The safe and sound recycling prediction model allows for simulating the economic impacts 
of extending the financial instrument to include smaller vessels as well, such as below the 
500  GT  threshold  size.  Including  this  category  of  vessels  into  the  prediction  model  also 
results in updated figures displayed in Table 5.3. According to the results, more vessels will 
be recycled in a safe and environmentally sound manner. For the smallest category, using 
the corresponding fee level of the SRL and the basic design assumptions, in 2045, 75% 
would  already  be  recycled  in  a  safe  and  environmentally  sound  manner.  From  2048 
onwards, all small vessels would be recycled in a safe and environmentally sound manner. 
Currently, despite the price cap there are ships already being recycled in EU-listed recycling 
facilities due to reasons other than price. Our model does not take that into consideration. 
This also applies for small vessels. 

Table 5.3 Economic impacts of without and with extension to small vessels (i.e. < 500 GT) 

Impacts 

Average of the vessels opting for safe and 
sound recycling 
Lowest and highest % of vessels opting for 
sound recycling by age category 
Lowest and highest % of vessels going for 
sound recycling by size category 
Cumulative soundly recycled at year 25 of the 
licence (LDT million) 
Cumulative size of the fund at year 25 of the 
licence (€ billion) 

Source: compilation of the authors. 

Without extension to 
small vessels (<500 
GT) 

With extension to 
small vessels 

54% 

56% 

35% (15-25 years old) 
80% (0-4 years old) 
44% (Very large) 
61% (Medium) 
29.0 

38% (15-25 years old) 
81% (0-4 years old) 
44% (Very large) 
61% (Medium) 
28.8 

13.0 

19.3 

175   Taking into account the conversion rate of GT to LDT per vessel type. The conversion rate ranges from 0.41 for bulk 

carriers to 0.83 for offshore vessels. 
Information retrieved via interviews. Conversion rate assumed at $ 1.00 equal to € 0.95. 

176  

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6  Conclusions and recommendations 

6.1  Possible future implications implementing the SRL 

6.1.1  Economic and technical implications 

Because the SRL’s effectiveness in achieving the objective of recycling end-of-life vessels 
in a safe and environmentally sound manner depends on how many ship owners will opt for 
EU-listed recycling facilities, the SRL’s first impact would be on the number of vessels safely 
and soundly recycled. The review of the literature and consultation activities with sector’s 
stakeholders  suggest  that  this  decision  strongly  depends  on  the  price  offered  (i.e.  the 
demolition rates and costs) by the recycling facilities to buy an end-of-life vessel. The  ship 
owners’  decision  is  economically  driven  and  the analysis  of  the  demolition  rates  showed 
that a substantial price gap exists between the demolition rates offered by recycling facilities 
located  in  South  Asia  compared  with  the  demolition  rates  offered  by  EU-listed  recycling 
facilities (i.e. € 370 per LDT). Moreover, the economics of ship recycling showed that the 
value of the demolition rates significantly depend on the demand for high-quality recycled 
steel  and  other  materials  in  the  country  where  an  end-of-life  vessel  is  sent  (i.e.  on  the 
balance between import and export of scrap steel) and its processing method (melting or 
re-rolling). 

Therefore, to achieve the objective of safe and environmentally sound ship recycling, the 
SRL is meant to work as financial incentive to ensure that the accumulated capital received 
by the last ship owner can bridge the price gap between recycling a vessel in an EU-listed 
recycling  facility  instead  of  in  a  facility  not  recycling  the  vessels  in  a  safe  and 
environmentally sound manner. The analysis of the trend of the demolition rate offered and 
the future projection thereof should therefore be assumed as a key driver in carrying out an 
impact  assessment  study  for  a  future  SRR  revision.  In this  respect,  the  literature  review 
showed that the value of the demolition rate offered to a ship owner depends on the demand 
of scrapped steel in the country where an end-of-life vessel will be recycled. That means 
that  for  other  future  analyses  on  the  implementation  of  a  financial  incentive,  it  will  be 
important to elaborate a sound analysis of the local economic conditions that determine the 
price of the scrapped steel. This analysis will be important also considering that, as pointed 
out  by  stakeholders  representing  the  steel  industry,  the  continuous  fluctuation  of  the 
recycled steel price makes it very difficult, if not impossible, to predict any long-term trend 
thereof.177 

There are also other key elements that might influence ship owner’s behaviour regarding 
the chosen recycling facility and the amount of capital accumulated. Firstly, the entering into 
force in June 2025 of the HKC is likely will have an impact on the recycling costs of non-EU 
listed recycling facilities. However, the short time period elapsed since the conditions for its 
entry into force have been met did not make it possible to elaborate quantitatively on the 
economic implications; therefore, qualitative analysis has been carried out elaborating on 
the  baseline  scenario.  Secondly,  although  the  review  of  the  literature  and  consultation 
activities  showed  that  the  age  of  the  vessel  is  a  key  parameter,  when  it  comes  to  the 
decision of a ship owner to retire a vessel from the fleet, other contingent market conditions 
or unforeseen socio-economic situations might be a relevant influencing factor deserving 
attention  too.  Thirdly,  a  vessel  may  be  damaged  during  its  operational  life  and  have  its 
actual operating period reduced. As a result, the amount of the capital collected might not 
be sufficient for the SRL to act as an actual financial incentive and eventually induce the 

177   The forecasts provided in an article by the European Federation of Associations of Steel, Tube and Metal Merchants 
(Eurometal) show that the association estimated variations on a short-term basis (i.e. from February to March 2023). 

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ship  owners  to  opt  for  recycling  facilities  outside  the  EU  list  and  forfeit  the  amount 
accumulated.178 

Beside a quantitative assessment of the economic effect stemming from the entry into force 
of  the  HKC,  a  future  impact  assessment  study  should  factor  in  the  analysis  of  the  main 
problems  and  problem  drivers  linked  to  the  other  abovementioned  elements,  in  order  to 
properly identify their scale, causes, interlinkages, and consequences. At the same time, 
the  analysis  of  the  problems  and  problem  drivers  should  inform  the  final  design  of  the 
financial incentive. The purpose of the analysis of the economic and technical impacts of 
implementing  the  SRL  should  be  to  verify,  with  the  HKC  in  force,  if  the  problems  and 
problem drivers (and the need for a policy initiative) will persist, as well as to set a sound 
and comprehensive (quantitative) baseline scenario against which the impacts of the policy 
measures and options will be measured and compared. 

Equally  important  is  that  the  SRL’s  effectiveness  also  depends  on  the  future  recycling 
capacity of the EU list. According to the study in support of the evaluation of the SRR, the 
observed  maximum  recycling  output  has  been  found  far  below  the  maximum  theoretical 
capacity of the EU-listed recycling facilities (i.e. 46% thereof, based on the 12th edition of 
the EU list adopted by the European Commission in 2023). However, the results originating 
from  the  elaboration  of  the  baseline  situation  for  this  study  and  quantitative  analyses 
gathered  from  the  stakeholder  consultation  forecast  a  significant  increase  in  volume  of 
vessels  to  be  recycled.179  Taking  into  account  the  projections  of  the  baseline,  chapter  4 
analysed the impacts that would stem from the implementation of the SRL and its ability to 
accumulate  sufficient  revenues  to  bridge  the  price  gap  between  recycling  in  EU  listed 
facilities  and  in  other  facilities  operating  under  less  safe  and  environmentally  sound 
recycling  methods.  The  impacts  are  assessed  in  incremental  terms  with  respect  to  the 
baseline situation established in chapter 3 and in which the entry into force of the HKC has 
been qualitatively addressed.180 

Moreover, as a non-incentive mechanism could arise both from poor shock anticipation and 
strategically underestimating the difference between two recycling options, a mechanism to 
monitor the ‘premium’ periodically would be necessary to update the revenue gap for the 
SRL’s accumulated capital. The mechanism would factor in unforeseen situations and allow 
to adjust  the  associated fee  levels  accordingly.  For this  reason,  the  possible uses  of the 
forfeited funds would also deserve further explorations in the interest of pursuing the SRR’s 
objectives. These important elements linked to the SRL’s implementation were analysed in 
chapter 5 of the study. 

6.1.2  Legal implications 

The study also showed that the introduction of a SRL requires a thorough legal assessment, 
as waste disposal legislation, including ship recycling, is governed by EU law under Articles 
174-175  of  the  TFEU.  These  provisions  aim  to ensure  smooth market  functioning,  while 
avoiding  competition  distortion.  The  EU’s  waste  management  provisions  typically  pass 
disposal  costs  to  consumers,  but  the  maritime  sector’s  unique  nature  presents  legal 
complexities.  

178   According to Devaux and Nicolai (2020), on this occasion, the contributions retained by the EU would generate a tax 

revenue and essentially an hidden tax for the sector. 
179   See also (Mosconi & Tola, 2023) and (Sea2Cradle, 2023). 
180  

In this respect, another aspect worth analysing for the future implementation of the SRL is the potential conflict that a 
financial incentive applied in the EU would have with respect to the coastal states’ role in approving the ship recycling 
facilities  under  the  HKC,  and  then,  the  Flag State  allowing  their flagged  vessels to  use them.  A  potential side  effect 
thereof would also the downplay of the role of the class societies working on behalf of the Flag or Coastal state to approve 
the recycling facilities and, eventually, question the adequacy of their audit system. The Commission should consider to 
analyse these consequences implementing the evaluation of the legislative text stemming from the revision of the SRR. 

113 

 
 
The SRL, designed as a financial incentive for both EU and non-EU-flagged vessels calling 
EU ports, raises significant legal questions. A precedent exists in a 2011 European Court 
of Justice ruling (Case 366/10), which upheld the legality of financial contributions imposed 
on  non-EU  aviation  companies  under  the  ETS,  provided  that  the  funds  benefit  all 
contributors  equally.  The  SRL  follows  a  similar  structure,  but  compliance  with  WTO 
regulations,  particularly  the  General  Agreement  on  Tariffs  and  Trade  (GATT),  must  be 
examined.  GATT’s  Article  V  prohibits  unnecessary  transit  restrictions  and  prevents 
discrimination  based  on  vessel  origin,  requiring  the  SRL’s  contributions  to  be  framed  as 
premiums rather than charges. If contested, the measure could still be justified under Article 
XX  GATT,  which  allows  exceptions  for  environmental  and  worker  protection  under  non-
arbitrary conditions.  

Moreover, the SRL must adhere to WTO’s Most Favoured Nation (MFN) principle to prevent 
de  facto  discrimination  between  shipowners  of  different  nationalities.  The  General 
Agreement  on  Trade  in  Services  (GATS)  also  applies,  covering  maritime  transport  and 
environmental  services.  While  GATS  generally  upholds  non-discriminatory  treatment,  its 
MFN clause does not extend to maritime transport, though transparency and legal recourse 
remain  required.  The  SRL,  by favouring  environmentally  sound  recycling  facilities  on  the 
EU  list,  could  be  seen  as  altering  the  competitive  conditions,  potentially  conflicting  with 
GATS commitments. However, its legitimacy could be defended under Article XIV(b) GATS, 
which  allows  trade-restrictive  measures  for  environmental  protection,  provided  no  less 
restrictive alternatives exist. A parallel can be drawn with the EU’s greenhouse gas emission 
obligations  under  the  ETS,  which  the  CJEU  deemed  lawful.  Consequently,  while  legal 
obstacles  exist,  precedents  suggest  the  SRL  could  withstand  a  legal  scrutiny  if  it  will  be 
structured carefully to align with WTO and EU trade regulations. 

6.2  Main conclusions on the SRL 

To be effective, a financial instrument must be capable of inducing a change of behaviour 
on  the  part  of  the  ship  owners  towards  vessel  recycling  in  compliance  with  the  SRR’s 
provisions. More specifically, the higher revenues for the end-of-life vessel offered currently 
for recycling to ship owners who opt to recycle their vessels at unsafe and environmentally 
unsound recycling facilities rather than at EU listed facilities must be neutralised or even 
reversed. 

The literature review showed that previous studies considered a number of different options 
as potential financial instrument. They were categorised in two options. On the one hand, 
instruments  obliging  the  ship  owners  to  collect  the  required  capital  through  a  privately 
managed mechanism that is attached to a unique vessel (i.e. Ship Recycling Guarantee, 
Ship  Recycling  Escrow  Account  and  Ship  Recycling  Insurance).  On  the  other  hand, 
instruments obliging the ship owners to contribute to a public regime through a fund based 
on  payments  to be  made  when  accessing  the  EU  ports  (i.e.  port  levy  or  Ship  Recycling 
Fund). 

The study of 2016 identified and analysed these various options for a financial instrument 
and used them to design a new financial instrument which consists of purchasing a Ship 
Recycling Licence (SRL) as a mechanism to collect capital for sound recycling when calling 
at  EU  ports.  The  SRL  overcomes  the  main  shortcomings  of  the  other  options,  and  its 
principles are as follows. 

• 

It obliges all vessels that call at EU ports (regardless of their flag) to obtain a prior licence 
from  a  designated  European  entity;  an  instrument  of  public,  administrative  law  is 

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created.  The  licence  can  be  used  to  provide  a financial  incentive  to  opt  for  safe  and 
environmentally  sound  ship  recycling  in  EU-listed  yards,  as  well  as  a  penalty  (i.e. 
forfeiture of accrued rights) in case of failure to comply. The purpose for the creation of 
the SRL is to achieve the SRR’s public policy objectives of safe and environmentally 
sound ship recycling;  

•  The SRL’s basis is that a contribution is charged to ship owners when they apply for it, 
consisting of two elements. Firstly, a small charge to cover the administrative costs of 
issuing the SRL (i.e. a ‘contribution’). Secondly, a ‘premium’, levied from the ship owner 
and  transferred  to  the  ship  recycling  fund,  where  it  is  administered  separately  (i.e. 
‘earmarked’)  in  a  transparent  manner,  together  with  the  other  capital  already 
accumulated by the relevant vessel as an individual credit to a future payment  of the 
same amount; 

•  The  amount  of  the  premium  levied  depends  on  the  capital  amount  that  needs  to  be 
accumulated  for  the  relevant  vessel  which  depends  on  (i)  factors  connected  to  the 
individual characteristics of the vessel (e.g. its size and type), (ii) exogenous variables 
that  cannot  be  designed  via  policy  measures  (e.g.  price  of  the  recycled  steel  and 
operating costs of the recycling facilities) and (iii) design assumptions of the financial 
instrument (e.g. payment duration). To be effective in terms of recycling behaviour, the 
capital amount needs to bridge the revenue gap between the revenues for a ship owner 
opting  for  ship  recycling  in  compliance  with  the  SRR  and  the  situation  with  the  ship 
owner opting for a more lucrative recycling option offered by facilities not operating safe 
and environmentally sound ship recycling; 

• 

In order to avoid that the SRL and the premium levied from vessels calling at EU ports 
work out disproportionally for vessels with either a very high frequency (e.g. tugboats 
and coastal vessels) or a very low frequency of calling at EU ports, the SRL’s validity 
would be time-based rather than linked to the number of calls. The duration of the SRL’s 
validity could be differentiated, thus offering ship owners the choice to apply for an SRL 
with a validity of a month instead of a year, and to adjust the premium accordingly. 

•  The  full  capital  amount  does  not  become  payable  until  after  the  vessel  has  been 
recycled. It  is  payable to  the  ultimate ship  owner  and is  subject to the fulfilment  of  a 
condition. Only if the ultimate ship owner proves that the vessel has been recycled in 
compliance  with  the  SRR  at  a  recycling  facility  included  in  the  EU-listed  recycling 
facilities  will  the  capital  amount  earmarked  for  the  vessel  be  paid  out.  If,  however,  it 
becomes apparent that the vessel has been recycled in a facility not included in the EU-
listed recycling facilities, the ship owner forfeits the accrued rights to the payment of the 
capital amount. Once the forfeiture procedure to be prescribed has been concluded, the 
capital amount will be transmitted by the Ship Recycling Fund to a general benefit fund 
in the area of ship recycling. The said procedure will need to be an administrative law 
procedure at the European level, which allows for the possibility of judicial review. 

In the baseline situation, we forecast the number of recycled vessels based on the average 
historical  retirement  age  and  order  books  for  construction  new  vessels.  The  estimated 
projections for the world fleet show a peak of recycling activities foreseen at 2033, going 
from about 18 million LDT currently to almost 25 million LDT. The peak would be the result 
of  the  large  expansion  of  the  global fleet  in  the 2000s,  which is  ageing and will  likely  be 
recycled within a decade. After this peak, the projection foresees that there will be fewer 
vessels available for recycling based on their average age, and the recycling activity would 
decrease to just over 22 million LDT per year in 2042.  

With  future  recycling  needs  expected  to  increase,  the  recycling  capacity  of  EU-listed 
recycling  facilities  will  also  need  to  grow.  For  the  baseline  situation,  a  peak  in  recycling 
needs for EU-flagged vessels is expected in 2033, at nearly 2.5 million LDT, which cannot 
be met with the EU list as it stands in its 12th edition, even if the recycling facilities were 
operated at the current maximum theoretical recycling capacity. There is therefore a need 
to expand the capacity of the EU list to accommodate future needs and meet the demand 

115 

for  recycling.  This  applies  especially  if  (i)  the  EU  has  the  ambition  of  including  non-EU 
flagged  vessels  that  call  on  EU  ports  under  the  purview  of  its  ship  recycling  policies  to 
disincentivise the behaviour of changing the flag flown, or (ii) if the peak in recycling will 
occur with more vessels during a shorter timeframe (e.g. for changed market situation or 
with  environmental  regulations  applying  to  vessels),  a  situation  that  could  make  the 
recycling  peak  narrower  and  taller.  The  recycling  capacity  of  facilities  located  in  other 
regions of the world could represent an opportunity for the list of EU-approved yards to grow 
in recycling capacity, and therefore accommodate the projected future peak. There could 
also represent an opportunity for ship recycling facilities located in the EU to expand their 
recycling activities.   

However, this situation should also be considered in light of the entry into force of the HKC 
in 2025, which still poses several uncertainties on the actual impacts thereof. Notably, about 
how the standards of non-EU listed recycling facilities could evolve. As noted earlier, the 
baseline situation has been elaborated taking into account that the entry into force of the 
HKC,  although  given  the  short  period  of  time  elapsed  since  the  conditions  related  to  its 
ratification were met, its likely effects have been assessed only qualitatively. Other potential 
impacts  on  the  demand of for recycling  in  the  baseline  situation  might  be  caused  by the 
onset of other legislation at IMO and in the EU. 

Assuming that the financial incentive in form of the SRL will be implemented with payments 
of  licence  fee  over  a  period  of  20  years  or  until  recycling,  whichever  comes  first,  the 
estimates  show  it  would  generate  substantial  impacts  after  approximately  15  years.  The 
prediction model foresees a slow start for the share of the fleet that would opt for safe and 
environmentally  sound  recycling  in  EU-listed  yards,  because  insufficient  funds  would  be 
gathered to cover the recycling price gap. However, 15 years after its implementation, when 
about  45%  of  the  vessels  will  have  accumulated  sufficient  funds,  the  prediction  model 
foresees a big increase of vessels opting for safe and environmentally sound recycling. The 
results  of  the  sensitivity  analysis  presented  in  Table  4.9  show  that  a  change  of  the 
assumptions of the prediction model will have moderate impacts on the share of the fleet 
recycled in a safe and environmentally sound manner. 

In terms of number of SRL issued, the prediction model foresees that some 27,800 SRLs 
would  be  requested  on  annual  basis,  based  on  the  number  of  unique  vessels  that  are 
expected to call at EU ports. In relation to the estimated level of the SRL, the prediction 
model  foresees  that  it  would  be  between  about  €  108,000  and  €  756,000  per  annum, 
depending on the type of vessel. In this respect, it is worth remarking that some adverse 
economic  impact  should  be  expected,  as  the  financial  instrument  would  generate  an 
increase of the vessels’ operating costs compared to the current situation. Using operating 
costs for different vessel types, the results of the prediction suggest that for a period of 20 
years the SRL’s fee level would be between 5% and 15% on annual basis and increase up 
to 32% for very large vessels.181 

The estimates  foresee that the  SRL’s  implementation will  yield social  and environmental 
benefits, as a result of the increased recycling standards applied to end-of-life vessels. It 
can however be noted that the magnitude of the benefits that can be attributed to the SRL 
could  change  depending  on  the  speed  of  the  recycling  facilities  not  operating  today  in 
accordance with safe and environmentally sound ship recycling to invest and comply with 
the  requirements  of  the  HKC.  By  complying  with  higher  standards  more  quickly,  the 
difference between the EU-listed facilities and the facilities operating with low safety and 
environmental standards should decrease resulting in less social benefits. 

181   As noted earlier, the fee level might be different, and in principle higher, if the financial instrument is an escrow account. 

Such difference should be quantified implementing an impact assessment study. 

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6.3  Possible roadmap for implementation 

Whether the Commission decides to propose a financial incentive in the form of a SRL, and 
imposes it upon the vessels calling at EU ports, would be the result of an impact assessment 
accompanying a possible proposal to revise the SRR. If a SRL is proposed and ultimately 
adopted  by  the  co-legislators,  the  following  possible  roadmap  for  implementation  is 
recommended on the basis of the present study.  

The introduction of an SRL requires that a designated European entity is entrusted with the 
task  of  implementing  the  regulatory  requirement.  The  responsibilities  of  this  designated 
European entity would be as follows: 

•  verification  that  an  applicant  meets  the  requirements  for  receiving  the  SRL  and 
collection the contribution to be paid by the ship owner for this activity, as well as setting 
up and maintaining the needed IT systems for it; 

•  collection of information and data to set the appropriate licence premium. This task could 
be  managed  by  a  third-party  commercial  provider  and  it  also  involves  keeping  the 
information regularly updated and ensuring a properly adjusted value of the premium 
through time; 

•  actual collection of the premium and management of the Ship Recycling Fund, which 

may also be performed by a third party; 

•  verification that the SRL is in place for vessels calling at EU ports; 

•  administrative verification of sound recycling, as a basis for paying out the accumulated 

amount. 

Regarding  the  option  of  establishing  a  dedicated  European  entity,  the  estimates  foresee 
that between 20 and 21 FTE in total might be necessary for the activities to implement the 
SRL. Benchmark analysis with respect to agencies established for other transport modes 
suggests  that  the  relatively  small  size  of  the  incremental  resources  necessary  for  this 
designated entity would not justify establishing a self-standing body or another dedicated 
agency. 

The SRL requirement needs to be integrated into (i) Port State Control, as exercised by EU 
Member States under the Paris Memorandum of Understanding (i.e. the Port State Control 
Directive 2009/16/EC), and (ii) into the THETIS information system as developed by EMSA. 
Ship owners must obtain a certificate demonstrating that the required payments have been 
made to the designated European entity managing the SRL.  

The Port State Control will be important to verify compliance by checking whether vessels, 
regardless of the flag flown, possess the necessary SRL certificate. From am operational 
perspective, the inspectors of the port state would verify the presence and  validity of the 
relevant documents with the option for a detailed inspection if (i) the vessel does not carry 
a  valid  certificate  or  (ii)  there  are  clear  grounds  for  believing  the  IHM  has  not  been 
elaborated  properly  or maintained.  The  analysis  of the  procedure  for  inspecting the  SRL 
certificate  considered  the  situation  of  the  enforcement  of  the  SRL  depending  solely  on 
inspections by Port State Control, and the penalty can be light. For this situation there is a 
concern that, for vessels calling at EU ports infrequently, not obtaining the SRL might worth 
the  risk.182  However,  since  the  port  or  coast  guard  can  easily  verify  from  the  designated 
European entity’s online database whether an SRL was issued to the vessel, this does not 

182   Although it is difficult to generalise for all EU ports, it may be observed that the introduction of an SRL not only creates a 
regulatory requirement for vessels calling at EU ports, but it would also have implications for EU ports and coast guards 
of EU Member States. These ports and coast guards give effect to EU law, of which said requirement would be a part. 

117 

 
 
pose too heavy an administrative burden. In other words, the analysis about SRL suggests 
that if it will be introduced, the obligations thereof could be included in the SRR, making 
them  applicable  under  the  Port  State  Control  Directive  with  negligible  incremental 
administrative burden. 

We identified potential issues, particularly concerning larger fishing vessels covered by the 
SRR. If the SRR was extended to vessels smaller than 500 GT, the challenges will increase. 
Fishing vessels are not covered by the Port State Control Directive, and the extension of its 
scope to fishing vessels is voluntary for Member States. The interplay between the SRR 
and  the  Port  State  Control  Directive,  especially  regarding  fishing  vessels  and  smaller 
vessels, poses uncertainties that depend on Member States' choices and potential future 
extensions of regulatory scope. 

The  study  also  addressed  the  possibility  to  extend  the  mechanism  of  the  SRR  towards 
smaller vessels, which are currently excluded from the scope of SRR.183 The results of the 
analysis  carried  out  in  relation  to  this  element  of  the  SRL  show  that  it  would  produce 
relatively small effects. By adding the smaller vessels, the share of vessels opting for safe 
and  environmentally  sound  recycling  in  total  would  increase  from  54%  to  56%  and  the 
corresponding  cumulative  LDT  recycled  in  a  sound  manner  would  remain  relatively 
unchanged until the end of the assessment period in 2055. 

On  a  practical  note,  if  the  SRL  is  implemented  in  a  new  Regulation,  it  will  be  equally 
important that the mechanism could maintain its effectiveness. A constant monitoring of its 
operational implications will be necessary, and in this respect, it is recommended to include: 

•  a  regular  review  of  the  price  gap  between  recycling  in  EU-listed  yards  and  in  other 
facilities operating with less safe and environmentally sound methods of recycling (e.g. 
on an annual basis). The review of the price gap would benefit from more detailed and 
updated information obtained from the relevant recycling facilities.  

• 

the  regular  review  of  the  price  gap  observed  between  recycling  facilities  located  in 
different regions would allow to implement a more robust prediction model for the ship 
owner’s  behaviour.  This  task  should  be  one  of  the  designated  European  entity’s 
activities. 

183   According to Article 2(2)(b), the SRR excludes vessels if less than 500 GT from the scope of applications of its provisions. 

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Assessment of Opportunities and Challenges. January 2008: Paper 765, Journal 
of Air & Waste Management Association. 

MARPROF. (2022). Report on the European List of Ship Recycling Facilities. 3rd Edition 

(October, 2022): Marprof Environmental Ltd. 
Mikelis, N. (2020). The Recycling of Ships. GMS: 2nd edition. 
Mosconi, E. M., & Tola, F. (2023). First results within the strand of studies: common 

European Ship Recycling Strategy under the Cicular Economy approach. Group of 
Study: Circular Economy and Innovation for the Blue Economy of the 
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NGO Shipbreaking Platform. (2022). Breaking out Anchoring Circular Innovation for Ship 
Recycling (20 September 2022 ed.). Brussels: NGO Shipbreaking Platform. 

NGO Shipbreaking Platform. (2023). Ship Recycling in Turkey, Challenges and Future 

Direction (20 December 2023 ed.). Brussels: Ekin Sakin, Ingvild Jenssen, Helen 
Perivier, Asli Odman and Benedetta Mantoan. 

OECD. (2017). Ship recycling, An overview.  
Official Journal of the European Union. (2006). Regulation (EC) No 1013/2006 of the 

European Parliament and of the Council of 14 June 2006 on shipments of waste. 
Strasbourg: 12.7.2006, L 190/1. 

Official Journal of the European Union. (2013). Regulation (EU) No 127/2013 of the 

European Parliament and of the Council of 20 November 2013 on ship recycling 
and amending Regulaiton (EC) No 1013/2006 and Directive 2009/16/EC. 
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Official Journal of the European Union. (2015). Regulation (EU) 2015/757 of the European 

Parliament and of the Council of 29 April 2015 on the monitoring, reporting and 
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Directive 2009/16/EC. Brussels: 19.5.2015. 

Official Journal of the European Union. (2018). Directive (EU) 2018/410 of the European 
Parliament and of the Coucil of 14 March 2018 amending Directive 2003/84/EC to 
enhance cost-effective emissions and low-carbon investments, and Decision (EU) 
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European Parliament and of the Council of 27 November 2019 on sustainability-
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2023/2726 of 6 December 2023 amending Implementing Decision (EU) 2016/2323 
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Panama Canal Authority (Autoridad del Canal de Panamá - ACP). (2021, June 14). 

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Shipbreaking Platform. (2019). Impact Report 2018-2019. NGO Platform on Shipbreaking 

(asbl) Rue de la Linière 11, B - 1060 Brussels: Edited by: Ingvild Jenssen, Nicola 
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Solakivi, T., Kiiski, T., Kuusinen, T., & Ojala, L. (2021). The EuropeanShip Recycling 

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Stevens, I. E., & Johannessen, S. H. (2020). How has the EU Ship Recycling Regulation 
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Sustainable Shipping Initiative. (2021). Exploring shipping's transition to a circular 

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trends-based-ship-scrapping-patterns 
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Practice. AMMS.000607.2020: Aspects Min Miner Sci 5(2). 

122 

 
 
 
 
 
 
 
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Annex II – Procedural and methodological approach 

The study on a potential financial incentive (i.e. Objective B), is one of the three objectives 
of the wider assignment launched by the European Commission in relation to Regulation 
(EU)  No  1257/2013.  Notably,  the  follow-up  study  on  a  potential  financial  incentive  to 
facilitate safe and environmentally sound ship recycling is Task 4 of the wider assignment. 

In  addition  to  this  follow-up  study,  the  assignment  included  (i)  a  study  in  support  to  he 
evaluation of the SRR, to support the Commission’s services preparing the Staff Working 
Document  (SWD)184  (i.e.  Objective  A,  as  Task  3  of  the  wider  assignment),  and  (ii)  the 
analysis of the enforcement measures implemented by the Member States (i.e. Objective 
C, as Task 5 of the wider assignment). The three different studies had also three tasks in 
common.  Task  1  on  the  development  of  the  methodology  of  the  study.  Task  2  on  the 
collection  and  review  of  relevant  information  and  evidence.  Task  6  on  stakeholder 
consultation activities, in support of tasks 2, 3, 4 and 5. 

From  a  procedural  perspective,  the  present  study    followed  the  four  steps  illustrated  in 
Figure A.1, which also relates to the other tasks 1, 2 and 6 and that paved the way of the 
follow-up  analysis  on  a  potential  financial  incentive.  In  Task  4,  the  present  study  was 
articulated as (i) analysing descriptive statistics, (ii) reviewing and analysing the stakeholder 
consultation  activities,  (iii)  triangulating  the  data  and  formulation  of  the  findings  and  (iv) 
elaborating the baseline and the assessment of the impacts. 

Figure  A.1  Steps  of  the  follow-up  exploratory  study  on  a  potential  financial  incentive, 
methods, and deliverables 

Source: elaboration of the authors. 

From a methodological perspective, Table A.1  on the next pages provides an overview of 
the  methods  applied  in  this  follow-up  study  on  a  potential  financial  incentive  and  their 
limitations. 

184  

It should be noted that the findings from both Objective A and Objective C will be included in the analysis for Objective 
B where relevant.  

123 

 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Table A.1 Overview of the methods applied to carry out a follow-up exploratory study on a potential financial incentive 

Information 
source 

Overview 

Input to the study 

Limitations 

Literature review  The literature review was particularly rich of sources and 
useful for the elaborations  of the follow-up  exploratory 
study.  For  this  study,  the  information  gathered  until 
submission  of  the  final  report  has  been  updated 
considering  the  other  information  sources  identified 
during the previous stages of the work, as well as other 
sources  provided  by  the  stakeholders  as  part  of  the 
consultation activities. 

Elaboration 
of 
interview guidelines to 
fill information gaps 
Elaboration  of 
the 
baseline scenario and 
assessment  of 
the 
impacts 

February - 2025February 2025 
February 2025 

provided 

reviewed 

the  projections  of 

The  literature  review  contributed  to  this  study  in 
terms  of  elaboration  on  the  problems,  description 
of  the  current  situation  and  identification  of  the 
relevant  future  trends  of  the  maritime  sector.  For 
the projection of the future situation and trends, the 
literature 
quantitative 
projections developed in own analyses by relevant 
organisations and stakeholders. Although, this type 
of information was limited to few cases, which also 
includes 
the  European 
Commission Reference Scenario 2020, they have 
been deemed sufficient and of good quality for the 
purpose  of  this  study.  Where  necessary,  we  also 
complemented  and  triangulated  the  information 
gathered  from  the  literature  review  with  field 
research,  notably  via  the  targeted 
interviews 
programme.  All  in  all,  we  did  not  encounter 
limitations to the data available from the literature, 
except for (i) future evolution of the scrap steel by 
geographical context and (ii) the effects stemming 
from the entry into force of the HKC. For the former, 
it  will  be  important  in  the  future  to  implement 
constant monitoring of the evolution of the price of 
future 
the  scrap  steel 
estimations. For the ratification of the Hong  Kong 
Convention, given the short period of time elapsed 
since its ratification in June 2023, and considering 
that it will enter into force after a period of two years 
in  June  2025,  desk  research  has  not  been 
conclusive.  Quantitative  analyses  thereof  should 
be considered when carrying out a possible future 

to  elaborate 

robust 

 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Information 
source 

Overview 

Input to the study 

Limitations 

Quantitative 
information 
databases 

via 

The databases listed below were used the elaborate the 
analyses of this follow-up exploratory study: 
•  EQUASIS185 and UNCTAD186 for the fleet and its 

composition by type of vessel and size; 

•  NGO Shipbreaking Platform187 and EMSA for the 

recycled vessels;188 

•  EMSA for (aggregate) data on port calls and on the 
proportion of the global fleet under EU flags 189; 
•  European Commission’s EU Reference scenario 
2020190 for the future projections of the EU fleet, 
transport activities and port calls (EU and non-EU 
flagged vessels) (European Commission, 
Directorate-General for Climate Action, Directorate-
General for Energy, Directorate-General for Mobility 
and Transport, De Vita, A., Capros, P., Paroussos, 
L. et al., 2021); 

•  VesselFinder191 (private organisation) for 

quantitative primary data of port calls in 2019; and 
•  UN Comtrade192 database for data on import and 
exports of scrap steel of countries relevant for the 
geographical scope of the study 

The survey questionnaire was open for about a month, 
with  an  official  launching  date  on  3  March  2023.  After 
the  cleaning  process  has  been  completed,  the  team 
ended up with a sample of 79 responses, of which 69 
reached the end 

Targeted  survey 
questionnaire 

Elaboration  of 
the 
baseline scenario and 
assessment  of 
the 
impacts 

fleet, 

impact assessment  in  the  context of a revision  of 
the SRR. 
Overall,  the  past  data  on  the  world  fleet,  publicly 
from  EQUASIS  and 
available  and  gathered 
UNCTAD  websites,  provided  up-to-date  and 
comprehensive  information  distinguishing  by  type 
and size of the ships. For the future projections of 
the  EU  Commission’s  Reference 
the 
Scenario  was  the  sole  source  of  quantitative 
information in relation to the assumed time horizon. 
As  regards 
the  port  calls,  publicly  available 
information  is scarce. The  lack of this information 
has  been  resolved  purchasing  the  data  from  a 
private  organisation.  The  data  purchased  have 
been limited to 2019 to take into account the impact 
of  the  pandemic  period  on  maritime  trade  and 
traffic. 

of 

Analysis 
problems 
elaboration  of 
baseline scenario 

the 
and 
the 

The  number  of  responses  to  the  targeted  survey 
questionnaire were somewhat limited. At the same 
time,  it  should  be  considered  that  the  number  of 
stakeholders operating in the ship recycling sector 
is  also  rather  limited,  as  this  is  a  very  specific 
business  in  the  maritime  transport.  Thus,  the 
number of responses can be considered sufficient 

Information available at https://www.equasis.org/EquasisWeb/public/HomePage.  
Information available at https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=93.  
Information available at https://shipbreakingplatform.org/annual-lists/.  
Information available at https://www.emsa.europa.eu/eumaritimeprofile/section-2-the-eu-maritime-cluster.html#eu.  
Information available at https://www.emsa.europa.eu/eumaritimeprofile/section-2-the-eu-maritime-cluster.html#port.  
Information available at https://energy.ec.europa.eu/data-and-analysis/energy-modelling/policy-scenarios-delivering-european-green-deal_en.  

185  
186  
187  
188  
189  
190  
191   See also https://www.vesselfinder.com/historical-ais-data#portcalls.  
192  

Information available at https://comtradeplus.un.org/.  

125 

 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Overview 

Input to the study 

Limitations 

Information 
source 

Bespoke survey 

To  quantitatively  assess  the  environmental  impacts  a 
bespoke  survey  was  implemented  to  gather  primary 
data on the type and volume of hazardous materials on 
board  of  vessels.  An  additional  bespoke  survey  was 
also  launched  before  submission  of  the  final  report  to 
gather other illustrative cases on costs and revenues for 
facilities to recycle end-of-life vessels  

Assessment  of 
environmental 
impacts 

the 

the 

returned  by 

information  gathered 

for the use of the targeted survey results. Given the 
qualitative  nature  of  the  responses,  the  results  of 
the targeted survey questionnaire were used as a 
complementary  source  to  the  desk  research  to 
elaborate  on 
financial 
the  argument  of 
incentive. 
The  literature  review  and  the  other  consultation 
activities did not provide quantitative information on 
the  type  and  volume  of  hazardous  materials  on 
board of the vessels. Therefore, a bespoke survey 
questionnaire  was  developed  to  gather  primary 
information  from  the  relevant  stakeholders  of  the 
from  11 
sector.  The 
questionnaires 
the  stakeholders 
consists  of  401  vessels  with  a  representative 
variety  of  vessel  types  (i.e.  dry  bulk  30%,  bulk 
carriers  14%,  oil  tankers  35%,  gas  carriers  15% 
and container ships 7%). The analysis of the data 
did  not  show  limitations  or  need  to  gather  more 
information  on the type and volume of  hazardous 
materials on board of vessels.  
The literature review provided only some illustrative 
cases on costs and revenues for facilities recycling 
vessels.  The  additional  bespoke  survey  launched 
to  complement 
the  desk  research  was  not 
conclusive,  as  the  stakeholders  to  which  this 
survey  was  addressed,  could  not  provide  or 
disclose information in this respect. The qualitative 
information  provided  has  been 
to 
complement  the  evidence  gathered  through  the 
desk research. 
No  limitations  emerged  in  relation  to  the  targeted 
interviews.  The  programme  developed  for  the 
consultation  strategy  covered  all  concerned  and 
relevant stakeholder groups, and the findings were 
consistent  with  the  feedback  provided  via  the 
targeted  survey  questionnaire.  The  stakeholder 
provided  also  written  contributions  and,  in  few 

included 

Exploratory  and 
targeted 
interviews 

A  total  of  48  organisations  were  interviewed  and/or 
provided written feedback between May and September 
2023. During the targeted interviews, questions were on 
the  likely  evolution  of  the  current  situation  in  the 
absence  of  a  potential  financial  incentive  and  impacts 
stemming from its implementation 

Elaboration  of 
the 
baseline scenario and 
the 
assessment  of 
impacts 

126 

 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Overview 

Input to the study 

Limitations 

Information 
source 

Stakeholder 
workshops 

On  27  June  a  workshop  was  organised  on  the  SRR, 
including  discussion  items  on  the  introduction  of  a 
possible  financial  incentive.  Representatives  of  all 
stakeholder  groups  attained  the  workshop.  Moreover, 
on  3  August  a  dedicated  workshop  was  organised  to 
discuss the capacity of the recycling facilities of the EU-
relevant 
approved 
organisations attained the workshop (i.e. BIMCO, ISRA, 
and ECSA) 

representatives  of 

list. 

the 

Source: compilation of the authors. 

Elaboration  of 
the 
baseline scenario and 
assessment  of 
the 
impacts 

cases, also own (quantitative) analyses on forward-
looking projections, notably on the capacity of the 
recycling  facilities.  The  information  provided  has 
been  referenced  and  considered  for  triangulation 
and validation of own subsequent analyses of the 
baseline and assessment of the impacts. 
The  workshop  organised  on  SRR  did  not  provide 
relevant  information  for  this  follow-up  exploratory 
study. However, it was the occasion to agree on a 
dedicated  workshop  on  the  capacity  of  EU  listed 
recycling 
facilities.  The  dedicated  workshop 
confirmed the polarised views on this topic by the 
two  concerned  stakeholder  categories  (i.e.  ship 
owners  and  recycling  facilities),  also  in  terms  of 
quantitative information presented to support their 
own opinions on the matter. 

127 

 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Based  on  the  above,  we  conclude  that  the  information  and  data  gathered  via  the  desk 
research for this study allowed to carry out robust elaborations and quantifications for both 
the baseline and assessment of the impacts stemming from the implementation of the SRL. 
The data used from the desk research are generally up to date and provide forward-looking 
projections until the long-term cut-off date assumed at 2050. 

As  regards  the  stakeholder  consultation  activities,  the  study  relies  on  several  distinct 
stakeholder  consultation  methods,  including  a  targeted  survey  questionnaire,  a  targeted 
interview  programme  and  stakeholder  workshops.  As  illustrated  in  Table  A.1  ,  the 
consultation  methods  complemented  each  other  in  relation  to  gathering  information  and 
quantitative data. The consultation also allowed to highlight that there are polarised views 
on  the  current  and  future  recycling  capacity  of  EU-listed  facilities.  Such  divergent  views 
emerged  on  several  occasions  during  the  consultation  activities  and  need  further 
consideration, if a potential financial incentive will be implemented. 

Eventually, in relation to the element for the implementation of the SRL, which is linked to 
the new responsibilities and tasks entrusted to a European  entity, we remark that the high-
level  estimates  carried  out  on  the  basis  of  desk  research,  data  provided  by  the 
Commission’s  services  and  professional  judgment  would  need  further  follow-up  and 
validation  work.  A  benchmark  analysis  with the  activities  carried  out  by  EMSA  would  be 
beneficial to strengthen the estimates and conclude on the administrative and other costs 
with more accurate figures. 

February - 2025February 2025 
February 2025 

 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Annex  III  –  Supporting  evidence  to  the  analysis  of  the 
background 

This annex presents additional supporting evidence to the analysis presented in chapter 1 
on the background of the ship recycling sector. 

In relation to the price of the scrap steel, Figure A.2 and Figure A.3 shows the amount of 
imports and exports of waste and scrap and remelting scrap ingots in Bangladesh, India, 
Pakistan, Türkiye and the EU. The trends elaborated from UN Comtrade database for the 
period  2011-2022  show  that  for  the  three  South  Asian  countries  the  volume  of  imported 
scrap metals is by far larger than the amount exported. A similar trend should be observed 
for Türkiye, whereas the EU has been a net exporter of scrap metals throughout this period.  

The demand of imports of scrap metals is among the factors that explain the difference of 
the prices offered for end-of-life vessels by the facilities located in South Asian countries 
compared to the prices offered in Türkiye and in the EU. Figure A.4, Figure A.5 and Figure 
A.6  present  the  trends  of  the  recycling  rates  for  dry  bulk,  tanker  and  container  ships  in 
Bangladesh, India, Pakistan and Türkiye for the period 2019-2023. The trends have been 
elaborated based on the information publicly available on a weekly basis by GMS, a cash 
buyer. The trends show that for the countries that are primarily importers of recycled metals, 
the rates offered are significantly higher than the value of the rate paid by recycling facilities 
located in the EU and equal to about € 100 per LDT. 

Figure A.2 Volume of imports and exports of waste and scrap and remelting scrap ingots for 
Bangladesh, India and Pakistan (millions of tonnes, 2011-2022) 

Source: elaboration based on UN Comtrade database. 

129 

 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Figure A.3 Volume of imports and exports of waste and scrap and remelting scrap ingots for 
Türkiye and the EU (Millions of tonnes, 2011-2022) 

Source: elaboration based in UN Comtrade database and Eurostat (CEI_SRM020). 

Figure  A.4  Trend  of  recycling  rates  for  dry  bulk  ships  in  India,  Bangladesh,  Pakistan  and 
Türkiye ($/LDT, 2019-2023) 

Source: elaboration based on GMS (available at https://twitter.com/GMS_Leadership), data gathered until 31 December 2023. 

130 

 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Figure  A.5  Trend  of  demolition  rates  for  tanker  ships  in  India,  Bangladesh,  Pakistan  and 
Türkiye ($/LDT, 2019-2023) 

Source: elaboration based on GMS (available at https://twitter.com/GMS_Leadership), data gathered until 31 December 2023. 

Figure A.6 Trend of demolition rates for container ships in India, Bangladesh, Pakistan and 
Türkiye ($/LDT, 2019-2023) 

Source: elaboration based on GMS (available at https://twitter.com/GMS_Leadership), data gathered until 31 December 2023. 

The  second  factor  identified  explaining  the  difference  of  the  recycling  rates  between 
facilities located in South Asia and Europe relates the recycling method, namely the process 
used in the facility to recycle a vessel. 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

For  illustrative  purposes  only,193  Table  A.2  shows  the  values  of  the  revenues,  costs  and 
profit margin generated using (i) the beaching method in relation to recycling an oil tanker 
in Bangladesh and Pakistan and (ii) the dry-dock method in relation to recycling a general 
cargo vessel in Finland. Further, Table A.3 provides additional anecdotal evidence gathered 
consulting the stakeholders on the economics of ship recycling; the information relates to 
two vessels, one Floating Production/Offloading Vessels (FPU) and one floating production 
storage and offloading (FPSO), respectively, recycled in a facility in Europe.194 Table A.4 
provides  a  comprehensive  description  of the  four recycling methods that  can  be  used to 
recycle the vessels. 

Table A.2 The economics of ship recycling for a sample of vessels (for illustrative purpose 
only), data gathered from desk research 

Category 

Element 

Panamax oil tanker 

General cargo 

Revenue (€)  Steel 

Bangladesh 
(2016) 
4,771,500 

Pakistan 
(2016) 
4,992,800 

Other recyclable items 

842,000 

512,700 

Total revenue 

Costs (€) 

Purchase of ship 

5,613,500 

5,505,500 

3,848,000 

3,848,000 

Finland 
(2017) 
424,575 

312,000 

736,575 

325,000 

345,000 

Investment costs 

Financial costs 

Labour costs 

Consumables 

Taxes, tariffs and duties 

Rents, levy and permits 

Other costs 

Total cost 

21,900 

147,900 

92,700 

302,200 

263,000 

2,700 

13,800 

18,300 

265,700 

233,400 

230,000 

693,600 

500 

51,300 

4,692,200 

5,340,800 

670,000 

Profit (€) 

Profit (value) 

921,300 

164,700 

66,575 

Profit (share) 

Vessel DWT 

Vessel LDT 

16% 

80,000 

14,800 

3% 

80,000 

14,800 

260.0 
Source: compilation based on Ecorys et al. (2016) and AJL Consulting and EVAK (2017).195 

Purchase price per LDT 

260.0 

9% 

5,414 

2,700 

120.4 

193  

194  

In relation to costs and revenues originating from ship recycling activities, stakeholder consultation activities allowed to 
clarify that they strongly depend on the type of vessel. For example, the recycling cost of a dry cargo vessel is usually 
smaller than that of a fishing trawler. Furthermore, the recycling facilities take into account the ongoing market situation, 
when it comes to offering a demolition rate, notably the availability of vessels to be recycled (i.e. the more vessels are 
available,  the  lower the  demolition  price  will  be  offered)  and  the  level  of  the selling  price  of  the finished  scrap metal 
resulting from the recycling process. Another important aspect for EU listed recycling facilities is the amount of hazardous 
material on board of the vessel that needs to be treated during the recycling process. 
In  relation  to  the  recycling  method,  the  vessels  have  been  offloaded  from  large  crane  vessels  to  the  yard.  The  cost 
element ‘marine inshore operation’ corresponds to the costs borne to make the vessels ready for recycling operations 
on the yard of the facility. 

195   Ecorys, DNV-GL and Erasmus School of Law, 2016. Financial instrument to facilitate safe and sound ship recycling, 
June  -  2016:  Final  Report.  AJL  Consulting  and  EVAK  (2017),  Ship  Recycling  in  Finland  Virtual  project  of  a  ship 
purchased, dismantled and recycled at Turku Repair Yard, Final Report, 11 January 2017. 

132 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Table A.3 The economics of ship recycling for a sample of vessels recycled in Norway (for 
illustrative purpose only), data gathered from stakeholder consultation 

Category 

Element 

Revenues (€ million)  Vessel recycling operation 

Vessel 1  
2016-2018 
6.15 

Vessel 2  
2020-2024 
24.27 

Steel 

Total revenue 

Costs (€ million) 

Yard rental 

Labour 

Consumables 

4.39 

10.54 

2.20 

6.59 

0.44 

Engineering, cleaning and waste management  0.88 

5.39 

29.66 

2.70 

10.79 

2.25 

2.70 

8.99 

27.41 

2.25 

2.64 

12.74 

-2.20 

20,500 

25,000 

Marine inshore operations 

Total cost 

Profit 

Vessel DWT 

Source: compilation based on data provided by stakeholder. 

Table A.4 Recycling methods and processes 

Recycling process 

Recycling 
method 
Beaching  This method is used in regions with high tidal amplitude and is very low cost. During 
the swell, the vessel approaches the beach using  its  own propulsion system, and 
when the waters recede,  it is pulled inwards  as much as possible with the use  of 
cranes. The vessel towed to the beach begins to be cut into big blocks that fall with 
the  effect  of  gravity;  and  after  being  brought  to  a  size  that  can  be  carried,  the 
structural  blocks  are  transported  to  an  inner  dismantling  area.  The  cut  blocks  are 
removed  and  when  the  remaining  part  becomes  light  enough,  it  is  processed  by 
being pulled inwards with the help of cranes. This method has significant flaws and 
risks: 
• 

In case of emergencies, it is difficult to reach the beach, evacuate the injured, 
meet  the  requirements  such  as  emergency  response  and  firefighting 
equipment, ambulance and crane; 
It is essentially impossible for heavy cranes to enter the beach to transport 
the cut vessel blocks or parts to the beach. For this reason, it is not possible 
to remove any heavy cut pieces if they fall into the water; 

• 

•  The  wastes  from  the  vessels  towed  to  the  beach  and  the  metal  wastes 

generated during the cutting mix with water; 

Landing 

•  Hazardous  wastes  generated  during  shipbreaking  activities  cannot  be 
controlled and they mix with the marine ecosystem due to tidal movements. 
The vessel is towed ashore using a concrete floor to begin the disassembly process. 
The tidal amplitude is lower in regions where this strategy is applied. It differs from 
beaching shipbreaking as in using a highly equipped environment for shipbreaking. 
With the recycling process through landing method, it is feasible to take advantage 
of  cranes  of  various  sizes  when  the  ship  is  being  divided  into  blocks.  Cranes  are 
used  in  the  process,  which  lowers  the  chance  of  accidents  and  environmental 
degradation. Mostly Türkiye utilises the landing shipbreaking technique. 
Alongside  Alongside shipbreaking method is used mostly in China, the USA and EU Member 
States. The vessel’s primary structural components are disassembled once all the 
removable  portions  have  been  removed.  Starting  from  the  superstructures  and 
descending vertically, the vessel connected to the quay is dismantled. The vessel is 
disassembled piece by piece from top to bottom. To avoid any leakage into the sea, 
the  liquids  on  the  vessel  are  released  in  a  regulated  manner  in  the  meantime. 
Afterward,  the  double  bottom  block  is  either  hoisted  or  pushed  into  the  dry-dock 
depending on the shipyard's crane capabilities. 
The  vessel  is  taken  from  the  sea  to  a  solid  dock  and  dismantled  with  the  help  of 
equipment such as cranes. Since there is no connection with water, dismantling is 
carried out in safer and more environmentally friendly conditions compared to other 
methods. After the dismantling is done in a closed, sheltered dry-dock, the dock is 

Dry-dock 

133 

 
 
 
 
 
 
 
 
 
Study on a potential financial incentive to facilitate safe and sound ship recycling 

Recycling 
method 

Recycling process 

cleaned. For this reason, when using this method, the damage to the environment is 
minimised.  The  dry-dock  method  has  fewer  environmental  risks  in  shipbreaking 
compared to other methods. The vessel to be dismantled is taken to the dry-dock, 
and  the  water  in  the  dock  is  discharged  during  the  performance  of  this  process. 
Although  the  dry-dock  infrastructure  cost  and  space  requirements  are  high,  it 
provides the safest and most environmentally friendly recycling opportunity. 

Source: compilation based on Izmir Development Agency (2022).196 

196  

Izmir Development Agency, 2022. Izmir Aliaga Ship Recycling Sector Analysis, Izmir. 

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Table A.5 Detailed statistics of EU listed recycling facilities in 2023 

Nr.  Country 

Recycling facility 

Length 
[m] 

Width 
[m] 

Draught 
[m] 

Maximum 
recycling 
output [LDT] 
(A) 

Theoretical 
maximum 
[LDT] (B) 

Ratio 
(A)/(B) 

1 
2 
3 
4 
5 
6 

7 
8 
9 
10 
11 
12 

13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 

Belgium 
Bulgaria 
Denmark 
Denmark 
Denmark 
Denmark 

Denmark 
Estonia 
Spain 
Spain 
France 
France 

France 
France 
Italy 
Latvia 
Lithuania 
Lithuania 
Lithuania 
Lithuania 
Netherlands 
Netherlands 
Netherlands 
Netherlands 

NV Galloo Recycling Ghent 
Ship and Industrial Service 
FAYARD 
Fornaes ApS 
Jatob ApS 
Modern american Recycling Service 
Europe 
Smedegaarden A/S 
BLRT Refonda Baltic OU 
Desguance Industrial Y Naval 
DDR Vessels XXI 
Demonaval Recycling 
Gardet & De Bezenac 

Grand Port Maritime de Bordeaux 
Recycleurs Bretons - Navaleo 
San Giorgio del Porto 
Galaksis N 
UAB APK 
UAB Armar 
UAB Demeksa 
UAB Vakaru refonda 
Damen Verolme Rotterdam 
DECOM Amsterdam 
Hoondert Services & Decommissioning 
Sagro Annnemingsmaatschappij 

265.00 
140.00 
415.00 
150.00 
150.00 
400.00 

200.00 
197.00 
120.00 
169.90 
140.00 
150.00 

240.00 
225.00 
350.00 
165.00 
130.00 
80.00 
58.00 
230.00 
400.00 
240.00 
175.00 
120.00 

37.00 
16.00 
90.00 
25.00 
30.00 
90.00 

48.00 
32.00 
20.00 
25.00 
25.00 
18.00 

37.00 
34.00 
75.00 
22.00 
35.00 
16.00 
16.00 
55.00 
90.00 
50.00 
40.00 
20.00 

12.50 
6.00 
7.80 
7.00 
6.00 
14.00 

7.50 
9.60 
6.00 

5.00 
7.00 

17.00 
27.00 
16.00 
7.00 
10.00 
5.00 
5.00 
14.00 
12.00 
9.00 
10.00 
6.00 

34,000 
12,500 
916 
30,000 
13,000 
60,000 

20,000 
24,364 
2,086 
3,600 
1,500 
7,730 

9,000 
15,000 
38,564 
2,490 
1,500 
3,910 
0 
20,140 
0 
17,500 
30,000 
15,000 

50,000 
12,500 
30,000 
50,000 
30,000 
200,000 

50,000 
36,000 
6,000 
60,000 
15,000 
12,000 

23,000 
40,000 
60,000 
10,000 
30,000 
6,000 
10,000 
45,000 
100,000 
47,500 
100,000 
100,000 

68% 
100% 
3% 
60% 
43% 
30% 

40% 
68% 
35% 
6% 
10% 
64% 

39% 
38% 
64% 
25% 
5% 
65% 
0% 
45% 
0% 
37% 
30% 
15% 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

Nr.  Country 

Recycling facility 

Length 
[m] 

Width 
[m] 

Draught 
[m] 

Maximum 
recycling 
output [LDT] 
(A) 

Theoretical 
maximum 
[LDT] (B) 

Ratio 
(A)/(B) 

25 
26 
27 
28 
29 
30 
31 
32 
33 

34 
35 
36 
37 
38 
39 

40 
41 
42 
43 
44 
45 

Finland 
Norway 
Norway 
Norway 
Norway 
Norway 
Norway 
Norway 
UK and Northern 
Ireland 
Türkiye 
Türkiye 
Türkiye 
Türkiye 
Türkiye 
Türkiye 

Türkiye 
Türkiye 
Türkiye 
UK 
UK 
USA 
Total 

Turun Korjaustelakka Oy 
Arise Recycling AS (ADRS Decom Gulen) 
AF Offshore Decom 
Green Yard AS 
Green Yard Kleven 
Fosen Gjenvinning AS 
Aker Solutions AS 
Norscrap West 
Harland and Wolff (Belfast) 

Anadolu Gemi Sokum Ormar 
Avsar Gemi Sokum San. Dis Tic. 
BMS Gemi Geri Donusum San 
Ege Celik San. Ve Tic. 
Leyal Gemi Sokum Sanayi ve Ticaret 
Leyal-Demtas Gemi Sokum Sanayi ve 
Ticaret 
Kiliclar Geri Donusumlu Maddler 
Oge Gemi Sokum Ith Ihr Tic. San. 
Sok Denizcilik Tic 
Dales Marine Service 
Kishorn Port 
International shipbreaking Limited 

250.00 
360.00 
500.00 
230.00 
170.00 
150.00 
230.00 
150.00 
556.00 

no limit 
no limit 
no limit 
no limit 
no limit 
no limit 

no limit 
no limit 
no limit 
165.00 
160.00 
366.00 

40.00 
no limit 
no limit 
25.00 
35.00 
20.00 
no limit 
34.00 
93.00 

50.00 
50.00 
49.00 
50.00 
100.00 
63.00 

49.00 
70.00 
90.00 
20.00 
160.00 
48.00 

7.90 
no limit 
no limit 
20.00 
no limit 
7.00 
no limit 
5.00 
7.50 

12.00 
15.00 
10.00 
15.00 
15.00 
15.00 

15.00 
15.00 
15.00 
7.70 
13.80 
9.00 

Source: compilation based on the 12th edition of the European List (Official Journal of the European Union, 2023).  

20,000 
0 
31,000 
30,000 
0 
8,000 
60,000 
25,000 
12,000 

111,823 
54,224 
37,132 
55,503 
64,815 
57,275 

16,711 
62,471 
66,167 
5,019 
38,148 
120,000 

40,000 
75,000 
75,000 
30,000 
30,000 
10,000 
85,000 
85,000 
300,000 

120,000 
60,000 
75,000 
60,000 
80,000 
70,000 

30,000 
90,000 
100,000 
7,275 
38,148 
120,000 

50% 
0% 
41% 
100% 
0% 
80% 
71% 
29% 
4% 

93% 
90% 
50% 
93% 
81% 
82% 

56% 
69% 
66% 
69% 
100% 
100% 

1,238,088 

2,703,423 

46% 

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Annex IV – Detailed background of the baseline 

Composition of the global merchant fleet 

The elaboration of the baseline required extensive data primarily on the global merchant 
fleet, including the size, type, and flag of those vessels, to be able to model the effects of 
the proposed SRL on each fleet segment. As introduced in Annex II (please see also Table 
A.1 ), a multitude of quantitative data sources have been used to provide projections of the 
composition of the global merchant fleet until 2055, namely the publicly available current 
fleet  composition  data  from  Equasis197  and  UNCTAD,198  which  allowed  us  to  obtain  the 
number of vessels and their corresponding GT for the global fleet, disaggregated by vessel 
type, vessel size, and age cohort.199 

The Equasis dataset contains for 2021 (i.e. the latest available year as of the elaboration of 
this study) data grouped by vessel size categories which are small, for vessels under 500 
GT; medium, for vessels between 500 and 25,000 GT; large, for vessels between 25,000 
and 60,000; and very large, for vessels over 60,000 GT.  

The data is also grouped by vessel types which are bulk carriers, container vessels, fishing 
vessels, general cargo, offshore vessels, oil tankers, and other types of vessels. Finally, the 
dataset groups vessels in vessels from 0 to 4 years old, from 5 to 15 years old, from 15 to 
24 years old, and over 25 years of age. Table A.6 shows the data extracted from Equasis 
for 2021, expressed in GT. 

Table A.6 Equasis data for GT in the global fleet in 2021 

Vessel type 
Bulk carriers 

Vessel age 
0-4 years old 
5-14 years old 
15-24 years old 

>25 years old 
Container vessels  0-4 years old 

Fishing vessels 

General cargo 

5-14 years old 
15-24 years old 
>25 years old 
0-4 years old 

5-14 years old 
15-24 years old 
>25 years old 
0-4 years old 
5-14 years old 
15-24 years old 

Small 
2,000 
13,001 
6,000 

94,000 
1,000 
4,999 
1,000 
1,000 
203,001 

Large 
42,736,000 

Medium 
6,256,000 
35,319,001  156,594,000  127,707,000 
8,484,999 

Very large 
42,539,000 

48,356,000 

25,120,000 

9,175,000 
6,566,000 
5,439,000 
4,218,000 
9,019,000 
27,506,000 
10,667,001  24,821,000 
3,767,000 
1,274,000 

3,006,000 
28,000 

1,480,000 
888,000 

556,000 
623,000 
3,017,001  4,249,000 
4,147,999 
80,000 
23,487,000  18,914,000 
240,000 
15,066,999  12,659,000 
232,000 

- 
- 
113,000 
2,586,000 

210,000 
37,296,000 
103,373,000 
35,808,000 
965,000 
- 

- 
- 
- 
3,194,002 
11,419,000 
3,747,999 

197   The  European  Commission  and the  French  Maritime  Administration  developed  an  information  system  which  collates 
existing safety-related information on ships from both public and private sources, and makes it available on the Internet. 
The information we used is available here. 

198   Maritime statistics collected by the United Nations Conference on Trade and Development, available online here. 
199   The age cohort is relevant to project fleet renewal in the future, more information on this below. 

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Vessel type 

Offshore vessels 

Oil tankers 

Other types of 
vessels 

Vessel age 
>25 years old 
0-4 years old 
5-14 years old 
15-24 years old 

>25 years old 
0-4 years old 
5-14 years old 
15-24 years old 
>25 years old 
0-4 years old 

5-14 years old 
15-24 years old 
>25 years old 

Small 
892,000 
60,999 
261,000 
154,000 

313,001 
60,000 
131,000 
73,000 
387,000 
677,000 

Large 

Medium 
18,384,000  3,373,000 
1,511,000 
9,500,000 
2,430,000 

29,000 
2,550,000 
827,000 

2,051,000 
2,027,999 
6,630,000 
16,404,000 
22,639,000  55,967,000 
16,191,000  40,413,000 
6,814,000 
1,911,001 

3,365,000 
863,000 

2,042,001  5,099,001 
1,111,000  2,471,000 
2,510,000  5,810,000 

1,234,000 
999,000 
1,501,000 

Very large 
207,000 
3,939,000 
9,127,000 
10,030,000 

12,363,000 
75,472,000 
147,738,000 
70,978,000 
4,656,999 
5,118,000 

8,353,000 
7,461,000 
1,415,000 

Source: elaboration of the authors based on Equasis data. 

To be able to break down the fleet data by whether the vessels fly an EU flag or not, another 
data source was needed. In this sense EMSA200 provides an overview of the percentage of 
vessels from the world fleet that fly the flag of an EU Member State for a number of different 
vessel types, which while useful to grasp the overall proportion of vessels that are part of 
the EU fleet do not provide further disaggregation (e.g. by size). 

Instead, we have used AIS data that contains specific vessels (and their flags) that have 
called on EU seaports for the year 2019201 to provide this disaggregation. This AIS data was 
supplemented via additional desk research to include information on vessel type and size 
for the individual vessels in the dataset and cleaned up to exclude vessels that were not 
relevant for the analysis (e.g. non-seagoing vessels202 and government-owned vessels203). 
The AIS dataset was then aggregated on the basis of vessel type, vessel size, and flag.  

Assuming that all EU-flagged vessels call on EU ports, which would mean all relevant EU-
flagged vessels would be captured in the dataset, the dataset could be used to estimate the 
proportions  of  vessels  that  are  part  of  the  EU-flagged  fleet  for  every  fleet  segment.  The 
results of this operation roughly align with higher-level EMSA estimates and are shown in 
Table A.7. These results were used to split the world fleet information in an EU-flagged fleet 
and a non-EU-flagged fleet.  

Table A.7 Percentage of the fleet that flies an EU flag, per vessel type and size 

Vessel type 
Bulk carriers 

Container vessels 

Vessel size 
Small 
Medium 
Large 
Very large 

Small 
Medium 

EU 
0% 
7% 
4% 
5% 

0% 
9% 

non-EU 
100% 
93% 
96% 
95% 

100% 
91% 

200   EMSA (2022). The EU Maritime Profile. Available here. 
201   AIS data was purchased from a data provider and it contains all the vessels that called in EU ports for the year 2019 
based on vessel tracking data, along with some information like specific IMO numbers, flag, and their number of port 
calls. The year 2019 was used because it is the most recent year at the time of the elaboration of the study when port 
calls would not be drastically distorted by the effects and aftereffects of the COVID-19 pandemic. EU Reference Scenario 
projections indicate that the number of port calls in 2020 will have recovered to 2019 levels, suggesting that indeed the 
data could be comparable. 
In  some  instances  vessels  that  focus  on  inland  waterways  can  call  on  seaports  that  are  connected  to  said  inland 
waterways and had to be excluded from the dataset. 

202  

203   For example, military and law enforcement vessels, which are not under the scope of the SRR. 

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Vessel type 

Fishing vessels 

General cargo 

Offshore vessels 

Oil tankers 

Vessel size 
Large 
Very large 
Small 
Medium 

Large 
Very large 
Small 
Medium 
Large 
Very large 

Small 
Medium 
Large 
Very large 
Small 
Medium 

Large 
Very large 

Other types of vessels  Small 

Medium 
Large 
Very large 

EU 
6% 
15% 
5% 
3% 

0% 
0% 
1% 
12% 
16% 
16% 

7% 
5% 
4% 
1% 
1% 
11% 

12% 
13% 
8% 
16% 
61% 
30% 

non-EU 
94% 
85% 
95% 
97% 

100% 
0% 
99% 
88% 
84% 
84% 

93% 
95% 
96% 
99% 
99% 
89% 

88% 
87% 
92% 
84% 
39% 
70% 

Source: elaboration of the authors based on AIS tracking data and Equasis global fleet data. 

As of this point, what we have obtained is the number of vessels and GT from the world 
fleet split in segments based on vessel type, vessel size, age cohorts, and vessel flag (EU 
and non-EU).  For the  purposes of  this  study,  we  also  need  to know  how  many  non-EU-
flagged vessels call on EU ports, and how often they do so. Again, from the AIS dataset it 
is possible to obtain this information. 

The proportion of non-EU-flagged vessels that call on EU ports can be obtained from the 
dataset  in  a  straightforward  manner,  by  comparing  the  non-EU-flagged vessels  from  the 
AIS dataset with those from the global fleet. For the frequency of these port calls we further 
work with the AIS data. 

We chose to split the vessels that call on EU ports in two categories, high and low frequency. 
These  categories  are  decided  based  on  the  number  of  calls  from  a  particular  vessel 
compared with the mean number of calls. If a vessel has a number of port calls higher than 
the median, then it is a high frequency vessel, and otherwise it is a low frequency vessel. 
For this dataset, the median is 12 port calls during the year 2019. We then once again obtain 
the information on how to break down the fleet. As way of example, Table A.8 shows the 
breakdown of the non-EU-flagged fleet. The port calls data that we have used is consistent 
with EMSA estimates that highlight that the majority of port activity in the EU comes from 
EU-flagged  vessels,  and  the  table  below  shows  that  on  the  other  hand  non-EU-flagged 
vessels seldom call on EU ports. The proportion of non-EU flagged vessels that call on EU 
ports at all is rarely over 30%. 

139 

Study on a potential financial incentive to facilitate safe and sound ship recycling 

Table A.8 Frequency of calls in EU ports by non EU-flagged vessels204 

Vessel type 
Container vessels 

Bulk carriers 

Offshore vessels 

Fishing vessels 

General cargo 

Oil tankers 

Vessel size 
Medium 
Large 
Very large 
Medium 
Large 

Very large 
Small 
Medium 
Large 
Very large 
Small 

Medium 
Small 
Medium 
Large 
Very large 
Small 

Medium 
Large 
Very large 

Other types of vessels  Small 

Medium 
Large 

Very large 

High frequency  Low frequency  Never 
17% 
21% 
28% 
3% 
0% 

80% 
73% 
52% 
74% 
72% 

3% 
7% 
19% 
24% 
28% 

0% 
1% 
2% 
1% 
0% 
0% 

0% 
0% 
13% 
16% 
30% 
0% 

7% 
3% 
3% 
1% 
5% 
38% 

32% 

16% 
1% 
3% 
6% 
6% 
0% 

3% 
0% 
13% 
42% 
54% 
0% 

7% 
35% 
35% 
1% 
6% 
13% 

6% 

84% 
98% 
95% 
93% 
94% 
100% 

97% 
100% 
75% 
42% 
17% 
100% 

85% 
62% 
62% 
98% 
89% 
48% 

62% 

Source: elaboration of the authors based on AIS tracking data and Equasis global fleet data. 

Once again, this information is used to further break down the fleet, and we obtain data for 
the global fleet that is now broken down in segments based also on port call frequency. 

Recycling and new build trends 

The  baseline  requires  the  number  of  vessels  that  are  recycled  every  year,  for  which  we 
need to obtain the size and composition of the fleet until 2055 (including newly built vessels 
that are incorporated) and what the recycling trends for that fleet are. 

The main assumption made is that vessel age is the main factor in decisions to recycle a 
vessel, as suggested in literature and by stakeholders, although we understand that other 
factors can come into play and shift the lifetime of a given vessel by a couple of years more 
or a couple of years less. 

From  the  fleet  information  described  in  the  previous  section  we  already  have  the  age 
cohorts of the different fleet segments, or in other words, we have information about the 
age  of  the  vessels  on  the  global  merchant  fleet.  This  needs  to  be  compared  with  the 
expected lifetimes of these vessels, for which we have used vessel recycling data, such as 
the  annual  lists  made  publicly  available  by  NGO  Shipbreaking  Platform,205  together  with 
data that EMSA shared with us. 

In some cases, the numbers do not add up exactly to 100% in this table due to rounding. 

204  
205   The  NGO  Shipbreaking  platform  publishes  since  2012  a  yearly  list  of  recycled  ships  worldwide,  which  details  the 

characteristics of the ships, their flags, and their destination for recycling. The lists are available online here. 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

The  data  from  the  NGO  Shipbreaking  Platform  and  EMSA  was  merged  into  a  single 
comprehensive dataset that contains individual vessels that have been recycled since 2012, 
along with the vessels’ characteristics, the time when they were recycled, and the location 
of recycling. This data set allows us to obtain data about the age distribution of vessels at 
the  time  of  recycling,  broken  down  per  type  of  vessels,  to  get  an  estimate  of  the  age  at 
which vessels are recycled.  

Figure A.7 shows the calculation of the average age of recycling over time, divided by ship 
type. It can be observed that while there are some peaks, the average oscillates within a 
constant  range,  with  the  exception  of  some  instances  for  the  year  2023  where  the  data 
available until the elaboration of this report includes only a few vessels and thus the average 
calculated might not be representative, or if this data is assumed to be complete it could 
point to a very tight shipping market where vessels are not sent to scrapping as it remains 
profitable to operate older vessels in some categories. 

Figure A.7 Average recycling age of different types of vessels over time 

Source: Consortium elaborations based on NGO Shipbreaking Platform and EMSA data. 

The recycling data was aggregated over time for the time period when the data is available 
(2012-2023) and aggregating the recycled vessels by size and type in line with the same 
aggregation used in the fleet data. The elaborations made on the basis of this data have an 
underlying assumption in which the age at which a vessel is sent to recycling remains more 
or less constant over time for a specific fleet segment, and while short term shocks might 
occur, these averages would still provide a good enough estimation. It must also be noted, 
however,  that the recycling  data  does not  cover all  fleet  segments (e.g. some small  and 
very large vessel types are missing), and in some cases there are very few observations 
within a segment (for example, small fishing vessels have only one observation, and thus a 
distribution cannot be estimated from it). In these cases, it might be necessary to extrapolate 
the distribution of the recycling age from a comparable segment, for example, vessels of 
the same type but a bigger or smaller size. Additionally, offshore vessels and other types of 
vessels often have large standard deviations, as these categories capture a wider variety 
of vessels. Table A.9 details the median and standard deviation of the life expectancy of 
vessels, per fleet segment. 

Table A.9 Median age at which vessels are recycled, broken down by vessel size and type 

Vessel size 

Vessel type 

Small 

General cargo 
Other types of vessels 

Fishing vessels 

Median 
49 
44 

28 

Standard deviation 
6.6 
16.5 

n. a. 

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Vessel size 

Medium 

Large 

Very large 

Vessel type 
Offshore vessels 

General cargo 

Container vessels 

Bulk carriers 

Oil tankers 

Other types of vessels 

Fishing vessels 

Offshore vessels 

General cargo 

Container vessels 

Bulk carriers 

Oil tankers 

Other types of vessels 

Fishing vessels 

Offshore vessels 

Container vessels 

Bulk carriers 

Oil tankers 

Other types of vessels 

Offshore vessels 

Median 
36 

Standard deviation 
3.0 

33 

23 

30 

28 

34 

37 

36 

30 

20 

24 

23 

24 

25 

30.5 

19 

22 

24 

20 

27 

8.6 

5.5 

7.8 

6.8 

10.0 

7.8 

10.9 

5.3 

7.3 

5.4 

6.0 

7.0 

n. a. 

12.3 

3.5 

3.3 

8.4 

5.5 

11.6 

Source: Consortium elaborations based on NGO Shipbreaking Platform and EMSA data. 

Having  the  life  expectancy  distribution206  per  type  of  vessel  allowed  us  to  elaborate 
projections for fleet recycling in the future. Using the current fleet as a point of departure, 
we could obtain the probability of a vessel of a specific segment being recycled based on 
its age by a given year (between 2030 and 2055). Multiplying this probability by the specific 
number of vessels (or GT) of the relevant segment we obtained the expected number of 
vessels (or GT) from the current fleet that are recycled every year. 

Figure A.8 details the forecast for the current fleet estimated remaining in operation over 
time  until  2055,  where  we  can  see  that  certain  fleet  segments  can  be  expected  to  be 
recycled at a faster rate than others. In particular, while the recycling of the current fleet 
slows down for all vessel categories as there are fewer vessels to recycle over time, fishing 
vessels, bulk carriers, and container vessels seem to slow down more dramatically. Other 
fleet segments decrease in numbers a lot less drastically, and almost linearly in comparison. 

206  

It is assumed to follow a normal distribution using as mean and standard deviation the ones calculated from recycling 
data. 

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Figure A.8 Estimated number of vessels from current fleet remaining in operation until 2055 

Source: Consortium elaborations based on Equasis database and ship recycling data. 

In terms of estimated GT, however, it is bulk carriers, oil tankers, and container vessels the 
categories that are much more pronounced in this trend, as can be seen in Figure A.9. In 
the  case  of  bulk  carriers  and  container  vessels  the  trend  in  terms  of  GT  could  be  more 
pronounced due to the larger size of the vessels, while in case of fishing vessels, the small 
size  of  the  majority  of  these  vessels  means  that  while  a  large  number  of  them  can  be 
recycled in the first years, this does not represent a very large amount in terms of GT.  

Figure A.9 Estimated GT from current fleet remaining in operation until 2055 

Source: Consortium elaborations based on Equasis database and ship recycling data. 

In addition to vessel recycling, new vessels are also expected to be added to the fleet every 
year and are  thus relevant for the  baseline.  To project  this  we have  based ourselves  on 

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shipping  market  reports by  Danish  Ship  Finance207  from  which  we have  derived renewal 
rates (as a percentage of the fleet) for the fleet segments. These rates represent the growth 
in number of vessels (or GT) that are newly incorporated to the fleet every year. To account 
for market volatility, these rates were based on the reports for different periods of time to 
obtain average rates that could be used for the projection period (up until 2055), assuming 
the fleet will grow at a similar rate in the future. The results are shown on Figure A.10. 

Figure A.10 Estimated GT added to fleet with new constructions until 2055 

Source: Consortium elaborations based on Equasis database and Danish Shipping report. 

The combined effect of new constructions incorporated to the fleet, recycling of the current 
fleet, and recycling of the newly incorporated fleet, projections of the global fleet size could 
be obtained, as shown in Figure A.11. It can be seen that the container vessel segment 
explodes in size at some point (especially for the very large vessels), indicating that many 
more vessels are being incorporated than are being recycled, which seems to confirm the 
view from Danish Shipping that while this segment is expected to grow fast there are no 
clear candidates for recycling based solely on age, and thus the reaction from the shipping 
sector on this regard needs to be looked at more closely.  

207   Danish  Ship  Finance  publishes  periodical  reports  that  discuss  the  status  of  shipping  markets  for  a  series  of  fleet 
segments. While the focus of these reports is not on vessel construction, they do analyse orderbooks as an indicator of 
the demand for specific types of vessels and for the supply of these vessels in the future, which was then used in this 
analysis. 

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Figure A.11 Estimated size of the fleet in GT per year, broken down by type of vessel 

Source: Consortium elaborations based on Equasis database, recycling data, and Danish Shipping report. 

While on one hand we have the size of the fleet over time, the more relevant metric for this 
study is the number of vessels and GT that are recycled every year, which is also obtained 
from this exercise. Figure A.12 shows the estimated total LDT208 recycled until 2055. 

Figure A.12 Estimated total LDT recycled until 2055 

Source: Consortium elaborations based on Equasis database, recycling data, and Danish Shipping report. 

These projections for recycling and new constructions of vessels, however, are meant to be 
interpreted  as  high-level  estimates  and  aggregated  trends,  as  they  do  not  account  for 
market  conditions  that  may  accelerate  or  slow  down  recycling  or  new  construction  over 

208   LDT is the metric more commonly used in recycling, as it more closely represents the weight of the materials of a vessel 
which will be recovered in recycling. To convert from GT to LDT, average conversion rates per fleet segment (vessel 
type and size) were calculated mainly from recycling data (from NGO Shipbreaking Platform and EMSA). 

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short periods of time. In other words, they should be interpreted as a good approximation 
for the long period of time on which the baseline is projected (i.e. just over 30 years) and 
that is fit for purpose for the assessment that needs to be performed. However, it is not fit 
to  accurately  reflect  the  short-term  market  fluctuations  or  shocks  that  may  affect  the 
shipping market, as described in previous sections, which are also very difficult to forecast 
with robust confidence. 

In particular, the estimation for the current demand (nowcast) shows that more LDT and GT 
were  expected  to  be  recycled  than  was  actually  the  case,  possibly  due  to  favourable 
shipping market conditions that caused the delay of recycling decisions (compared to their 
expected lifetimes). Fitting the projections to match the real recycling demand and continue 
matching  it  in  the  future  would  require  accurately  forecasting  shipping  market  conditions 
until 2055, which is not possible to do. Alternatively, using the current data to correct the 
current estimate would imply that the delayed demand needs to be tackled at some future 
point or period in time, and determining this point or period in time is not straightforward 
either. For these reasons we have chosen to keep the measure of recycling demand based 
on vessel age, which yields a consistent way of measuring that should be relatively close 
to reality (as opposed to introducing new uncertainties that possibly reduce accuracy) and 
does not ignore the fact that vessels that are not recycled at a given time due to market 
conditions will still need to be recycled at a later time. We do, however, note the limitations 
of this approach. 

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Annex V – Possible impacts of the entry into force of HKC 
on the SRL 

The HKC will enter into force209 on 26 June 2025.210 In December 2023, the HKC had 23 
Contracting  Parties,  including  India,  Bangladesh,  and  Pakistan,  the  latter  two  countries 
having ratified the Convention in 2023.211  

At  the  time  of  publication  of  this  report  there  are  still  a  lot  of  uncertainties  regarding  the 
impacts  of  the  entry  into  force  for  the  sector,  particularly,  the  development  for  the  steel 
prices. The development of the steel prices shows that since 2015 the prices in Bangladesh, 
India and Pakistan has increased up until 2022. After the ratification of the HKC the prices 
have decreased in these regions.  

The entry into force of the HKC is not expected to produce effects on the future development 
of the size and composition of the fleet, on the capacity of the recycling facilities to recycle 
end-of-life  vessels  on  a  global  level  or  on  the  choice  of  the  destination  for  recycling  EU 
flagged vessels since the EU legislation remains unchanged in the baseline.  

Becoming compliant to HKC could lead to (i) an increase of some administrative costs in 
relation to the new obligations and (ii) the costs necessary to meet the requirements of the 
HKC  will  be  passed  on  to  the  shipowners  at  the  time  of  recycling  an  end-of-life  vessel, 
eventually  reducing  the  demolition  rates  that  can  be  offered  to  a  shipowner  and  the 
expected revenues.  

To estimate at this stage (a priori) the effect of the entry into force of the HKC on the prices 
offered to  shipowners  a quantitative  analysis of  the  investment  and  operational  cost that 
could be borne by the recycling facilities is highly uncertain. This would need to be based 
on bespoke analysis of the current situation (which was not possible to cover in this study), 
also taking into account other market conditions that determine the level of the demolition 
rates offered.  

It is unlikely that the latest developments in the steel prices is due to the ratification of HKC, 
and if any causal relation is present between the ratification and the latest development of 
the steel prices. It is however more likely it has an impact on the investments and operation 
costs  has  higher  standards  have  to  be  met  by  a  number  of  facilities.  The  speed  and 
magnitude of the impact remains however unclear. However, the model does allow for a 
theoretical approach to assess the impacts when the price gap between EU and the other 
regions becomes less than the current € 370, per LDT simulating a possible scenario of the 
entry into force of HKC. 

209   See IMO here. 
210   Article 17 of the HKC stipulates that it shall enter into force 24 months after the date on which three conditions are met.  
211   See IMO Status of Conventions here (updated until 1 January 2024). 

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Figure A.13 Development the rates for recycling vessels ($ per LDT) in Bangladesh, India and 
Pakistan, Türkiye and EU 

Source: elaboration based on  (Sustainable Shipping Initiative, 2021), (Developed by 2BHonest based on  (Mikelis, 2020)), 
(ISL, 2021), (Izmir Development Agency, 2022) and GMS website ((*) average value until 1 September 2024). 

The figure above shows the development of the rates offered for recycling vessels, where 
the gap in September 2024 is € 370 per LDT between Bangladesh and India and Pakistan 
compared to EU, a decline compared to the price gap on 31 December 2023 of € 408 per 
LDT.  

To provide insights in the possible impact of HKC on the SRL we will show the main results 
of chapter 4 for two scenarios. One scenario in which the HKC ratification will have a minor 
impact on the price gap of vessel scrap price and one scenario in which HKC have a major 
impact on the price gap.  

Scenario’s of the HKC on the price gap 

Between 1 January 2024 and 1 September 2024 the gap in the price offered between EU 
and the other regions (i.e. Bangladesh, India and Pakistan) have declined with 9.3%. The 
first scenario considered in this report is that this decline in the price gap is solely due to the 
ratification of HKC, and therefore, the gap will decrease each year until 2030 with 9.3% to 
a  price  gap  of  €  205  per  LDT  in  2030.  The  second  scenario  only  a fraction  of  the  9.3% 
decline is due to the ratification of HKC, leading to a price gap in 2030 of € 321 per LDT.   

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Figure A.14 Scenarios of the development of the price gap for recycling vessels (€ per LDT) 

Source: consortium, based on (Sustainable Shipping Initiative, 2021), (Developed by 2BHonest based on  (Mikelis, 2020)), 
(ISL, 2021), (Izmir Development Agency, 2022) and GMS website. 

In the section below we only show the results of the two scenario’s for the main outcomes. 
The design assumptions and the argumentation as described in chapter 4 remain the same.  

Scenario 1: Full impact HKC on price gap 

Level of the Ship Recycling Licence fee 

Table A.10 shows the licence fee needed to cover the price gap. Compared to the baseline 
scenario the licence fee lowered by 44.5% for all the categories.  

Table A.10 Amounts to accumulate per vessel size and the annual licence fee – Scenario 1 

Vessel size category212  Total amount to accumulate over the economic 

                    €  

Minimum 

€ 24,056 

Average 

€ 34,429 

€ 234,148 
€ 2,405,463 
€ 5,329,067 

€ 731,333 
€ 2,952,524 
€ 6,745,351 

Maximum 

€ 50,273 

€ 1,301,646 
€ 3,890,031 
€ 9,925,677 

Small 

Medium 
Large 
Very large 

Source: elaboration of the authors. 

Licence fee 
 €           

Not 
applicable 
€ 60,450 
€ 170,696 
€ 420,022 

Table A.11 Amounts to accumulate and costs of the licence per vessel type – Scenario 1 

Vessel 
size 
category 

Small 

Vessel type 

Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 

Total amount to 
accumulate over 
economic life of 
the vessel 
Not applicable 
Not applicable 
€ 37,325  
€ 24,056  
€ 28,959  
€ 50,273  

Optimised 
             €  

             €  
(annual) 

Not applicable 
Not applicable 
€ 2,304 
€ 1,485 
€ 1,788 
€ 3,104 

Not applicable 
Not applicable 
Not applicable 
Not applicable 
Not applicable 
Not applicable 

212   Vessel size categories should be read as follows: small 0-500 GT, medium 500-25,000 GT, large 25,000-60,000 GT and 

very large if larger than 60,000 GT. 

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Vessel 
size 
category 

Medium 

Large 

Very large 

Vessel type 

Other types of 
ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of 
ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of 
ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of 
ships 

Total amount to 
accumulate over 
economic life of 
the vessel 
€ 31,533  

Optimised 
             €  

             €  
(annual) 

€ 1,947 

Not applicable 

€ 1,301,646  
€ 1,233,317  
€ 234,148  
€ 814,617  
€ 623,125  
€ 540,993  
€ 371,484  

€ 2,405,463  
€ 2,912,506  
Not applicable  
€ 2,462,013  
€ 3,310,704  
€ 3,890,031  
€ 2,734,425  

€ 5,356,180  
€ 9,925,677  
Not applicable  
€ 7,523,405  
€ 5,884,300  
€ 6,453,475  
€ 5,329,067  

€ 116,234 
€ 76,138 
€ 20,909 
€ 72,743 
€ 55,644 
€ 48,309 
€ 33,173 

€ 148,499 
€ 179,801 

€ 151,990 
€ 204,383 

€ 168,807 

€ 330,659 
€ 612,753 

€ 464,451 
€ 363,262 

€ 328,985 

€ 60,450 
€ 60,450 
€ 60,450 
€ 60,450 
€ 60,450 
€ 60,450 
€ 60,450 

€ 170,696 
€ 170,696 
€ 170,696 
€ 170,696 
€ 170,696 
€ 170,696 
€ 170,696 

€ 420,022 
€ 420,022 
€ 420,022 
€ 420,022 
€ 420,022 
€ 420,022 
€ 420,022 

Source: elaboration of the authors. 

Percentage of the fleet recycled in a safe and environmentally sound manner 

As the recycling decision is based on the design assumptions, adjusting the annual licence 
fee to the price gap of € 205, the percentage of the fleet that will recycle in a safe and sound 
manner is the same as in the baseline scenario considered in the main report.  

Volume of vessels recycled in a safe and sound manner over time  

As the recycling decision is based on the design assumptions, adjusting the annual licence 
fee to the price gap of € 205, the volume of the vessels that will recycle in a safe and sound 
manner  is  the  same  as  in  the  baseline  scenario  considered  in  the  main  report.  The 
accumulated amount of LDT that will be recycled in a safe and sound manner is 29 million 
LDT in 2055.  

Aggregate fund position and cashflow of the Ship Recycling Fund  

As  the  annual  licence  fee  in  this  scenario  per  category  are  lower,  the  fund  revenue  and 
expenses  will  be  lower  in  absolute  terms.  The  development  of  the  fund  revenue,  fund 
expenses  and  cumulative  size,  compared  to  the  baseline  scenario  in  the  main  report, 
remains the same.  

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Figure A.15 Fund revenue and expenditure (left axis) and accumulated size of the fund (right 
axis) – Scenario 1 

Source: elaboration of the authors. 

The impact of the licence on the operational costs 

Table A.12 shows the estimates of the impact of introducing a licence on the operational 
costs of the vessels, by size and type for this scenario. The impacts of introducing a licence 
in this  scenario will  be  significantly  lower  compared  to  the  baseline  scenario  in  the main 
report.  

Table A.12 Licence fee as percentage of yearly operational costs per vessel type and size  – 
Scenario 1 

Vessel 
type 

Vessel size 

Container 
ship 

Bulk 
carriers 

Tankers 

Feeder (100-1,000 
TEU)213 
Medium (1,000-
2,000 TEU) 
Main liner (2,000-
6,000 TEU) 
Panamax 
Handysize 
Capesize 
Handymax 
Product 
Handysize Product 
Panamax 
Aframax 
Suezmax 
VLCC 

Size 
category in 
model 

Small 

Licence fee as 
percentage of 
yearly operational 
cost – Scenario 1 
HKC 
0% 

Licence fee as 
percentage of 
yearly operational 
cost – Baseline 
scenario 
0% 

Medium 

3% 

Medium/large  3% 

Very large 
Large 
Very large 
Large 
n. a. 
Large 
n. a. 
Very large 
Very large 
Very large 

18% 
8% 
15% 
8% 
0% 
6% 
0% 
14% 
12% 
11% 

6% 

5% 

32% 
15% 
27% 
14% 
0% 
11% 
0% 
25% 
22% 
20% 

Source: elaboration of the authors based on R. Greiner and M, Stephens, Ship operating costs: Current and future trends, 
December 2017. 

213   TEU is the designation for the dimensions of containers. The abbreviation stands for Twenty-foot Equivalent Unit. 1 TEU 
is a container of 20 feet long, 8'0" wide and usually 8'6" high. In metric terms, a TEU is 6.10 metres long, 2.44 metres 
wide and 2.59 metres high. A 40-foot container is equivalent to 2 TEU. 

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Social impacts 

Table A.13 Impact of the SRL on the number of accidents in recycling facilities – Scenario 1 

Element 

Without Chinese Ban 

With Chinese Ban 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2030-2055) 

36 

9,059 

8 

1,913 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2055) 

4 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2030-2055) 

45 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2055) 

5 

1,027 

11,535 

1,308 

1 

217 

10 

2,436 

1 

276 

Fatal accidents 
(adults, yearly) 
Non-fatal accidents 
(adults, yearly) 
Fatal accidents 
(children, yearly) 
Non-fatal accidents 
(children, yearly) 

Source: elaboration of the authors. 

Table  A.14  Potential  pollution  reduction  against  the  baseline  from  environmentally  sound 
recycling (Without Chinese Ban) – Scenario 1 

Hazardous material 

Unit 

India 
(2055) 

Banglades
h and 
Pakistan 
(2055) 

 82  

 0.164  

 1 

 - 

India 
(2030-
2055) 

842  

2,2  

10.42  

-  

Banglades
h and 
Pakistan 
(2030-
2055) 
721  

1.4  

8.9  

-  

14,068  

 9,052  

123,975  

79,702  

- 

0.27  

16.37  

 -  

 0.18  

 11.41  

-  

2.40  

-  

1.55  

144.18  

100.44  

Tonnes 

95  

0.255  

1.18  

-  

Asbestos 

PCB 

Heavy metals 

Oil 

Oil sludges 

Tri butyl tin 

Mercury 

Ozone depleting 
substances 

Source: elaboration of the authors. 

Kg 

Tonnes 

Tonnes 

Tonnes 

Tonnes 

Kg 

Tonnes 

Table  A.15  Potential  pollution  reduction  against  the  baseline  from  environmentally  sound 
recycling (With Chinese Ban) – Scenario 1 

Hazardous material 

Unit 

India 
(2055) 

Banglade
sh and 
Pakistan 
(2055) 

India 
(2030-
2055) 

117  

0.235  

1.5  

-  

800  

2.1  

9.9  

-  

Banglade
sh and 
Pakistan 
(2030-
2055) 
1.032  

2.1  

12.8  

-  

13,375  

12,958  

117,860  

114,094  

-  

0.26  

-  

0.25  

-  

2.29  

-  

2.21  

Tonnes 

91  

0.242  

1.1  

-  

Kg 

Tonnes 

Tonnes 

Tonnes 

Tonnes 

Kg 

Asbestos 

PCB 

Heavy metals 

Oil 

Oil sludges 

Tri butyl tin 

Mercury 

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Ozone depleting 
substances 

Source: elaboration of the authors. 

Tonnes 

15.56  

16.33  

137.07  

143.79  

Scenario 2: Minor impact HKC on price gap 

Level of the Ship Recycling Licence fee 

Table A.16 shows the annual average licence fee needed to cover the price gap. Compared 
to  the  baseline  scenario  the  annual  average  licence  fee  lowered  by  13.2%  for  all  the 
categories.  

Table A.16 Amounts to accumulate per vessel size and the annual licence fee – Scenario 2 

Vessel size category214  Total amount to accumulate over the economic 

                    €  

Minimum 
€ 37,589 
€ 365,872 
€ 3,758,691 
€ 8,327,010 

Average 
€ 53,798 
€ 1,142,755 
€ 4,613,508 
€ 10,540,044 

Maximum 
€ 78,554 
€ 2,033,906 
€ 6,078,423 
€ 15,509,508 

Small 
Medium 
Large 
Very large 

Source: elaboration of the authors. 

Annual 
average 
             €  

Not applicable 
€ 94,457  
€ 266,724  
€ 656,311  

Table A.17 Amounts to accumulate and costs of the licence per vessel type – Scenario 2 

Optimised 
             €  

Annual licence 
     €  

Vessel size 
category 

Vessel type 

Small 

Medium 

Large 

Very large 

Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 
Offshore vessels 
Other types of ships 
Bulk carriers 
Container ships 
Fishing vessels 
Oil tankers 
General cargo 

Total amount 
to accumulate 
over economic 
life of the 
vessel 
Not applicable 
Not applicable 
€ 58,323  
€ 37,589  
€ 45,251  
€ 78,554  
€ 49,272  
€ 2,033,906  
€ 1,927,138  
€ 365,872  
€ 1,272,891  
€ 973,673  
€ 845,336  
€ 580,467  
€ 3,758,691  
€ 4,550,978  

€ 3,847,054  
€ 5,173,187  
€ 6,078,423  
€ 4,272,715  
€ 8,369,375  
€ 15,509,508  

Not applicable 
Not applicable 
€ 3,601 
€ 2,321 
€ 2,794 
€ 5,588 
€ 3,521 
€ 181,623 
€ 118,970 
€ 32,671 
€ 113,666 
€ 86,947 
€ 75,487 
€ 51,834 
€ 232,039 
€ 280,951 
€- 
€ 237,494 
€ 319,362 
€- 
€ 263,772 
€ 516,676 
€ 957,466 

€ 11,755,803  
€ 9,194,596  

€ 725,734 
€ 567,620 

Not applicable 
Not applicable 
Not applicable 
Not applicable 
Not applicable 
Not applicable 
Not applicable 
€ 94,457  
€ 94,457  
€ 94,457  
€ 94,457  
€ 94,457  
€ 94,457  
€ 94,457  
€ 266,724  
€ 266,724  
€ 266,724  
€ 266,724  
€ 266,724  
€ 266,724  
€ 266,724  
€ 656,311  
€ 656,311  
€ 656,311  
€ 656,311  
€ 656,311  

214   Vessel size categories should be read as follows: small 0-500 GT, medium 500-25,000 GT, large 25,000-60,000 GT and 

very large if larger than 60,000 GT. 

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Vessel size 
category 

Vessel type 

Offshore vessels 
Other types of ships 

Source: elaboration of the authors. 

Total amount 
to accumulate 
over economic 
life of the 
vessel 
€ 10,083,969  
€ 8,327,010  

Optimised 
             €  

Annual licence 
     €  

€- 
€ 514,061 

€ 656,311  
€ 656,311  

Percentage of the fleet recycled in a safe and environmentally sound manner 

As the recycling decision is based on the design assumptions, adjusting the annual licence 
fee to the price gap of € 321 per LDT, the percentage of the fleet that will recycle in a safe 
and sound manner is the same as in the baseline scenario considered in the main report.  

Volume of vessels recycled in a safe and sound manner over time  

As the recycling decision is based on the design assumptions, adjusting the annual licence 
fee to the price gap of € 321 per LDT, the volume of the vessels that will recycle in a safe 
and sound manner is the same as in the baseline scenario considered in the main report. 
The accumulated amount of LDT that will be recycled in a safe and sound manner is 29 
million LDT in 2055.  

Aggregate fund position and cashflow of the Ship Recycling Fund  

As  the  annual  licence fee  in  this  scenario  per  category  are  lower,  the  fund  revenue  and 
expenses  will  be  lower  in  absolute  terms.  The  development  of  the  fund  revenue,  fund 
expenses  and  cumulative  size,  compared  to  the  baseline  scenario  in  the  main  report, 
remains the same.  

Figure A.16 Fund revenue and expenditure (left axis) and accumulated size of the fund (right 
axis) – Scenario 2 

Source: elaboration of the authors. 

The impact of the licence on the operational costs 

Table A.18 shows the estimates of the impact of introducing a licence on the operational 
costs of the vessels, by size and type for this scenario. The impacts of introducing a licence 
in this  scenario  will  be  significantly  lower  compared  to  the  baseline  scenario  in  the main 
report.  

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Table A.18 Licence fee as percentage of yearly operational costs per vessel type and size  – 
Scenario 2 

Vessel 
type 

Vessel size 

Size category in 
model 

Licence fee as 
percentage of 
yearly 
operational cost 
– Scenario 1 HKC 

Container 
ship 

Bulk 
carriers 

Tankers 

Medium/large 

Medium 

Small 

Feeder (100-1,000 
TEU)215 
Medium (1,000-
2,000 TEU) 
Main liner (2,000-
6,000 TEU) 
Panamax 
Handysize 
Capesize 
Handymax 
Product 
Handysize Product  Large 
Panamax 
Aframax 
Suezmax 
VLCC 

Very large 
Large 
Very large 
Large 
n. a. 

n. a. 
Very large 
Very large 
Very large 

0% 

5% 

4% 

28% 
13% 
24% 
12% 
0% 
9% 
0% 
22% 
19% 
17% 

Licence fee as 
percentage of 
yearly 
operational cost 
– Baseline 
scenario 
0% 

6% 

5% 

32% 
15% 
27% 
14% 
0% 
11% 
0% 
25% 
22% 
20% 

Source: elaboration of the authors based on R. Greiner and M, Stephens, Ship operating costs: Current and future trends, 
December 2017. 

Social impacts 

Table A.19 Impact of the SRL on the number of accidents in recycling facilities – Scenario 2 

Element 

Without Chinese Ban 

With Chinese Ban 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2030-2055) 

36 

9,059 

8 

1,913 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2055) 

4 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2030-2055) 

45 

Reduction of 
the number of 
accidents 
against the 
baseline 
situation 
(2055) 

5 

1,027 

11,535 

1,308 

1 

217 

10 

2,436 

1 

276 

Fatal accidents 
(adults, yearly) 
Non-fatal accidents 
(adults, yearly) 
Fatal accidents 
(children, yearly) 
Non-fatal accidents 
(children, yearly) 

Source: elaboration of the authors. 

Table  A.20  Potential  pollution  reduction  against  the  baseline  from  environmentally  sound 
recycling (Without Chinese Ban) – Scenario 2 

Hazardous material 

Unit 

India 
(2055) 

Banglades
h and 
Pakistan 
(2055) 

India 
(2030-
2055) 

Asbestos 

Tonnes 

95  

82  

842  

Banglades
h and 
Pakistan 
(2030-
2055) 
721  

215   TEU is the designation for the dimensions of containers. The abbreviation stands for Twenty-foot Equivalent Unit. 1 TEU 
is a container of 20 feet long, 8'0" wide and usually 8'6" high. In metric terms, a TEU is 6.10 metres long, 2.44 metres 
wide and 2.59 metres high. A 40-foot container is equivalent to 2 TEU. 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

Hazardous material 

Unit 

PCB 

Heavy metals 

Oil 

Oil sludges 

Tri butyl tin 

Mercury 

Ozone depleting 
substances 

Source: elaboration of the authors. 

Kg 

Tonnes 

Tonnes 

Tonnes 

Tonnes 

Kg 

Tonnes 

India 
(2055) 

0.255  

1.18  

-  

Banglades
h and 
Pakistan 
(2055) 

India 
(2030-
2055) 

0.164  

1.0  

-  

2.2  

10.42  

-  

Banglades
h and 
Pakistan 
(2030-
2055) 
1.4  

8.9  

-  

14,068  

9,052  

123,975  

79,702  

-  

0.27  

16.37  

-  

0.18  

11.41  

-  

2.40  

-  

1.55  

144.18  

100.44  

Table  A.21  Potential  pollution  reduction  against  the  baseline  from  environmentally  sound 
recycling (With Chinese Ban) – Scenario 2 

Hazardous material 

Unit 

India 
(2055) 

Banglades
h and 
Pakistan 
(2055) 

India 
(2030-
2055) 

117  

0.235  

1.5  

-  

800  

2.1  

9.9  

-  

Banglades
h and 
Pakistan 
(2030-
2055) 
1.032  

2.1  

12.8  

-  

13,375  

12,958  

117,860  

114,094  

-  

0.26  

15.56  

-  

0.25  

16.33  

-  

2.29  

-  

2.21  

137.07  

143.79  

Tonnes 

91  

0.242  

1.1  

-  

Kg 

Tonnes 

Tonnes 

Tonnes 

Tonnes 

Kg 

Tonnes 

Asbestos 

PCB 

Heavy metals 

Oil 

Oil sludges 

Tri butyl tin 

Mercury 

Ozone depleting 
substances 

Source: elaboration of the authors. 

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Annex VI – Comparison between 2016 and 2025 studies on 
a potential financial incentive 

This annex reflects on the outcomes between the results of this follow-up study (i.e. chapter 
3 on the elaboration of a baseline and chapter 4 on the Assessment of the impacts) and the 
previous study of 2016 on a financial instrument.216 

Baseline 

The 2016 study used seven different numbered categories for vessel sizes for the modelling 
and assessment of the impacts, whereas the current study uses 4 size categories, as can 
be  seen  in  the  comparison  in  Table  A.22.  It  is  important  to  note  that  the  current 
categorisation includes vessels smaller than 500 GT, which were not included previously, 
and which was requested for this follow-up study. 

Table A.22    p                 ’                         2016     2025         

Ecorys (2016) 
Size category 
1 

2 

3 

4 

5 

6 

7 

Size range (DWT) 
500 – 5,000 

5,000 – 10,000 

10,000 – 20,000 

Ecorys (2025) 
Size category 
Small 

Medium 

Large 

Size range (GT) 
0 – 500  

500 – 25,000 

25,000 – 60,000 

20,000 – 50,000 

Very Large 

> 60,000 

50,000 – 100,000 

100,000 – 200,000 

> 200,000 

- 

- 

- 

- 

- 

- 

Source: compilation of the authors. 

Similarly,  the  2016  study  used  6  different  age  categories  for  the  vessels,  each 
corresponding to roughly a period of 10 years, except for the segment of the oldest vessels 
which  spans  an  indeterminate  period.  As  Table  A.23  shows,  in  the  current  study,  4 
categories  are  used,  and  while  the  categories  also  roughly  correspond  to  periods  of  10 
years, and the last one spans an indeterminate period, on this occasion, the segment of the 
youngest vessels only spans 5 years. 

Table A.23    p                 ’                        2016     2025         

Ecorys (2016) 
Age category 
0 

1 

2 

3 

4 

5 

Year of build range 
2005 – 2014 

1995 – 2004 

1985 – 1994 

1975 – 1984 

1965 – 1974 

before 1964 

Ecorys (2025) 
Age category 
0 – 4 years 

5 – 15 years 

15 – 24 years 

> 24 years 

- 

- 

Source: compilation of the authors. 

Year of build range 
2017 – 2021 

2007 – 2016 

1997 – 2006 

before 1996 

- 

- 

On the other hand, the type categories used in the 2016 study classify vessels in 5 broad 
categories,  while the  current  study  includes 7 categories,  as  can  be  seen  in  Table  A.24. 
This  is  advantageous  because  more  categories  allow  for  more  detailed  projections  for 
vessels with behaviours that could be different from the rest (e.g. fishing vessels or offshore 
vessels), notably if they have different behaviours when it comes to the frequency of their 

216   Ecorys, DNV-GL and Erasmus School of Law (2016), Financial instrument to facilitate sound ship recycling, Final Report.  

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port calls. This also allows us to disaggregate the EU fleet from the global fleet with more 
precision on the vessel typology. 

Table A.24    p                 ’   p                     2016     2024         

Ecorys (2016) 
Bulk 
Container 
Passenger 
Tanker 
Other 
- 
- 

Source: compilation of the authors. 

Ecorys (2024) 
Bulk carriers 
Container vessels 
Fishing vessels 
General cargo 
Offshore vessels 
Oil tankers 
Other types of vessels 

In practice, the main reason for these differences lies on the data used for the global fleet, 
which  was  different  in  format  between  the  two  studies.  For  the  2016  study,  the  analysis 
relied  on  disaggregated  vessel  data  for  a  given  year,  which  was  then  broken  down  in 
categories  assumed  convenient  for  the  elaborations.  For  the  current  study,  the  need  to 
include  vessels  beyond  the  EU-flagged  fleet  imposes  constraints  as  obtaining  detailed 
vessel data for the entire global fleet can be resource-intensive. 

On this occasion, to be able to perform the analyses also on non-EU flagged vessels that 
call at EU ports at reasonable cost, and on the developments of the remainder of the global 
fleet,217 the study team obtained data from reliable publicly available sources for the global 
fleet. This decision effectively limits the need to procure detailed vessel data to only port 
calls  data,  but  it  represents  a trade-off  as  this  data  is  already  aggregated  on  predefined 
segments, which are not necessarily ideal for the study. For the follow-up analysis, the study 
performed extensive work to turn the aggregated data into a more useful dataset by carefully 
collating  different  sources  of  data  (as  described  in  Annex  IV),  but  the  differences  in  the 
categories used persisted, and it rolled onto the analysis performed. 

Methodologically, there were also changes in the way recycling projections were made. The 
2016  study  essentially  projected  the  recycling  of  individual  vessels,  and  in  doing  so 
simplified the process by assuming a broad expected lifetime for the vessels.  

The use of aggregated data in this study means that the projection must be done for vessels 
in a segment instead of individual vessels. The way this was done was using a probabilistic 
distribution  of  the  expected  lifetime  of  the  vessels  to  calculate  the  expected  number  of 
vessels or tonnage that is recycled every year per segment (please see Annex IV for more 
detail). These probabilistic distributions were derived from primary recycling data for each 
of  the  vessel  types  and  sizes,  therefore  this  study  also  provides  more  precision  and 
accuracy on the vessel recycling lifetimes. 

Outcomes of the study 

The outcomes of this study differ from the study conducted in 2016 for the following aspects. 
The  follow-up  study  elaborates  more  on  the  underlying  factors  originating  different 
outcomes.  namely:  (i)  the  categorisation  of  the  fleet  used  in  the  baseline  and  (ii)  the 
recycling  price  gap (and  the following  resulting  licence fees).  On  the  latter  elements,  we 
briefly explain here the assumptions made for this study.  

217   Given the  global  nature  of shipping  markets,  a  wealth  of  data  is  available for  a  global scale,  and thus  having  global 

projections allows us to validate them more easily against these data sources. 

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Recycling price gap 

An  important  factor  for  the  results  is  the  updated  recycling  price  gap  between  EU  listed 
recycling facilities and non-EU listed recycling facilities. Where in the previous study, a price 
gap  of  €  17  per  LDT  was  used,  in  this  study  the  updated  figures  collected  estimate  a 
recycling price gap of € 370 per LDT. This has major consequences for the required amount 
of  funds  that  needs  to  be  covered  via  the  SRL.  The  €  17  per  LDT  of  the  2016  study 
originated from the additional costs for recycling in accordance with the SRR for a Turkish 
recycling  facility.  The  €  370  per  LDT  originates  from  the  difference  in  recycling  prices  in 
2023 between facilities located in Bangladesh, India, and Pakistan, and the recycling prices 
for facilities in the EU.  

In the 2016 study a price difference of € 17 per LDT has been used which originates from 
an evaluation of DNV GL together with a medium sized recycling facility in Türkiye, covering 
the  additional  costs    for  an  environmentally  sound  recycling  process.  The  evaluation 
considered  the  investments  in  the  recycling  facility  which  are  needed  to  fulfil  the 
requirements set out in articles 13 and 15 of the SRR. That analysis provided an additional 
cost for recycling in accordance with the SRR of about 34%, or about € 17 per LDT. In this 
study the price gap originates from weekly updates publicly available on GMS’ website, a 
cash buyer.218 For recycling facilities located in the EU, the prices are set at around € 100 
per LDT, based on data reported in (Mosconi & Tola, 2023) and stakeholder consultation. 
The  analysis  of  the  data  showed  that  a  high  price  gap  of  €  370  per  LDT  existed  as  of 
September 1st 2024. 

Level of the SRL fee 

The different vessels’ size categories together with the recycling price gap that has to be 
covered result in different amounts per vessel type and size, when it comes to the capital 
that has to be accumulated during the lifetime of the vessel. Table A.25 shows the different 
levels of SRL fee. It can be noted that there is a big difference between the SRL per year 
between the two studies, mainly originating from the recycling price gap difference.  

Table A.25 Comparison of the SRL level between 2016 and 2025 studies 

Ecorys (2016) 
Size 
category 

Ship size 
used  
(DWT) 

Licence 
cost  
(per year) 

Ecorys (2025) 
Size 
category 

Ship size 
used 
(average) 
(DWT) 

Licence 
cost  
(per year) 

Licence 
cost  
(per year) 
– with 
2016 price 
gap 

1 

2 

3 

4 

5 

6 

7 

5,000 

10,000 

20,000 

50,000 

100,000 

200,000 

250,000 

€ 810 

€ 1,650 

€ 3,300 

€ 8,200 

€ 16,500 

€ 33,000 

€ 41,000 

Source: compilation of the authors. 

Small 

Medium 

193  

6,897 

€ -  

€ 108,835 

 € 5,003  

Large 

32,372 

€ 307,325 

 € 14,126  

Very Large  106,813 

€ 756,215  

 € 34,759  

218   See here. 

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Accumulated funds 

This in turn has consequences on the LDT soundly recycled and on the cumulative size of 
the fund  at  year  25 that results  from the safe  and sound  prediction model.  Where  in the 
2016 study the LDT soundly recycled was 3.8 million, in this study the result is 29 million. 
For the cumulative size of the fund at year 25 the outcomes are respectively €  25 billion 
(2016) and € 13.018 billion (2025), respectively. 

                                  2025            p       p    € 17  2016        

Using the price gap of € 17 per LDT and optimising the revised model for this study, we can 
simulate the outcome of the model. The price gap of € 17 per LDT means that the licence 
fee will significantly decrease as the table above have shown.  

Percentage of the fleet recycled in a safe and environmentally sound manner 

The recycling decision is based on the same design assumptions as in the main report.219 
The price gap of € 17 per LDT results in a new optimum of the license fees per vessel type 
and size as shown in Table A.25. With these licence fees, based on the price gap of € 17 
per LDT, the percentage of the fleet that will recycle in a safe and sound manner is 56% 
over the period 2030-2055, similar to the results of the main report. 

Volume of vessels recycled in a safe and sound manner over time  

As the recycling decision is based on the design assumptions, adjusting the annual licence 
fee to the price gap of € 17 per LDT, the volume of the vessels that will recycle in a safe 
and sound manner is the same as in the baseline scenario considered in the main report. 
The accumulated amount of LDT that will be recycled in a safe and sound manner is 29,02 
million LDT in 2055.  

Aggregate fund position and cashflow of the Ship Recycling Fund  

As  the  annual  licence fee  in  this  scenario  per  category  are  lower,  the  fund  revenue  and 
expenses  will  be  lower  in  absolute  terms.  The  development  of  the  fund  revenue,  fund 
expenses  and  cumulative  size,  compared  to  the  baseline  scenario  in  the  main  report, 
remains the same. 

219   The assumptions are as follows. Payment duration: 15 years, Financial accumulation period: 20 years, Administrative 
costs: 0.5%, Return on capital: 1.5%, Percentage of the recycling price gap that needs to be covered: 100%, Decision 
to opt for safe and sound recycling: 90%, Extension to vessels under 500 GT: No. 

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Figure A.17 Fund revenue and expenditure (left axis) and accumulated size of the fund (right 
axis) – 2016 price gap 

The impact of the licence on the operational costs 

The  table  below  shows  the  estimates  of  the  impact  of  introducing  a  licence  on  the 
operational  costs  of  the  vessels,  by  size  and  type  for  this  scenario.  The  impacts  of 
introducing a licence in this scenario will be significantly lower compared to the baseline 
scenario in the main report.  

Table A.26 Licence fee as percentage of yearly operational costs per vessel type and size  – 
2016 price gap 

Vessel 
type 

Vessel size 

Container 
ship 

Bulk 
carriers 

Tankers 

Feeder (100-1,000 
TEU)220 
Medium (1,000-
2,000 TEU) 
Main liner (2,000-
6,000 TEU) 
Panamax 
Handysize 
Capesize 
Handymax 
Product 
Handysize Product 
Panamax 
Aframax 
Suezmax 
VLCC 

Size 
category in 
model 

Small 

Licence fee as 
percentage of 
yearly operational 
cost – 2016 price 
gap 
0% 

Licence fee as 
percentage of 
yearly operational 
cost – Baseline 
scenario 

Medium 

0.3% 

Medium/large  0.2% 

Very large 
Large 
Very large 
Large 
n. a. 
Large 
n. a. 
Very large 
Very large 
Very large 

1,5% 
0.7% 
1,3% 
0,6% 

0,5% 

1,2% 
1,0% 
0,9% 

6% 

5% 

32% 
15% 
27% 
14% 

11% 

25% 
22% 
20% 

Source: elaboration of the authors based on R. Greiner and M, Stephens, Ship operating costs: Current and future trends, 
December 2017. 

220   TEU is the designation for the dimensions of containers. The abbreviation stands for Twenty-foot Equivalent Unit. 1 TEU 
is a container of 20 feet long, 8'0" wide and usually 8'6" high. In metric terms, a TEU is 6.10 metres long, 2.44 metres 
wide and 2.59 metres high. A 40-foot container is equivalent to 2 TEU. 

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Social impacts and environmental impacts 

As the volume of the vessels that will recycle in a safe and sound manner is the same as in 
the baseline scenario considered in the main report there are no differences in the social 
impacts and environmental impacts between the 2016 price gap and the 2025 price gap. 

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Annex  VII  –  Supporting  analysis  of  the  elements  for  the 
implementation of the SRL 

Options for a designated European entity 

Introduction 

Decentralised European public entities, such as agencies, institutions, or other self-standing 
bodies  (e.g.  joint  undertakings)  have  become  an  established  part  of  the  way  the  EU 
operates.  They  contribute  to  the  implementation  of  important  policies,  thus  helping  the 
European institutions in general, and the Commission in particular, to concentrate on core 
policy tasks. European public entities also have a role in supporting the decision-making 
process  by  pooling  the  technical  or  specialist  expertise  available  at  European  level  and 
thereby help to enhance the cooperation between Member States and the EU in important 
policy  areas.  The  literature  shows  that  the  design  and  establishment  of  decentralised 
European public entities is done on a case-by-case basis,221 depending on the scope of the 
activities and set of functions and tasks.222 The specifications of the scope and activities are 
set out in the legal basis of the establish public entity, usually characterised according to 
the  provisions  of  a  sectoral  Regulation  (e.g.  the  SRR),  and  endowed  with  own  legal 
personality.  

Decentralised public entities do not have the power to adopt regulatory measures. They are 
limited  to  taking  specific  decisions  (i)  in  areas  where  technical  expertise  is  required,  (ii) 
under clearly and precisely defined conditions and (iii) without genuine discretionary power. 
In  addition,  the  public  authorities  cannot  be  entrusted  with  powers  which  may  affect  the 
responsibilities conferred on the Commission. For public entities playing a role in preparing 
or taking decisions, one of the goals has been to give those decisions extra credibility and 
authority, with public entities helping to demonstrate that decisions are based on technical 
and scientific grounds. This requires the public entity to provide direct technical assistance 
to the  Commission’s  services and take  decisions  based  on  reliable  technical  information 
and  expertise,  making  transparency  and  scientific  competence  essential  requirements. 
Eventually, the decentralised European public entities usually rely on two channels that can 
provide the funding resources, namely (i) the transfers from the EU budget and (ii) the direct 
receipt of the administrative revenues originating from the services provided. 

Against this background, as regards the SRL, we assume that the tasks of implementing 
and monitoring it will be a public responsibility, like that established in the areas of vessels 
inspection or the certification of recycling facilities. It could thus be assigned as a task to an 
existing public entity (e.g. EMSA223 or EEA).224 Moreover, specific technical expertise would 
be needed to handling large payments and reinvesting the monies. Therefore, as general 
assumption, we assume that the public entity would need to combine different expertise to 

221   See  EPRS  (2018).  EU  Agencies,  Common  Approach  and  Parliamentary  Scrutiny,  European  Implementation 

Assessment, Study, Editor Ron Korver, European Parliament Research Service, Ex-Post Evaluation Unit.  

222   The European Parliament, the Council of the European Union and the European Commission have agreed to launch an 
inter-institutional  dialogue  on  decentralised  agencies  leading  to  the  creation  of  an  Inter-Institutional  Working  Group 
(IIWG) in March 2009. The IIWG has addressed a number of key issues in relation to the establishment of the Agencies, 
including  the  role  and  position,  the  creation, structure  and  operation,  as  well  as funding,  budgetary, supervision  and 
management issues. See also Commission of European Communities (2008). Communication from the Commission to 
the  European  Parliament  and  the  Council,  European  Agencies  –  The  way  forward,  COM(2008)  135  final,  Brussels, 
11.3.2008. 

223   EMSA  supports  the  European  Commission  in  the  implementation  of  a  wide  set  of  legislative  acts  including  on 
Classification  Societies  (Regulation  (EC)  No  391/2009),  on  the  minimum  level  of  training  for  seafarers  (Directive 
2008/106/EC), on passenger ships safety (Directive 2009/45/EC) and marine equipment (Directive 2014/90/EU), and on 
ship source pollution. Other relevant areas to the work of the Agency concern responsibilities of Member States in their 
roles as flag states (Directive 2009/21/EC), port states (Directive 2009/16/EC) and in investigating maritime accidents 
(Directive 2009/18/EC). On the pollution prevention side, the Agency supports the Commission in the implementation of 
EU legislation on air pollutants and GHG emissions from ships, ships’ waste disposal in ports, and ship recycling. 

224   The task could also be outsourced to a private body, which would still require some form of public supervision. 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

operate at European level and be an instrument of public and administrative law in relation 
to the SRL. 

Considering the design and characteristics of the SRL (please see also section  2.3), the 
Commission would designate a European entity with the following tasks and functions: 

•  setting appropriate licence premium collection;  

•  supervision and monitoring activity of the implementation of the SRR;  

• 

issuing certificates/licences to vessel owners required to call at EU ports;  

•  monitoring the collection of contributions from vessel owners and the granting of credits 

to future payments in relation to vessels by the Ship Recycling Fund;  

•  accrediting providers of financial instruments;  

•  monitoring  the  recycling  of  vessels  generally,  establishing  whether  individual  vessels 
have  been  recycled  in  accordance  with  the  SRR  and  issue  declaratory  decisions 
accordingly;  

•  monitoring  the  payment  or  transfer  of  capital  amounts  by  providers  of  financial 

instruments further to such declaratory decisions. 

As illustrated earlier, the basic idea of the SRL is to oblige all vessels that call at EU ports 
to obtain a SRL from a designated European entity and the amount charged to the vessel 
owner  would  consist  of  two  elements.  Firstly,  a  ‘contribution’  to  cover  the  administrative 
costs for issuing the SRL. Secondly, a ‘premium’ that would be administered separately and 
transparently. The premium consists of the capital accumulated by a vessel, as a credit to 
a future payment of the same amount, but provided that the vessel has been recycled in a 
safe and environmentally sound manner. 

Once  the  ultimate  vessel  owner  proves  that  the  condition  above  has  been  satisfied  at  a 
recycling  facility  included  in  the  list  of  EU  listed  recycling  facilities,  the  public  entity  can 
proceed paying out the full capital amount earmarked for the vessel to the ultimate vessel 
owner. If, however, it become apparent to the public entity that the vessel has been recycled 
in a recycling facility not included in the EU list, it is authorised to (i) consider the accrued 
rights to the payment of the capital amount forfeited by the ship owner and (ii) transfer the 
capital amount from a Ship Recycling Fund to a general benefit fund administered in the 
area of vessel recycling (see also section 5.3). 

In the following section, we present high-level estimations of the administrative costs that 
would stem from the core tasks and functions linked to implementing and monitoring the 
SRL. The estimations provide the elements to roughly quantify the (incremental) resources 
that would be necessary for adding a specific recycling pillar, for example, to an existing 
public  entity  either  acting  in  the  transport  sector  or  with  similar  functions  but  not  in  the 
transport  sector.  As  noted  earlier,  the  public  entity  would  also  need  complementary 
expertise to handle the large payments originating from the application of the SRL. Against 
this background, the estimations provide the elements to develop further the analysis in the 
following section, assuming that such European public entity could support an existing DG 
of the Commission. 

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Activities and approach to the estimation of resources and costs 

The proposed model of a SRL, with the ‘contribution’ and ‘premium’ elements administered 
by  a  designated  European  entity,  will  originate  administrative  costs.225  According  to  the 
previously identified tasks and functions, the following activities assigned to the designated 
entity would originate administrative cost, either from executing the activities with its own 
staff or through the procurement of third-party services: 

•  verifications  that  an  applicant  meets  the  requirements  for  receiving  the  SRL  and 

collecting the contribution to be paid by the vessel owner for this activity; 

•  collection  of  information  and  data  to  set  the  appropriate  licence  premium.  This  tasks 
also  requires  maintaining  the  information  regularly  updated  and  ensuring  a  properly 
adjusted value of the premium through time; 

•  actual collection of the premium and management of the Ship Recycling Fund; 

•  verification that the SRL is in place for vessels calling at EU ports; 

•  verification of sound vessel recycling, as a basis for paying out the accumulated amount. 

The Commission’s Standard Cost Model (SCM) provides the methodological approach to 
estimate the administrative costs originating from the activities listed above.226 In general, 
an estimate of the total administrative cost stems from multiplying the average unit cost of 
a required administrative activity with the total number of activities performed (per year) and 
subtracting the cost of the administrative activities removed.227 The average unit cost per 
activity can be estimated by multiplying a tariff (i.e. based on the average hourly labour cost 
including pro-rated overheads) by the estimated time needed to carry out an activity. The 
pro-rated  overheads  include  the  indirect  costs,  such  as  equipment  or  supplies’  costs. 
Because the identified functions and tasks might require several administrative activities, 
these are summed up to estimate the total administrative cost per information obligation. 
The core equation of the SCM is as follows: 

𝑁
𝑆𝐶𝑀 =   ∑ 𝑃𝑛 ∙ 𝑄𝑛
𝑖=1

𝑅

−  ∑ 𝑃𝑟 ∙ 𝑄𝑟

𝑖=1

In  this  case,  it  can  be  assumed  that  there  will  not  be  administrative  activities  removed, 
because  the  identified  activities  will  originate  from  a  new  administrative  obligation. 
Therefore, the previous equation of the SCM simplifies as follows: 

𝑁
𝑆𝐶𝑀 =   ∑ 𝑃𝑛 ∙ 𝑄𝑛
𝑖=1

𝑁

= ∑ 𝑇𝑛 ∙ 𝑡𝑛 ∙ 𝑄𝑛

𝑖=1

Where: 

•  𝑃𝑛 is the estimated cost of the n-th administrative activity, in turn equal to the product of 
the unit tariff (𝑇𝑛) by the time (𝑡𝑛) needed to carry out the activity. The Eurostat Structure 

225   Administrative  costs  are  those  costs  borne  by  business,  citizens,  civil  society  organisations  and  public  authorities 
because of administrative activities to comply with administrative obligations included in the legal rules. They concern 
the provision of information, such as notification of activities, submission of reports, information labelling and certification 
of products or processes, registration, monitoring, and assessment needed to provide the information. See European 
Commission (2023), Better Regulation Toolbox, Tool #56. 

226   See European Commission (2023), Better Regulation Toolbox, Tool #58. 
227   Only the administrative costs for business and citizens are subject to the so-called One-in-One-Out (OIOO) offsetting. 

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of  earnings  survey,  Labour  Force  Survey  data  for  Non-Wage  Labour  Costs  provides 
quantitative information on the representative unit tariff to be assumed at EU-27 level;228 

•  𝑄𝑁 is the number of activities related to the administrative obligations stemming from 

the implementation of the SRL. 

We elaborated high-level estimates of the total administrative costs considering the results 
of the updated model to assess the impacts when it comes to the number of estimated SRL 
that the public entity could issue and number of vessels that will be recycled in a safe and 
environmentally sound manner. The estimates span over the duration of the assessment 
period (i.e. 2030-2055) and against a baseline situation, which assumed the absence of the 
SRL  being  implemented.  The  calculation  of  the  total  present  value  assumes  the  social 
discount factor recommended for EU policy analysis and equal to 3% in real terms.229 

Given  the  fact  that  there  is  still  some  level  of  uncertainty  surrounding  the  actual 
implementation  scenario  of  the  designated  European  entity,  the  high-level  estimations 
presented should be read as a first step paving the way for follow-up validation. As noted 
earlier,  we  assume  that  to  carry  out  the  activities  related  to  the  SRL,  the  designated 
European entity would ideally need to combine different expertise from the maritime sector 
and for  handling  large payments  and reinvesting  the  monies.230  Therefore, a benchmark 
analysis  with  the  activities  carried  out  by  the  appropriate  entities  would  be  beneficial  to 
strengthen the estimates and conclude on more accurate figures. This section of Annex VI 
presents the methodological approach and the calculations carried out in detail. 

Activity 1 - Licence verification 

The time to carry out this activity consists of the average estimated time to process a SRL 
application for a vessel and handle the payment thereof for the contribution required from a 
vessel owner. Based on estimations for the same activity elaborated for the previous study 
on a financial instrument,231 it can be assumed that the working time has not changed, and 
on average, it will take 1 hour of time for the staff of the designated European entity. It is 
worth observing that this is an average value, because for vessels with a high frequency of 
visiting EU ports, the time needed to carry out this activity might be shorter, whereas for 
vessels  less  frequently  calling  at  EU  ports,  the  procedure  might  take  more  time.  The 
elaborations of the baseline and assessment of the impacts provide rough information about 
the number of SRL that will be issued on annual basis (i.e. the quantity). We assume that 
the costs originating from this activity will be in addition to the baseline situation without the 
SRL being implemented. 

In addition  to the  time needed to carry  out  the  verification,  we have  assumed that  an IT 
system or interface is needed for shipowners to apply for the licence, which allows to submit 
the  relevant  information  and  proof  of  payment  of  the  contribution.  Further,  given  that 
immediate  verification  could  substantially  increase  costs  to  accommodate  last-minute 
applications, especially after hours, we have assumed that flexible mechanism could be in 
place  for  these  cases,  such  as  allowing  vessel  owners  to  present  proof  of  their  (non-
rejected)  application when calling  at  EU  ports. Setting  up this  system with comes  with a 

228  

In terms of hourly Earnings, NWLC and 25% overhead for 2018. Eurostat data on HICP provide information to update 
the data from 2018 to 2022. See HICP - annual data (average index and rate of change) (prc_hicp_aind). 

229   See European Commission (2023), Better Regulation Toolbox, Tool #64. 
230   Because the actual mix of expertise needed for this activity and the location chosen to host the European public entity 
are unknown at this stage, we assume an hourly tariff of the working time of the staff equal to the value at EU-27 level 
for the ISCO 2 category, as recommended by the Eurostat Structure of earnings survey, Labour Force Survey data for 
Non-Wage Labour Costs. We deem this assumption proper, as the value at EU-27 is equal to € 40.5 per hour and the 
average value of for Portugal and Luxembourg, the Member States where EMSA and EIB or EIF are located is equal to 
€ 42.7 per hour. Eventually, the assumed hourly tariff has been updated from 2018's to 2022's values considering the 
Eurostat’s harmonised index of consumer prices (HICP). 

231   See Ecorys, DNV-GL and Erasmus School of Law (2016). 

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one-off costs for the initial design and setup, and recurring costs for the maintenance and 
security of the system. 

According to the inputs and previous assumptions, the average yearly administrative costs 
are  equal  to  €  1.15  million.  Expressed  in  present  values,  the  value  of  the  time  for  the 
verification of the SRL would originate a cost of € 18.3 million for the period 2030-2055. 

Activity 2 - Set the appropriate SRL licence premium 

Setting the appropriate SRL premium requires building, feeding with data and maintaining 
an estimation model. The information needs framework consists of the set of indicators we 
identified to elaborate the estimation model to establish the baseline and assess the impacts 
with the SRL being implemented. Notably, the set of indicators include information about (i) 
the characteristics of the fleet calling at EU ports, (ii) the frequency of the calls at EU ports 
over  the  lifetime  of  a  vessel  and  (iii)  the revenue gap  between  safe  and  environmentally 
sound recycling  in an  EU  listed  recycling facility  vis-à-vis  that  in  a  substandard  recycling 
facility.  We  assume  that  the  costs  originating  from  this  activity  will  be  in  addition  to  the 
baseline situation without the SRL being implemented. 

This task would likely be performed by a third-party service provider. As high-level estimate 
of setting up the quantitative model to calculate the SRL’s premium, it can be assumed that 
the staff of the provider will need an amount of time that is similar to the time that the study 
team  used  to  gather  the  information  and  elaborate the  model  for  this  study,  will  need  to 
purchase  commercially  available  data  on  the  merchant  fleet,  and  will  incur  in  overheads 
and gain a profit (assumed at a combined 20% margin). Based on these assumption, we 
estimated a one-off cost equal to € 16,717 in 2030. For the working time needed to update 
and maintain the model (i.e. on yearly basis), we assumed that it would require a smaller, 
but  recurrent  workload  of  80  hours  per  year,  as  well  as  continued  purchase  of  data,  in 
addition to overheads and profits. Based on these assumptions, we estimated an annual 
recurring  cost  of  €  10,887  from  2030  to  2055.  Expressed  in  present  values,  the  total 
administrative costs for setting the appropriate SRL licence premium are estimated at about 
€ 177,947 for the period 2030-2055. 

Activity 3 - Collection of the premium and management of the Ship Recycling Fund 

Based on the number of SRL issued in Activity 1, this activity consists of the time to collect 
and  maintain  updated  the  Ship  Recycling  Fund  on  the  basis  the  amount  calculated  in 
Activity 2, which is earmarked for a vessel and paid out at the end of the life thereof. It is 
assumed that third-party asset managers will perform this activity against payment of a fee, 
which is calculated on the basis of the Assets Under Management (AUM, which in this case 
is  the  money  in  the  Fund),  as  is  common  in  the  asset  management  industry.  We  have 
assumed  a  fee  rate  of  0.34%  of  AUM,  which  is  the  average  revenue  margin  of  asset 
managers in western Europe from 2008 to 2022. 

Asset  management  is  expected  to  cost  the  entity  a  yearly  average  of  €  37.2  million. 
Expressed in present values, the total administrative costs for the collection of the premium 
and management of the Ship Recycling Fund are estimated at € 534.2 million for the period 
2030-2055. 

Activity 4 - Verification that the SRL is in place for vessels calling at EU ports 

One of the elements of the SRL is that all vessels that wish to call at an EU port are obliged 
to obtain a SRL prior to entering a port. The designated European entity verifies that the 
SRL  is  in  place  for  a  given  vessel  (or  an  application  has  been  made  and  is  currently  in 
process) upon obtaining notice of a (scheduled) port call, an activity that could be carried 
out  relying  on  information  made  available  by  THETIS-EU,  an  information  system 
established by EMSA and used for vessel traffic monitoring. THETIS-EU enables the EU 

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Member  States,  Norway  and  Iceland  to  provide  and  receive  information  on  vessels 
movements, among others information available from this system.232 We assume that the 
information could be made accessible to the European public entity free of charges. The 
designated entity can then notify PSC authorities performing their regular control activities 
in case no SRL is in place for a vessel.  

According to data we used to build the model to set the amount of premium of the SRL, the 
quantity of information that needs to be managed is rather voluminous. We assume that this 
activity  would  require  0.5  FTE  annually  to  collect  the  information  from  the  THETIS-EU 
system and carry out the verifications. Expressed in present values, the total administrative 
costs for the verification that the SRL is in place for vessels calling at EU ports are estimated 
at around € 0.7 million for the period 2030-2055. 

Activity 5 - Verification of sound recycling 

The  designated  European  entity  has  also  to  verify  if  the  vessel  will  be  recycled  in 
accordance  with  the  SRR  in  an  EU-approved  recycling  facility.  For  this  activity,  the 
personnel of the public entity may request for a proof of delivery of the vessel in an  EU-
approved recycling facility. We assume that the costs originating from this activity will be in 
addition to the baseline situation without the SRL being implemented and that it could be 
carried out in the home office by the personnel of the public entity as it will mainly consist in 
checking(cross-checking)  a  proper  statement  of  completion  has  been  received.  It  is 
estimated that the verification of sound recycling might require on average 0.25 hours per 
vessel.  Expressed  in  present  values,  the  total  administrative  costs  for  the  verification  of 
sound recycling are estimated at € 15,031 for the period 2030-2055. 

Summary of the administrative costs originating from the activities 

Based  on  the  results  of  the  estimates  presented  in  the  previous  sections,  Table  A.27 
summarises the administrative costs that would originate from implementing and monitoring 
the regulatory requirements of the SRL. We present the administrative costs by individual 
activity,  in  present  values  and  steps  from  2030  to  2055.  The  administrative  costs  are 
assumed to originate against a baseline situation of the SRL not being implemented.  

Table A.27 Administrative costs for the activities of implementing the regulatory requirements 
of the SRL (€ million, present values) 

Activity 
1 
2 
3 
4 
5 
Total 

2030 
1.3 
0.0 
2.9 
0.0 
0.0 
4.2 

2040 
0.7 
0.0 
22.9 
0.0 
0.0 
23.6 

2050 
0.5 
0.0 
26.1 
0.0 
0.0 
26.6 

2055 
0.5 
0.0 
21.3 
0.0 
0.0 
21.8 

Source: elaboration of the authors. 

Additional resources and costs for a self-standing body or dedicated agency to support a 
Directorate-General of the Commission 

The  estimates  presented  in  the  previous  section  provided  the  elements  to  quantify  the 
resources that would be necessary for adding a specific recycling pillar, for example, to an 
existing European entity. 

232   See on EMSA’s website here.  

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Assuming the  creation  of  a  designated  European entity  to  support  an  existing  DG  of  the 
Commission, other (incremental) costs would be borne on top of the administrative costs 
estimated for the SRL. In this respect, we identified two additional sources of cost. Firstly, 
the  costs  to  hire  administrative  profiles  (i.e.  for  the  secretariat  and  technical  roles)  for 
ensuring that the European public entity could properly perform the tasks and functions set 
out in its basic act. Secondly, the cost related to the location and facilities. 

For the first additional cost item, we assume that 2 resources for assistants and 2 resources 
for  technical  roles  (e.g.  IT  management  and  helpdesk)  might  be  necessary,  having 
estimated between 16 and 17 FTE,233 as the total amount of resources necessary for the 
period  2025-2050.  Considering  the  size  of  the  administrative  staff,  we  estimated  a  total 
annual cost equal to € 0.3 million, assuming that they would be hired for full-time positions 
and at hourly cost rate of the ISCO 2 category (i.e. € 40.50 per hour).  

For the second cost item, the cost of the facilities will depend on the Member State and city 
selected as location to host the European public entity. However, at this stage this is an 
unknown for the element of the SRL related to the European public entity. We recommend 
to carry out necessary and detailed estimates in a follow up impact assessment study. 

Conclusions 

The  results  of  the  estimates  carried  out  for  a  designated  European  entity  responsible  of 
implementing the tasks and functions of the SRL show that a total of 20-21 FTE would be 
necessary, including both the operational and managerial staff. Additional costs would be 
necessary for the facilities in the selected location. Taking all the cost items into account, 
Table  A.28  summarises  the  total  estimated  costs  for  implementing  the  regulatory 
requirements of the SRL. 

Table A.28 Total estimated costs for implementing the regulatory requirements of the SRL (€ 
million, present values) 

Item 
Administrative  
   of which IT 
systems 
   of which third 

party providers 
costs 
Secretary and 
technical 
Total 

Source: elaboration of the authors. 

2030 
4.2 
0.3 

2.9 

0.3 

4.5 

2040 
23.6 
0.0 

22.9 

0.3 

23.9 

2050 
26.6 
0.0 

26.1 

0.3 

26.9 

2055 
21.8 
0.0 

21.3 

0.3 

22.1 

Benchmark analysis about the size of the staff employed by three agencies created for other 
transport modes (i.e. EMSA, ERA and EASA) suggests that the estimated additional human 
resources would not justify the incremental costs also necessary for the creation of a self-
standing  or  dedicated  entity.  As  Table  A.29  shows,  the  number  of  additional  human 
resources needed does not warrant creating a self-standing agency and instead it should 
be considered to add a specific recycling pillar to an existing European public entity. 

Table A.29 Benchmark analysis of the staff for establishing the public entity of the SRL 

Public entity 
SRL 
EMSA 

Transport mode 
Maritime 
Maritime 

Staff 
20 – 21 FTE 
253 FTE (2022) 

233   We assumed that 1 FTE corresponds to 1,760 hours of annual work (i.e. 8 hours per day and 220 working days per 

year). 

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Public entity 
ERA 
EASA 

Transport mode 
Rail 
Aviation 

Staff 
182 persons (2022) 
734 persons (2022) 

Source: elaboration of the authors based on annual activities of EMSA, ERA and EASA.234 

Use of forfeited funds 

Figure A.18 shows the flow of the funds that would be forfeited by vessel owners opting for 
recycling end-of-life vessels in an unsafe and environmentally unsound manner, according 
to the results of the projection model. Expressed in present values for the period 2025-2050, 
the total amount of the forfeited funds would be equal to € 2.07 billion or about € 83 million 
annually on average. 

Figure A.18 Estimated forfeited funds (present value, € million) 

Source: elaboration of the authors. 

Desk research shows that the estimated average annual amount of forfeited funds would 
be  roughly  comparable  to  the  purchase  costs  of  some  types  of  vessels.  For  illustrative 
purpose, Table A.30 presents the data gathered from specialised press on the purchase 
costs of new vessels. The identified purchase costs show that the (present) average annual 
amount of forfeited fund would be sufficient to finance the construction of some of the vessel 
types. 

Table A.30 Purchase cost of new vessels (€ million) 

Tanker 

Vessel 
Bulk carrier 

Type 
Handysize 
Handymax 
Panamax 
Capesize 
Suezmax 
Aframax 
VLCC 
ULCC 
ULCV 
- 
Source: various articles of specialised press. 

Container 
Cruise 

Purchase cost 
25 
25 
35 
58 
60 
60 
120 
120 
150-250 
500-1,000 

234   For EMSA, see EMSA (2023), Consolidated Annual Activity Report 2022. For ERA, see information available on the 
webpage of the agency here. For EASA, see EASA (2022), Report on Budgetary and Financial Management 2022. 

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Annex VIII – Synopsis of stakeholder consultation 

Targeted survey questionnaire 

Stakeholders’  opinions  on  the  causes  contributing  to  the  problems  and  evolution  in  the 
future up to 2050 without EU intervention addressing that issue 

Figure A.19                    p             q        ‘On the basis of your experience in the 
country (countries) where you operate, how do you  expect that each cause contributing to 
the problem of dismantling large commercial ships will evolve in the future (up to 2050), in 
the absence of a financial instrument being implemented?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

Figure A.20                    p             q        ‘On the basis of your experience in the 
country (countries) where you operate, how do you expect the dismantling of ships will evolve 
in the future up to 2050 without a EU intervention addressing that issue?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

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Figure  A.21                        p                q         ‘On  the  basis  of  your  experience, 
should  the  Hong  Kong  Convention  enter  into  force  over  the  coming  years,  are  you  of  the 
opinion that’ 

Source: consortium elaboration based on targeted survey questionnaire. 

            ’  p                                              

Figure A.22                    p             q        ‘To stimulate safe and environmentally 
sound recycling there is a need for a financial instrument’ 

Source: consortium elaboration based on targeted survey questionnaire. 

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            ’  p                p                                           

Figure A.23                    p             q        ‘In general, what would be the impact 
of introducing a financial instrument in the form of a Ship Recycling Licence in facilitating 
safe and environmentally sound ship recycling?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

Figure A.24                    p             q        ‘Do you think that a financial instrument 
in the form of a Ship Recycling Licence would still be relevant in the Hong Kong convention 
will enter into force?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

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Figure A.25                    p             q        ‘In particular, what do you think would 
be the impacts of introducing a financial instrument in the form of a Ship Recycling Licence 
(with no other change being implemented), when it comes to:’ 

Source: consortium elaboration based on targeted survey questionnaire. 

Figure  A.26                        p                q         ‘Based  on  your  experience,  do  you 
think it is relevant introducing a financial instrument in the form of a Ship Recycling Licence 
if the scope of the ship recycling Regulation would be linked to the beneficial ownership?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

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Figure  A.27                        p                q         ‘How  would  the  introduction  of  a 
financial instrument in the form of a Ship Recycling Licence affect the operating costs at your 
organisation?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

Figure  A.28                        p                q         ‘Considering  the  introduction  of  a 
financial  instrument  in  the  form  of  a  Ship  Recycling  Licence  to  promote  safe  and 
environmentally  sound  recycling  of  ships,  can  you  provide  an  estimate  of  the  type  and 
quantity of one-off costs (e.g. adjustment costs for personnel and equipment costs occurring 
only once) for your organisation?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

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Figure  A.29                        p                q         ‘Considering  the  introduction  of  a 
financial  instrument  in  the  form  of  a  Ship  Recycling  Licence  to  promote  safe  and 
environmentally  sound  recycling  of  ships,  can  you  provide  an  estimate  of  the  type  and 
quantity  of  recurring  costs  (e.g.  adjustment  costs  for  personnel  and  equipment  costs 
occurring on annual basis) for your organisation?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

            ’   p                     p                         p                     
proposed Ship Recycling Licence 

Figure A.30                    p             q        ‘The financial instrument in the form of 
a Ship Recycling Licence should apply to ships smaller than 500 gross tonnes’ 

Source: consortium elaboration based on targeted survey questionnaire. 

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Figure A.31                    p             q        ‘Based on your experience, what the 
best use of the funds forfeited would be?’ 

Source: consortium elaboration based on targeted survey questionnaire. 

Figure A.32                    p             q        ‘The financial instrument in the form of 
a  Ship  Recycling  Licence  should  completely  cover  the  revenue  gap  between  sound  and 
unsound recycling for a certain type of ship’ 

Source: consortium elaboration based on targeted survey questionnaire. 

Targeted interviews 

This section of the annex focusses on the takeaways from the targeted interviews with the 
stakeholders  during  which  we  have  addressed  questions  that  were  related  to  the 
introduction of a potential financial incentive. The sections summarise the main points of 
discussion breaking down the summaries by stakeholder group. 

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Recycling facilities 

On the capacity to recycle the vessels 

As regards the current situation, the representatives of the recycling facilities commented 
that there is sufficient capacity on the EU listed facilities and most of them are underutilised. 
The  stakeholders  interviewed  estimated  that  for  the  current  utilisation,  the  recycling 
activities could be estimated at 40% of the capacity. That is also the case for the recycling 
facilities located in Türkiye, where quite a few yards had less work over the last 6-12 months. 

The representatives of the recycling facilities largely agree that there is sufficient capacity 
in EU listed facilities also when it comes to the size of the vessels. There are now 9 recycling 
facilities in Türkiye, where there are hardly any capacity restrictions, both length and width. 
And they reported that there are also some EU listed recycling facilities located in the EU 
that are capable of handling very large vessels. The statement was corroborated with own 
quantitative analysis presented during the interview and shared afterwards. 

The stakeholders stressed that the recycling business is a supply and demand market. In a 
situation with the low demand, the recycling facilities can in principle carry out also other 
activities,  if  they  are  lucrative  (e.g.  repairing  and  refurbishment  works  of  the  vessels). 
However,  at this moment,  it  is  hard  to  get  any  kind  of  job,  because the  demand is  at  its 
lowest point in general. 

Even in other specialised sectors, such as oil rigs, the oil companies try to postpone the 
recycling of oil platforms as long as possible. The recycling facilities that are specialised to 
absorb the demand of this market segment will be approximately 30-35% of their capacity 
until 2025, and afterwards there is actually no demand yet.  

Speaking  about  costs  to  recycles  the  vessels,  the  stakeholders  pointed  out  that  the 
production cost is not the main cause of the observed price gap between EU listed and non-
EU listed recycling facilities. The driver of the cost difference has been identified mainly with 
the cost of the recycling facility for EU located recycling facilities. An example was for a dry 
dock  available  to  recycle  a  Floating  Production,  Storage  and  Offloading  (FPSO)  vessel. 
However,  as  in  South  Asia  there  are  almost  no  facility  costs  that  situation  gave  a  big 
competitive advantage. 

The demand for  recycling  vessels  has  been  low over the  past  2 years and  is  still  at  low 
level, but the market is expected to grow a lot, taking into account the orderbooks of the 
yards,  which  might  eventually  entail  some  overcapacity  of  the  maritime  sector.  Equally 
important to factor in is the need to be compliant with the new environmental standards.  

From the perspective (and quantitative analysis) of the stakeholders, the current capacity 
of the EU listed recycling facilities should be sufficient for the next 5 years, including large 
vessels. For container vessels, there might be an early start of the recycling needs, because 
for  the  next  2  years  the  stakeholders  foresee  an  inflow  of  container  vessels;  it  will  be 
triggered by delayed phasing off old container vessels that have been kept operating for the 
high  demand  of  shipping  rates.  The  larger  vessels  will  come  later  in  time,  as  they  are 
relatively young now. If the demand will grow as expected, quantitative estimated provided 
by the stakeholders suggest that a peak will be reached in 5-10 years. 

Should  this  situation  materialise,  additional  capacity  will  be  needed  for  the  EU  listed 
recycling  facilities.  Adding  facilities  in  Türkiye  to  the  EU  list  (and  compliant  with  the 
standards), it will help a lot. However, the representatives of one recycling facility expressed 
concern  about  the  actual  environmental  standards  that  Turkish  recycling  facilities  can 

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guarantee. If expanding the capacity will be still needed, the stakeholders indicated other 
options. First, look at recycling facilities located India, where 90% of the yards are certified 
according to HKC, whereas those located Bangladesh are not. Second, look for additional 
capacity in other countries and they reported some examples for consideration. They are 
as follows: (i) Indonesia, because of the pressure building at global level, (ii) Japan, where 
Mitsubishi wants to start recycling activities due to the local demand of steel and (iii) Brazil, 
where a recycling facility is doing green recycling due to environmental activism. 

Another avenue to improve the recycling capacity is to introduce forms of mechanisation in 
the  process  to  recycle  the  vessels.  That  is  beneficial  both  for  the  productivity,  more 
sustainable and environmentally friendly recycling, and lowering the cost in the long run. 

On the practice to reflag end-of-life vessels 

The stakeholders agree that, in the current situation, the decision about where and when 
recycle a vessel is basically economic-driven, notably by the price offered by a recycling 
facility to buy an end-of-life vessel. The stakeholders commented that re-flagging is still the 
main problem and a widespread practice, not only for recycling the vessels, but also when 
it comes to taxation. Therefore, they believe that reflagging is a behaviour that could hardly 
be changed.  

The stakeholders commented that there might be other factors that determine the decision 
of  recycling  a  vessel,  other  than  just  the  price  of  the  recycled  steel.  However,  the  other 
factors are usually not considered by the vessel owners and the potential financial incentive 
might be a solution to change the current behaviour. 

To make this solution more effective, the stakeholders suggested to broaden the scope of 
the Regulation to the beneficial owner. The remarked that this approach is used also other 
Regulations  and  applied  to  the  sanctions  in  force  for  Russian  companies.  Currently, 
reflagging is way too easy, whereas introducing the beneficial ownership might make the 
process more cumbersome. 

On the ratification of the Hong Kong Convention 

The stakeholders  largely  agree  that  the  entry  into force  of the  HKC  is  a concrete risk  of 
creating a minimum common denominator that is way below the standards of the SRR (e.g. 
HKC  does not  demand an  impermeable floor). They believe  that the  risk  of  a downward 
push of the standards of the SRR towards the HKC might be concrete. It might also provide 
ground  for  the  vessel  owners  to  justify  the  behaviour  to  dismantle  a  vessel  in  a  HKC 
approved  recycling  facility  instead  of  an  EU  listed  recycling  facility.  In  general,  the  HKC 
gives the feeling that everything is right, already because it looks as a supranational form 
of regulation, but in reality, the local implementation can be very different. 

The representatives of recycling facilities largely believe that, it is more likely that vessel 
owners might lean towards the lower recycling standards of the HKC. 

On the Basel convention 

the 
that  currently,  notable 
The  stakeholders  remarked 
implementation of the SRR and the Basel Convention. They stressed that when considering 
the plain English reading of the Basel Convention, it appears impossible to export an end-
of-life  vessel,  classified  as  hazardous  waste,  to  countries  like  Bangladesh,  India,  and 
Pakistan.  Despite  the  full  implementation  of  the  Basel  Ban  in  the  WSR,  which  is  legally 
binding in all EU member states, a contradictory situation has emerged where the SRR or 
individual decision-makers appear to permit the export of waste end-of-life vessels to the 
aforementioned countries. 

inconsistencies  exist 

in 

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On the price of the recycled steel and financial incentive 

The representatives of the recycling facilities believe that there will be a lot of demand for 
high-quality recycled steel in EU, but they are not confident that the price will increase. The 
stakeholders reported that demand of recycled steel will be sustained by the construction 
sector in Asian countries and in the far East (e.g. 2 million tonnes from Japan). According 
to representatives of recycling facilities, the estimated demand justifies the interest of the 
steel industry to search for other sources that supply recycling steel. 

If the Green Deal will impact on the scrapping activities of the vessels, it will improve the 
outlook also for the European steel market, and eventually increase the recycling demand 
for EU listed recycling facilities. Over the past years, the prices have been fluctuating and it 
is difficult to predict the future price of the steel. 

As regards other factors influencing the price of the recycled steel, interviewees state that 
if  all  recycling  facilities  were  HKC-compliant  then  the  price  of  steel  would  not  change. 
However, the price offered to the vessel owners could change, if the recycling facilities had 
to invest in facilities compliant with the SRR. In this respect, the stakeholder stressed that 
the actual price offered depends on the level of the operating costs of the recycling facilities. 
The costs for EU listed recycling facilities are usually higher for the standards of the SRR, 
a condition that has also implications for the duration of the recycling process. For example, 
for a tanker, the dismantling time can be estimated equal to 8 months for a recycling facility 
compliant  with  the  SRR  standards  and  equal  to  4  months  for  a  recycling  facility  not 
compliant with SRR standards. 

Moreover, the stakeholders argued that also the requirements in force at national level may 
influence the price that an EU listed recycling facilities can offer. The representatives of a 
recycling  facilities  reported  the  need  to  get  local  environmental  approval,  even  if  the 
recycling facility operated is more than compliant with the requirements in force at EU level. 
They  concluded  that  the  need  for  local  approval  is  redundant  and  increase  the 
administrative burden, and eventually the operating costs. 

Speaking about a potential financial incentive, the interviewees believe that it would make 
a  big  difference.  The  representatives  of  a  recycling  facility  reported  that  Norway  had  a 
program providing a subsidy from the government (€ 135 per tonne), but it was abandoned 
because against the EU Regulation. 

Vessel owners 

On fleet trends and influencing factors 

When it comes to the decision to retire a vessel from the fleet, the age of the vessel is still 
the main decision factor; the representative of the vessel owners explained that the age for 
retiring  a  vessel  from  the  fleet  is  primarily  economic-driven  and  estimated  taking  into 
account the volume of maintenance and repair costs needed.  

As regards the future trends of the fleet and other influencing factors, the representatives 
of the vessel owners commented that the new environmental regulations and the efficiency 
standards (i.e. CII and EEXI) are expected to impact on the composition of the current fleet. 
In this respect, they clarified that when it will not be economically sustainable anymore to 
maintain and upgrade a vessel to make it compliant with the new environmental regulations, 
then that will be the point in time for scrapping it. 

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From a market perspective, and possible future evolution of the trade flows in the maritime 
sector, the representatives of the vessel owners do not foresee a significant change of the 
current situation, notably towards a stronger preference for ‘nearshoring’ or ‘friendshoring’ 
of the economic activities. 

On the recycling facilities’ capacity to recycle the vessels 

The  representatives  of  the  vessel  owners,  both  from  umbrella  association  and  individual 
organisation largely agree that, in the current situation, the recycling capacity of EU listed 
recycling facilities is not sufficient. They pointed out that the EU listed recycling facilities do 
not  have  adequate  dimensions  (i.e.  length,  width,  and  draught)  to  accommodate  large 
vessels and expressed criticisms about the fact that the capacity of the recycling facilities 
is not representatives of the actual capacity. 

For the future situation, the representatives of the vessel owners reckon that the issue of 
the  recycling  capacity  will  worsen.  As  noted  earlier  introducing  their  opinions  on  the 
influencing  factors,  the  new  environmental  initiatives  launched  by  the  European 
Commission within the ‘Fit for 55’ package, such as ETS and FuelEU Maritime, will warrant 
a faster renewal of the fleet, eventually increasing the demand of capacity of the recycling 
facilities.  Moreover,  as  Europe  is  going  to  reduce  its  reliance  on  oil  and  gas,  the 
decommissioning of offshore installations will be more frequent, further eroding the future 
recycling  capacity.  They  believe  that  this  issue  might  become  more  prominent  in  some 
recycling facilities located in northern Europe (e.g. Denmark and Norway). 

From an economic perspective, the representatives of the vessel owners argued that the 
EU listed recycling facilities are also limited in terms of geographical scope, as there are a 
lot of approved yards in Europe and Türkiye, few in other regions of the world, and there 
are no facilities in Asia, Middle East, or South America. On that note, they pointed out that 
the maritime industry is global, a situation that makes important to include also recycling 
facilities outside the EU, also to ensure minimisation of the operating costs borne to transfer 
the vessel to the recycling facilities. 

When it comes to the decision about the location where dismantle a vessel, the consultation 
with the representatives of the vessel owners allowed to identify exceptions to the general 
behaviour. For one case, the organisation expressed willingness to recycle the vessels at 
EU listed recycling facility, for corporate and reputational reasons (i.e. public company with 
strict auditing report), although they are aware of the different price offered by EU-listed and 
non-EU listed recycling facilities. 

On the ratification of the Hong Kong Convention 

The  representatives  of  the  vessel  owners  tend  to  agree  that  the  HKC  will  provide  an 
opportunity  to  raise  and  improve  the  current  recycling  standards  of  the  facilities.  They 
commented  that  over  the  coming  years  there  will  be  more  HKC-compliant  facilities, 
generally improving the current situation. The representatives of the vessel owners pointed 
out that instead of relying on a list of pre-approved facilities, they would work in collaboration 
with the recycling facilities, regardless of their location or jurisdiction, in order to maintain 
an own lists of preferred facilities. That would allow them to comply with the requirements 
of their responsible recycling plan. 

On the price of recycled steel and financial incentive 

As mentioned earlier the price of the steel is among the factor the lead to the decision of 
the  location  where a vessel  will  be  recycled.  However,  the  representatives  of  the  vessel 
owners acknowledge that the price of the steel is hard to predict, because in turn it depends 
on other factors, like to example the demand of steel for buildings in South Asian countries. 
In this  respect,  they recall  that  when  China  was  still  open for recycling  vessels,  Chinese 

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recycling facilities were used. Should they be reopened, it is likely that the vessels will sail 
there again, attracted by the demand of steel. 

The  representatives  of  the  ship  owners  would  not  recommend  the  implementation  of  a 
financial  incentive,  because  they  do  not  see  the  need  to  implement  it  and  deemed  not 
efficient either. They provide this opinion on the ground that the implementation of a financial 
incentive would be a regional instrument, whereas the HKC and the maritime industry have 
a  global  geographical  scope.  Introducing  a  regional  financial  instrument  might  trigger  a 
political climate of retaliation. The representatives of the vessel owners suggest considering 
opening  the market  and  include  more recycling yards  into the  SRR to ease  the  capacity 
issue. However, with the HCK entering into force, they pointed out that there will be less 
needed to introduce a financial incentive. 

Steel industry 

The  representatives  of  the  steel  industry  agreed  that  the  EU  is  the  leading  authority  for 
sustainable  and  social  goals.  They  acknowledged  the  added  value  of  the  EU  policy 
compared to actions taken at country level, because some treaties in force, but they are not 
enforced at the  same level.  From  a  policy  perspective, they  deem the  circular  economic 
action  plan  as  a  strategy  document,  whereas,  specifically  for  recycled  steel,  the  Waste 
Shipment Regulation (WSR) is the most important legislative document. However, it deals 
primarily with plastics products and not with metal scrap. 

The representatives of the steel industry agree that the recycled steel obtained from vessels 
is  a  valuable  material,  notably  for  the  high  quality  and  metallurgic  characteristics  of  the 
material. Having a direct access to the steel recycled from vessels is the main reason for 
which the steel industry is cooperating with EU listed recycling facilities located in the EU.  

The  (start-up)  projects  include  more  reliance  on  mechanised  recycling  processes  to 
decrease  the  cost. In this  respect,  the  representatives  of  the  steel  industry  acknowledge 
that recycling facilities located in the EU are not competitive with those in South Asia for the 
big price gap that there exist. They attribute the price gap to a large extent to the difference 
in  environmental  and  labour  standards.  They  believe  also that  the  price gap  is  the  main 
driver for the vessel owners to circumvent the provisions of the SRR, in order to maximise 
their own profits. In this respect, they conclude that to make the recycling facilities located 
in Europe competitive with the facilities in Türkiye and South Asia, the market conditions 
need to be closer. 

For the price of the recycled steel, and the price gap with other regions of the world, they 
cannot report quantitative estimates. They price of the steel depends on a variety of factors, 
which make any predictions hardly reliable. On a qualitative note, they tend to agree that 
with  the  European  Green  Deal,  it  is  likely  that  the  production  of  high-quality  steel  might 
increase  (i.e.  green  steel)  to  reduce  the  carbon  footprint.  Therefore,  to  support  the 
production of green steel, more steel from recycled vessels will be necessary. In general, if 
the price increases, more recycled steel will stay in Europe, and in terms of price difference, 
it  might  be  between  green  steel  and  other  steel  in  the  future.  In  terms  of  supply,  the 
stakeholders confirm they are aware that there are also other sources to supply the demand 
of recycled steel, such as the decommissioning of offshore oil rigs and cars. 

Regarding  recycling  activities  and  projections  for  the  future,  interviewees  reported 
quantitative  information,  also  based  on  own  estimates  elaborated  on  market  figures. 
Overall,  in  the  current  situation,  the  EU  is  a  net  exporter  of  steel  (i.e.  4  million  tonnes 

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imported, and 17.7 million tonnes exported, respectively). Specifically for recycled steel, the 
volume of material extracted from recycled vessels is around 4-5 million LDT and for the 
future they  foresee  it  might  peak  up  to  25  million  and then  level  at  15-20.  The  foreseen 
increase of demand of scrap steel in the EU will depend on the technology switch from blast 
furnaces to electro gas furnaces. 

Classification societies 

On fleet trends and influencing factors 

The representatives of the classification societies agreed that the development of the fleet 
is mainly driven by the age of the vessels and the demand for trade. They mentioned that, 
for example, container vessels have shown fluctuation in their average lifetimes over time 
based on the demand for shipping (i.e. average vessel lifetime of about 25 years), but that 
is decreasing in certain segments. For the future trends, the environmental requirements 
linked to the decarbonisation of the transport sector are reckoned as a factor that will affect 
the demand of new vessels over the coming years. 

On the recycling facilities’ capacity to recycle the vessels 

In  relation  to  the  effect  of  the  environmental  requirements  for  decarbonisation  and 
implementation of greener technologies, the representatives of the classification societies 
believe that they will likely result in an increase of recycling activities for both the global and 
the EU fleet. Eventually, it will impact on the capacity of the recycling facilities even though 
the rate of implementation of these technologies is still uncertain, as the vessel owners can 
decide  to  pursue  different  strategies  (e.g.  proactively  upgrading  the  fleet  over  time  or 
upgrading it only if necessary). 

The representatives of the classification societies reported that over the past three years 
much more interest for the green recycling of the vessels was shown by the vessel owners. 
They commented that that might explain the reason for which the recycling facilities, and 
thus many more applications, have been filed to be an approved yard under the SRR or 
HKC. 

The  decision  to  recycle a  vessel  in  a  ‘green’  facility  would  be  seen  as  an  opportunity  to 
bolster the environmental, social and governance (ESG) image of the vessel owners, an 
opportunity  which  is  gaining  consideration  in  the  maritime  sector.  However,  the 
representatives of the classification societies believe that what ‘green’ means in this context 
is not well defined, and it does not necessarily imply recycling on an EU listed facility. With 
the  HKC  being  ratified,  the  vessel  owners  can  demonstrate  that  they  are  doing  what  is 
expected  from  them  by  dismantling  at  HKC-compliant  facilities,  a  strategic  decision  that 
allows them to pursue their business without fundamentally changing anything. 

On the ratification of the Hong Kong Convention 

As regards the ratification of the HKC, the representatives of the classification anticipate 
that  resistance  might  arise from the  vessel  owners.  They  would prefer  to dismantle their 
vessels at HKC-compliant yards. Usually, EU-listed yards have higher costs, a situation that 
entails  that  they  can  offer  lower  prices  to  buy  vessels  and  dismantle  them  for  recycling 
purposes. 

On the price of recycled steel and financial incentive 

The price of the steel is a big factor influencing, when it comes to vessel recycling decisions, 
not only due to the price difference between regions of the world, but for price fluctuations 
over time. The vessel owners may decide to postpone the decision to retire a vessel from 
the fleet, when the price of steel is low, and wait for a better period. 

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Overall, the representatives of the classification societies believe that a financial incentive 
will be beneficial instrument, for example, by also covering vessels flying flags of non-HKC 
signatories. However, they foresee challenges in its design and implementation. 

Other businesses / consultancy 

On the recycling facilities’ capacity to recycle the vessels 

The representatives of a consultancy have risen concern about the recycling capacity of EU 
listed  recycling  facilities.  They  commented  that  only  a  few  Turkish  yards  are  preferred, 
whereas many  recycling  facilities  located  in  northern Europe are too  small  to handle  the 
demand to recycle vessels. 

On the ratification of the Hong Kong Convention 

The representatives of a consultancy commented that the standards of the HKC should be 
risen to a higher level. That would entail recycling facilities being more comparable in terms 
of costs of the recycling process, also making it more uneven across locations. 

On the price of recycled steel and financial incentive 

The representatives of a consultancy expressed reluctance to introduce a financial incentive 
and justify the argument on the basis of the widespread re-flagging practice in the sector. 
They commented also that re-flagging might be done regardless of the end-of-life time of a 
vessel  and well  in advance  to  it,  in order to avoid  the  requirements  of the  SRR.  Forcing 
vessel  owners to recycle only  in  EU  listed  facilities lead them  to  sell the  vessel  before it 
becomes too old and avoid the recycling problem. The representatives also pointed out that 
there might be the possibility that the previous owner of the vessel might negotiate to include 
the financial incentive or fund in the vessel's sale. 

The representatives of another consultancy active in this sector commented on the likely 
acceptance  of  a  financial  incentive.  They  believe  there  might  be  a  difference  between 
southern  and  northern  European  vessel  owners  with  respect  to  the  willingness  to  be 
compliance  with  environmental  standards.  Northern  European  vessel  owners  (e.g. 
Germany, Norway, the Netherlands, and the UK) would tend to accept a need for higher 
environmental standards, compared to southern European vessel owners (e.g. Greece). 

Academia, research institutions and civil society 

On the ratification of the Hong Kong Convention 

The representative of an NGO pointed out that the entry into force of the HKC should not 
deter  the  EU  from  implementing  the  stricter  standards  of  the  SRR.  In  this  respect,  they 
suggest that the EU should propose amendments to the HKC to align it with enhanced SRR. 

On the price of scrap steel and financial incentive 

The representatives of an NGO commented that a well-implemented licensing system could 
provide a framework for standardising recycling practices. They believe this would ensure 
that  they  meet  environmental  and  safety  standards.  It  is  suggested  that  such  a  financial 
incentive (in form of a licence) should align with international standards, such as the HKC. 
The EU is identified as an ideal body to take the lead in developing and implementing the 
financial incentive, potentially serving as a gateway for its global adoption. 

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The financial incentive is deemed necessary to internalise external costs and able to close 
the price gap of the steel that currently encourages vessel owners to opt for less responsible 
recycling methods. They note that the price gap between safe and unsafe recycling facilities 
can  also  vary  significantly,  a  situation  which  might  warrant  a  review  mechanism  of  the 
financial incentive for future adjustments. 

By serving as both a regulatory tool and a financial incentive, the licence could encourage 
better  recycling  practices.  The  representatives  of  the  NGO  believe  that  the  financial 
incentive  would  increase  the  demand  for  responsibly  recycled  vessels.  Moreover,  they 
foresee that such a financial incentive would stimulate innovation and development in the 
vessel recycling sector. This would make responsible recycling more cost-effective in the 
long term.  

The  main  barrier  foreseen  for  its  implementation  is  the  need  to  gain  international 
acceptance  for  the  licensing  system,  and  additionally,  they  identified  other  potential 
regulatory challenges, such as alignment with WTO rules, though not insurmountable. They 
point out also that the incentive would have a slow effect, as it would take some years for 
the first vessels to accumulate enough capital. An expansion of the scope of the Regulation 
to beneficial owners would have a more immediate effect, although the use of forfeited funds 
presents an opportunity to pursue the Commission’s objectives in the policy area. 

Workshops 

This  section  of  the  annex  reports  the  takeaways  of  the  workshops  organised  during  the 
activities of the study, when it comes to items that are relevant for Objective B. The first 
sub-section  presents  the  takeaways  of  the  study  workshop,  held  on  27  June  2023.  The 
second sub-section presents the takeaways of the workshop dedicated to discussing the 
current and future recycling capacity of the shipyards, held on 3 August 2023.  

Study workshop 

•  Taking into account the ratification of the Hong Kong Convention (HKC), the participants 
noted  that  more  information  will  be  needed  on the  legal matters  entailed by the  Ship 
Recycling  Licence  (SRL).  For  example,  when  it  comes  to  vessels  that  are  not  EU-
flagged and the scope of application (e.g. all the vessels in the EU); 

•  The participants pointed out that the financial incentive was proposed at the time when 
the SRR was drafted, building on the ‘polluter pays principle’. They pointed out that (i) 
the  SRL  is  difficult  to  implement,  also  in  terms  of  distribution  the  fund  to  the  correct 
recipient, and (ii) will not help on the enforcement of the SRR. The stakeholders stressed 
that in the shipping industry a strong pillar is that all the vessels are treated in the same 
way; 

•  The participants remarked that the financial incentive would make is less attractive the 
EU  ports  and  EU-flagged  vessels,  eventually  with  consequences  on 
the 
competitiveness  of  ports.  They  argued  that  the  financial  incentive  might  distort  the 
market, with implications that could not be overlooked when it comes to international 
aspects of maritime transport; 

•  The following considerations have been put forward for the SRL:  

−  On the mechanism, it is meant to fill the price gap between recycling in EU-
listed yards and non-EU-listed recycling facilities. However, the amount of 
money that should be collected does not depend only on the type of vessel, but 
also on the dynamics of maritime transport. The participants pointed out that 
the latter condition would make way hard to implement the incentive; 

−  On the characteristics of the incentive, it should be vessel-specific; 

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−  On the type of instrument, (i) an insurance related to specific vessel could be 
considered as another option and (ii) another potential instrument could be to 
support proper recycling facilities. 

•  The participants also suggested that the fund collected could be linked with the IHM. 
That would mean that modern and greener vessels should pay less. The stakeholders 
suggest looking at the waste and the materials that are handled; 

• 

In relation to the dynamics of the maritime sector, the stakeholders argued on practical 
elements of a SRL, pointing out on the difficulty to calculate the incentive for a vessel 
given that the retirement time might be an unknow. Depending on market conditions, it 
might be after 30 years of operations, but also only after few years of operations; 

•  Again, on the focus of the financial incentive about the price gap between the recycling 
facilities, the participants suggested to focus also on the difference of an EU beneficial 
owner of an EU-flagged vessels or non-EU beneficial owner. The participants believe 
that via that way, it will be a market-driven instrument instead of a government-driven 
instrument; 

•  The participants stressed that the SRR only applies to EU-flagged vessels, a situation 
that gives room to circumvent the flagging requirement. From a practical perspective, 
the financial incentive looks more suitable for small vessels, which more likely could be 
recycled at an EU facility. The incentive should be strong enough for the vessels to go 
an EU listed recycling facility, regardless of the size; 

•  An example of financial instrument, the participants mentioned the Canadian oil wells 
and gas industry, and remarked also that a legally sound financial instrument can help 
to solve issues related to its enforcement.  

For the design of the financial instrument to incentivise safe and sound vessel recycling, the 
participants  to  the  workshop  were  requested  to  provide  an  opinion  on  the  procedure  to 
define the amount accumulated, namely whether it should be specific to the age, size, type 
and operating profile of a vessel. According to the responses provided to this question (i.e. 
29 out of 50), they either strongly agree or agree (i.e. 10 and 12, respectively, or 76% of 29 
opinions)  that  the  amount  accumulated  should  be  tailored  taking  into  account  the 
characteristics  of  the  vessel.  Figure  A.33  summarises  the  analysis  of  the  responses 
provided to this question. 

Figure A.33                   p             q         ‘The procedure to define the amount 
accumulated should be specific to the age, size, type and operating profile of a vessel?’    = 
29) 

Source: consortium elaboration based on Mentimeter question. 

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Dedicated workshop on capacity of the shipyards 

Item 1: Current vessel recycling capacity 

•  On the information shared about the size of the recycled vessels (i.e. length and width), 
the representatives of the recycling facilities reported that, over the last 5 years, only 2 
vessels longer than 294 meters have been recycled; 

•  The data elaborated by the representatives of the vessel owners does not contain inland 
navigation vessels and offshore plants. They pointed out that inland navigation vessels, 
offshore plants and vessels smaller than 500 GT hinder the capacity of the recycling 
facilities and that it is an information included in the commonly known figures; 

•  The representatives of the recycling facilities responded that if the EU listed recycling 
facilities  would  receive  sufficient  EU-flagged  vessels,  the  facility  would  only  recycle 
those vessels and those under the 500 GT threshold would be recycled in other (and 
smaller) facilities; 

•  The Commission remarked that the offshore plants and vessels smaller than 500 GT 
vessels would be an issue if EU listed facilities were at full capacity. In the future this 
might be an issue (to be assessed), but figures show it is not an issue for now;  

•  The representatives of the vessel owners remarked that the offshore plants and vessels 
smaller  than  500  GT  should  be  taken  into  account  in  the  theoretical  exercise  on 
assessing future recycling capacity, because it does play a role; 

•  They added that based on their data, on the average DWT of recycled vessels in the 
EU  listed  recycling  facilities  (in  the  EU),  the  facilities  also  recycle  small  vessels  (i.e. 
smaller  than  500  GT  and  inland  waterways  vessels).  Their  conclusion  is  that  the 
theoretical capacity of the facilities is not the actual capacity and it is not the availability 
of capacity that will incentivise the recycling activities in EU-listed facilities; 

•  The representatives of the recycling facilities remarks that 5 years ago the demand for 
recycling of big vessels was good, but that now the market is at low level and that this 
is  the  reason  why  they  now  recycle  more  vessels  that  are  also  below  the  500  GT 
threshold. They commented that the current recycling of the smaller vessels is not an 
issue  for  the  capacity  of  the  facilities.  Moreover,  for  the  EU  listed  recycling  facilities, 
there  are  around  5  of  them  that  also  doing  other  activities  and  there  are  2  EU  listed 
recycling facilities that are not doing any recycling activity;  

•  BIMCO mentions that the aim is not to supply the EU-listed recycling facilities, the EU 
listed recycling facilities were already well regulated. The aim is to recycle in a safe and 
environmentally sound manner;  

•  On  the  capacity  of  the  recycling  yards,  the  Commission  recalls  that  the  core  of  the 
evaluation  exercise  should  be  on  whether  the  recycling  capacity  of  the  yards  was 
sufficient during the evaluation period and whether it will be sufficient in the future; 

•  The  representatives  of  the  vessel  owners  concludes  that  the  vessel  owners  are  not 
using  the  capacity  on  the  EU  listed  recycling  facilities.  The  shipping  industry  is  a 
competitive  business,  hence  the  recycling  prices  offered  have  a  big  influence  on  the 
recycling  demand.  In  addition,  the  absolute  prices  are  not  an  issue,  but  it  is  the 
difference in the prices between the regions. Currently, the price of steel in Europe is 
not going up despites the demand of high-quality steel;  

•  The representatives of the vessel owners add that for the future the demand of green 
steel could increase and this could have an impact the price of steel in Europe. However, 
it cannot be predicted how much it will change; 

•  The representatives of the vessel owners remark that vessel owners have to compete 
at global level and therefore the recycling price is important. That makes it difficult to 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

recycle having rules set at regional level, when the vessel owners compete on a global 
level;  

•  The representatives of the vessel owners acknowledge that re-flagging the vessels is a 
common practice of industry and they hope that the Hong Kong Convention (HKC) will 
help to resolve this issue;  

•  The  representatives  of  the  recycling  yards  suggest  agreeing  that  EU  listed  recycling 
facilities have sufficient capacity. The representatives of the vessel owners argue that it 
depends on the types of vessels that are recycled, like the inland vessels. The recycling 
capacity necessary for these vessels should be excluded from the numbers estimating 
the  recycling  capacity.  The  representatives  of  the  vessel  owners  agree  that  there  is 
capacity in the EU listed facilities for recycling, but at the same time they are not sure 
whether there is sufficient capacity;  

•  The representatives of the recycling yards counterargue that they have gathered figures 
over  the  past  years  that  show  that  there  is  capacity  at  the  EU  listed  facilities.  This 
conclusion is also supported by other information sources; 

•  The  representatives  of  the  recycling  facilities  comment  that  while  there  is  sufficient 
capacity, it does not mean that it is going to be used. For actual sustainable and sound 
recycling,  they  suggest  resolving  the  issue  of  re-flagging  of  the  vessels.  For  vessel 
owners, if there is capacity in EU, it is because the price is a key element in the equation; 

•  On the 500 GT threshold will be changed, the Commission remarks that a modification 
of the provisions of the Regulation will be considered depending on the conclusions of 
the evaluation and assessed in terms of impacts. 

Item 2: Future vessel recycling capacity and impact of the HKC on the capacity of the EU-
listed facilities 

•  On the change of behaviour of the vessel owners as effect of the ratification of the HKC, 
the  representatives  of  the  vessel  owners  pointed  out  that  the  expected  lifetime  of  a 
vessel depends on the type. The future fleet depends on the past behaviour. They do 
not expect more vessels to be recycled, because of the greening of the fleet. On how 
the vessel owners will react to the HKC, the representatives of the vessel owners react 
that  it  is  difficult to predict  it,  although they  foresee  that the  sector  will  comply  to the 
HKC. The compliance rate to a HKC is generally high, because the price of detainment 
is big, if a vessel does not align with the legislation. In addition, the vessel owners are 
willing to recycle at a compliant facility; 

•  The  representatives  of  the  vessel  owners  remark  that  the  HKC  applies  to  the  whole 
world fleet, and a more level playing field will be created. It will bring more certainly to 
the market. They added that that there is a non-favourable clause in the HKC, so also 
a non-party flag will be treated the same in the same manner; 

•  The representatives of the vessel owners commented that for the average age of the 
vessels in there are a number of parameters that should be taken into account. In the 
current market,  a  lot  of  the  fleet remained active  after  the  Covid period, but  they  will 
soon be recycled and (the requirement of) the ‘Fit for 55’ will accelerate the renewal of 
the  fleet.  A  last  component  is  the  decommissioning  of  the  offshore  plants  and  oil 
platforms that brings more need for recycling; 

•  The  representatives  of  the  vessel  owners  adds  that  it  is  difficult  to  predict  how  the 
number of vessels will increase as also vessels sizes increase. In terms of DWT, there 
will probably be an increase and will there be more recycling; 

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Study on a potential financial incentive to facilitate safe and sound ship recycling 

•  For  the  representatives  of  the  vessel  owners,  when  it  comes  to  the  future  recycling 
capacity, the biggest challenge is that Pakistan has not ratified the HKC yet, and if their 
(substandard) yards are widely available the vessel owners will still go there; 

•  The  representatives  of  the  vessel  owners  remark  that  ESG  topic  (i.e.  environmental, 
social and governance) is among initiatives are on the agenda. The focus of the sector 
is mainly on the greening aspects of the fleet. They commented also that the ESG topic 
is not equally important in the regions; 

•  Another important point that deserves consideration is whether the recycling facilities in 

Europe are working on expanding the future capacity; 

•  The representatives of the recycling facilities commented that at this moment, and in the 
short-term, there is no need to invest in the capacity. As long as the projected trends do 
not  materialise  in  real,  no  investment  will  be  made.  They  add  that  there  have  been 
investigations, also into the possible extra effects in capacity of increasing the operation 
hours of the facilities, but due to country regulations it is difficult to assess this potential 
impact per facility; 

•  The Commission add that in order to calculate properly the future capacity needs, it is 

necessary to work on the assumption that the reflagging is solved; 

•  The consultants share with the other participants estimations on the recycling capacity 
provided by other stakeholders during the consultation activities (i.e. outlook of the EU 
listed facilities recycling capacity). That estimations show by when the recycling capacity 
will be above the capacity of EU-listed yards (in two scenarios). 

Item 3: Data needs for further analysis on impacts 

•  The  participants  agreed  that  this  agenda  item  has  been  discussed  as  part  of  the 
previous  two  items.  Own  quantitative  analysis  on  projection  will  be  shared  by  the 
representatives  of  the  vessel  owners.  The  representatives  of  the  recycling  facilities 
provided quantitative analysis on the capacity of EU listed recycling facilities over the 
past years. 

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