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# 52012SC0047

**COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on ship recycling This report commits only the Commission's services involved in its preparation and does not prejudge the final form of any decision to be taken by the Commission. /\* SWD/2012/0047 - COD/2012/0055 \*/**

  

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
on ship recycling

This report commits only the
Commission's services involved in its preparation and does not prejudge the
final form of any decision to be taken by the Commission.

TABLE OF CONTENTS

1........... Procedural issues and
consultation of interested parties.................................................... 6

1.1........ Organisation and timing................................................................................................... 6

1.2........ Consultation for the Impact
Assessment.......................................................................... 6

2........... Problem definition and
identification of the drivers............................................................ 9

2.1........ Large commercial European ships
end up in substandard dismantling facilities outside the OECD leading to
negative health and environmental impacts....................................................................... 9

2.2........ What are the underlying drivers
of the problems?........................................................... 13

2.3........ Who is affected, in what ways,
and to what extent?....................................................... 22

2.4........ How would the problem evolve, all
things being equal?.................................................. 22

2.5........ International and national policy
approaches.................................................................. 23

2.6........ Industry approaches..................................................................................................... 26

2.7........ The right of the EU to act.............................................................................................. 27

3........... Policy objectives........................................................................................................... 28

3.1........ General objective:......................................................................................................... 28

3.2........ Specific objectives:....................................................................................................... 29

3.3........ Consistency of the objectives
with fundamental rights..................................................... 29

4........... Description of policy options......................................................................................... 29

4.1........ Option A: the baseline option........................................................................................ 30

4.2........ Option B: implementing key
elements of the Hong Kong Convention in the current European legislation.           32

4.3........ Option C: addressing the
dismantling of large commercial vessels through domestic legislation of the EU
Member States only.................................................................................................................... 33

4.4........ Option D: covering ship
dismantling by specific rules implementing the Hong Kong Convention 33

4.5........ Option E: covering ship
dismantling by specific rules implementing and going beyond the Hong Kong
Convention:.................................................................................................................................... 34

5........... Analysis of impacts....................................................................................................... 35

5.1........ Assumptions and methodology used for the quantitative assessment............................... 36

5.2........ The impact of options on where ships are dismantled..................................................... 38

5.3........ Baseline scenario.......................................................................................................... 40

5.4........ Option B: implementing key
elements of the Hong Kong Convention in the current European legislation.           45

5.5........ Option C: addressing the
dismantling of large commercial vessels through domestic legislation of the EU
Member States only.................................................................................................................... 46

5.6........ Option D: covering ship
dismantling by specific rules implementing the Hong Kong Convention 47

5.7........ Option E1: addressing also
government vessels, including navy vessels, in the new legislation instrument
transposing the Hong Kong Convention........................................................................................... 48

5.8........ Option E2: requesting EU flagged
ships to be treated in facilities which are providing a level of protection of
health and of the environment equivalent to EU facilities........................................................... 50

5.9........ Option E3: allowing the export of
EU-flagged ships only to a list of third party certified and audited
facilities.    52

6........... Comparing the options.................................................................................................. 55

6.1........ Effectiveness................................................................................................................. 55

6.2........ Efficiency...................................................................................................................... 56

6.3........ Coherence.................................................................................................................... 56

6.4........ Recommended option................................................................................................... 56

7........... Monitoring and evaluation............................................................................................. 57

COMMISSION STAFF WORKING PAPER

IMPACT ASSESSMENT
Accompanying document to a legislative proposal on ship dismantling
 
This report commits only the Commission’s services involved in its preparation
and does not prejudge the final form of any decision to be taken by the
Commission.

Introduction

According to the current legislation (the
Waste Shipment Regulation[1]),
the EU flagged ships which are going for dismantling are hazardous waste and
can only be dismantled within the OECD. This legislation is almost
systematically circumvented by EU flagged ships[2].
Currently, most EU controlled ships are indeed dismantled in Asia (India,
Pakistan and Bangladesh), usually through "beaching" method and with
significant environmental and health impacts.

This widespread non-compliance is firstly
linked with the lack of recycling capacity available within the OECD in
particular for the largest ships. Developing capacity within the OECD has not
been feasible in particular because of the lack of economic viability. The
non-compliance is also partially driven by the interest of shipowners to avoid
the costs of environmentally and socially acceptable dismantling in OECD
facilities, and partially by the ease with which the legislation can be
avoided: EU shipowners can with limited effort maximise the profit from selling
their old vessels by choosing a non-EU jurisdiction for their vessels at the
end of the life of the ships.

The Commission adopted a Green Paper on
better ship dismantling in 2007 and a Communication proposing an EU strategy on
ship dismantling[3]
in 2008. This strategy proposed measures to improve ship dismantling conditions
as soon as possible, including in the interim period before the entry into
force of the Hong Kong Convention[4]:
i.e. preparing the establishment of measures on key elements of the Convention,
encouraging voluntary industry action, providing technical assistance and
support to developing countries and better enforcing the current legislation.
The Commission also announced that it would look at the feasibility of
developing a certification and audit scheme for ship recycling facilities
worldwide, addressing also navy ships and other government vessels not covered
by the Hong Kong Convention and establishing a mandatory international funding
system for clean ship dismantling.

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

The Convention was adopted in 2009 but
needs to be ratified by a sufficient number of large flag and recycling states
in order to enter into force and start producing effects. This is not expected
to happen before 2020 at the earliest.

Broadly speaking, this Impact Assessment
considers the options for the development of a regime for ship recycling which
can be effectively enforced. The analysis considers the economic, social and
environmental impacts of different options by examining the changes in ship
dismantling behaviour. It has been prepared by the Unit for Waste Management of
the Directorate General for Environment (DG ENV) and is the basis for a
legislative proposal on ship recycling.

1.           Procedural
issues and consultation of interested parties

1.1.        Organisation
and timing

The impact assessment process was steered
by the Inter-Service Group on ship dismantling which was used as an Impact
Assessment Steering Group. This group was chaired by DG ENV and with members
from SG and DGs COMP, DEVCO, ENTR, EMPL, MARE, REGIO, RTD, SANCO, TRADE and
MOVE. Furthermore, experts of the European Maritime Safety Agency (EMSA)
provided valuable input and advice for the impact assessment studies.

1.2.        Consultation
for the Impact Assessment

In
developing this Impact Assessment, the Commission services consulted stakeholders
and drew upon external expertise through a public consultation and three expert
workshops.

1.2.1.     Public
consultation and expert workshops.

The preparation of this report has been
preceded by a public consultation on a new initiative regarding dismantling of
ship open from April to June 2009 in order to gather as many comments and
suggestions as possible from the stakeholders concerned.

Given the complicated nature of the topic,
participation was relatively large: 27 contributions were received from various
stakeholders active at local, national, European and international level: EU
Member States, local authorities, environmental NGOs[5], individual companies and
industry associations (shipowners, recycling facilities, P&I clubs,
classification society[6]),
trade unions, academia. Both public (Member States) and private shipowners
(through their professional associations) have actively contributed to the
public consultation as well as to the stakeholder workshops. Contributions have
been received from national (France, Belgium), European (European Community
Shipowners’ Association[7])
and International associations (the Internation Chamber of Shipping[8], Intertanko).

The detailed inputs received have been
summarized in a report published on DG Environment's website[9] and are addressed in a detailed
manner in this report (in the sections presenting problem definition,
identifying and assessing of the possible options).

Some
stakeholders have asked for a continued involvement of stakeholders on a
on-going basis and not only through a general public consultation. For this
reason, and in order to get more detailed information to support the study
undertaken to supporting this impact assessment, the Commission services also
organised three expert workshops on 9 June and 23 October 2009 in Brussels and
on 26 and 27 June 2011 in the European Maritime Safety Agency in Lisbon. The
presentations provided during these workshops as well as a summary of the
information gathered from the experts have been made available on DG
Environment's website[10] in order for
both experts and all interested parties to further contribute. Contributions
have been received in particular from recycling facilities located in Turkey
and India directly or though the coordinator of the DIVEST Project[11]
and taken into account in the studies undertaken on behalf of the Commission[12].

Most stakeholders clearly supported a
prompt ratification of the Hong Kong Convention by the EU Member States in
order to fulfil, to a large extent, its entry into force of provisions related
to flag States[13]
whilst encouraging ratification by other States. Many stakeholders are in
favour of early implementation of the Convention by the EU since they consider
that waiting for entry into force of the Convention is unacceptable when ship
breaking workers continue to be killed or injured at work and considerable
environmental damage occurs. Some consider that the EU should not impose
additional requirements that go beyond the Convention.

The main positive consequence of early implementation
would be the improvement of ship recycling operations with respect to worker
health and safety and environmental protection. Many stakeholders take the view
that an harmonised transposition at EU level will ensure a more level playing
field and reduce administrative burdens for ship owners and recycling facilities
in the EU. Early transposition could also encourage the development of more
ship recycling facilities. It was noted that such EU legislation should also
comply with ILO conventions and recommendations. It is suggested that the
Commission should promote ratification among the Member States and use its
political influence to encourage recycling States to take similar action so
that sufficient global ship recycling capacity is maintained.

The most significant negative consequence
of early implementation identified by the stakeholders is the risk of reflagging
of EU ships during their operational life to an "open register" , or
the reflagging of ships nearing the end of their life to non-EU countries in
order to avoid complying with regional measures. Reflagging would result in a
reduction of the size of the EU fleet and the EU’s influence with regard to
maritime issues. Another risk is that implementation would be too rapid and
there would not be enough recycling capacity available for EU flagged ships in
view of the phasing out of single hull tankers. Finally, some stakeholders
point out that since early implementation at EU level could make ratification
by Member States apparently redundant and therefore discourage them to ratify
the Convention thus postponing its entry into force.

The public consultation and the expert
workshops met the minimum standards for consultation. The contributions
received to the public consultation are available, together with the summary of
the responses, on the following website: http://ec.europa.eu/environment/waste/ships/index.htm

1.2.2.     Opinions
expressed by the European institutions on the Communication.

The European Parliament, the European
Economic and Social Committee and the Council debated the Communication and
adopted respectively a resolution on 26 March 2009[14], an opinion on the 13 May 2009[15]
and conclusions on 21 October 2010[16]on
an EU Strategy for better ship dismantling.

1.2.3.     External
contractor

External contractors carried out
preparatory studies for this IA, that are published at: http://ec.europa.eu/environment/waste/ships/index.htm.
Moreover, in order to update the available information about the world fleet
and dismantled ships in 2008 and 2009, additional data have been provided to
the Commission through a contract with one of the leading companies (IHS
Fairplay) managing maritime databases.

1.2.4.     Results
of the consultation of the Impact Assessment Board (IAB)

Following the submission of a draft report
to the Impact Assessment Board (IAB) on 27 July 2011 and a written procedure,
the IAB sent its opinion on 8 September 2011. The recommendations of the IAB
were duly taken into account and the main modifications were the following:

·
the problem definition was revised to:

·
include more information about the dismantling
capacity in the EU and the current and expected competitiveness of the ship
recycling countries,

·
clarify to what extent the current problems are
going to be solved by the Hong Kong Convention and describe what would be the
outstanding problems which would justify the need to go beyond the requirements
of this Convention,

·
More detailed information was provided about the
stakeholders' positions,

·
A table presenting the follow up of the actions
announced in the 2008 EU Strategy on ship dismantling was introduced.

·
The specific and operational objectives were
reformulated so as not to pre-empt discussions on policy options,

·
The content of the policy options was clarified
and more explanations were introduced regarding their impacts, proportionality
and effectiveness focusing in particular on compliance aspects.

·
The indicators for monitoring the intended
effects of the legislation were clarified and expended in order to address
employment, the state of ratification of the Hong Kong Convention and the
effective enforcement of this Regulation.

2.           Problem
definition and identification of the drivers

Small ships and governmental vessels are
usually dismantled within the European Union or in Turkey. For technical
(inability to travel in high sea and impossibility to tow them) and economic
reasons (travel costs) small ships are generally dismantled locally[17]. Some stakeholders expect the small local markets will continue to
exist handling coastal, fishing and inland waterway vessels. These
stakeholders consider that while these can provide models of responsible ship
recycling and best practice, it is not realistic or economic to expect such
facilities to handle significant volumes of larger ships, given the high labour
costs and low recycled value. It is therefore more cost-effective to devote
resources to improving standards and upgrading facilities in more appropriate
countries, rather than creating artificial markets and subsidised facilities in
high cost countries.

Large governmental vessels (including navy
ships) are dismantled within the OECD because the existing recycling capacity
is adequate but also to protect some sensitive technologies. The recycling
demand has been estimated at 40 000 LDT per year for these ships while the
existing capacity has been estimated at 250 000 LDT[18].

2.1.        Large commercial European ships end up in substandard
dismantling facilities outside the OECD leading to negative health and
environmental impacts.

The dismantling of ships is at present sustainable from a
narrow economic point of view, but the costs for human health and the
environment are high. It is fair to say that with regard to end-of-life ships
the polluter pays principle is usually not applied. Ship owners generally make
a profit from selling their obsolete ships to ship dismantling facilities or
intermediate buyers, and they can maximise this profit when selling to
facilities which do not follow the strictest health and safety and
environmental standards.

Ships have a normal life span of about 30 years after
which they are sent for dismantling. The average dismantling age varies over
time and depending on several factors[19].
Due to the shipping crisis and to regulatory developments (phasing out of
single hull tankers in 2015), the number of ships sent for dismantling since
2008 has doubled compared to the previous yearly averages[20].

Ship
dismantling is, in principle, a very positive activity leading to reuse and
recycling of large amounts of valuable resources (steel, other scrap metal and
equipment in particular). But ships also contain large amount of hazardous
materials such as asbestos, PCB, heavy metals, oil, mercury, ozone depleting
substances (ODS) which, if not handled, removed and disposed of in a safe and
environmentally sound manner (ESM) lead to significant detrimental effects on
both human health and the environment.

Member
States and companies in the EU are concerned since they play a major role in
international shipping (17 % of the international merchant fleet tonnage is
flying EU flags and about 37 % of the tonnage belongs to EU owners). The dismantling of EU flagged ships will produce an estimated yearly
average of 80 600 tonnes of hazardous waste in the period 2012-203012.

Most ship dismantling takes place nowadays
in South Asia, on tidal beaches and under unacceptable conditions from the
point of view of safety and environmental protection. This has not always be
the same. Looking back, the demolition of (European)
vessels has moved from the Europe and Japan during the 60's and 70’s to Asian
countries such as Taiwan and South Korea in the 80’s where dismantling took
place along piers in connection with ship building activities. As the economy
grew in South Korea and Taiwan, labour costs increased making ship dismantling
less attractive in these countries.

During the 1980's the method of
"beaching"[21]
became the most frequent method used for demolition since expensive
infrastructures like piers, sufficient depth of the harbour, cranes etc. could
be replaced by a mud flat, portable equipment and a huge labour force. As shown in Figure 3 in Annex VII, the
South-East Asian countries are nowadays dominating the dismantling industy[22]. Today, 95% of ship
dismantling takes place in five countries (Bangladesh, China, India, Pakistan
and Turkey)[23].
In these countries ship dismantling provides for
employment opportunities, and resources such as scrap metals which are
important in particular for the construction sector (Pakistan, Bangladesh, India)
and for ship building (China). The current practices have however significant
costs in the short and in the long term for human health and the environment.

The EU and Turkey treat today almost
exclusively government vessels, including navy ships, and small ships. Both EU
and non-EU flagged ships are recycled in the EU.

In 2009, 28 ships which were non-EU flagged
have been recycled in the EU.

The three largest vessels were navy vessels
from the United States dismantled in the UK. These vessels are not included in
the scope of the Hong Kong Convention. The other vessels are all small to
medium-sized (from 233 to 3470 GT) and owned by European, Norwegian, Russian or
Ukrainian ship owners. These vessels are not expected to be relocated outside
the EU for the following technical and economic reasons:

- these ships are usually not designed to
navigate in high seas,

- the economic advantage of countries
offering low labour costs and low level of mechanisation is less important when
the ships are small. The fee applied for transiting through the Suez Canal
would also have an important impact for these ships, in particular, as they
will have difficulties to arrange for a final journey given their limited
capacity and the overcapacity of the shipping market .

As a conclusion, it is expected that the
ships which are currently dismantled in the EU would continue to do so and
would therefore not be affected by the proposed changes.

Ship
dismantling provides for hundreds of jobs but with important short term and long
term impacts.

The number of jobs associated with ship
dismantling depends upon the dismantling practices. It is pretty limited in the
countries which uses the slipway; docking or afloat method[24]. In countries using the
beaching method, such as Bangladesh, India and Pakistan the level of
mechanisation and the labour costs are low and this industry offers thousands
of jobs.

But in these countries, ship dismantling
involves high risks for human health both at the time
of dismantling (deaths, injuries) and in the long term (asbestosis for
example). This is primarily due to dangerous working practices (lack of
training and of protective equipement, insufficient precautions against
explosions and falling hazards...) and to the hazardous materials on board old
ships.

Safety
and health conditions in many South Asian facilities are known to be critical
but official records are rarely kept, accidents and incidents are underreported
and access to facilities by third party is often restricted[25]. Unlike in India where the
regional government has started to organise safety training for workers, no
systematic accident precautions are at present visible in Bangladesh even if
the situation could hopefully improve after a recent judgment from the High
Court[26].

Workers
are mainly migrant. No workers’union exists at present in Bangladesh, and
although many workers believe that a union would bring improvements to their
situation, most are averse to organizing one for fear of putting their jobs at
risk30. In Pakistan, the Gadani workers have organized themselves
into a Ship-breaking Labor Union, which in February 2009 successfully
campaigned for a 40 percent wage increase, better working conditions, and
improvements in medical facilities. Some reports describe a “pocket” union,
composed of “loyal” workers, that has been put in place by the ship breakers to
rival the official union, thus denying true worker representation30.

Child labour is
still a reality in Bangladesh, as children represent a cheaper work force that
is easy to control and unlikely to defend its rights, and even more unlikely to
organize into trade unions[27]. The recent judgment from the Supreme
Court, if implemented, might improve the situation by prohibiting the use of
workers under the age of 18.

Ship
dismantling is also hazardous in the long term. It is estimated that thousands
of labourers contract irreversible diseases from handling and inhaling toxic
substances without proper safety precautions in particular in Bangladesh where
most shipbreaking workers do not even have helmets, gloves and shoes to protect
themselves. According to a medical report to the Indian Supreme Court of
September 2006, 16% of the workforce handling asbestos in Alang (India) showed
symptoms of asbestosis and were thus at serious risk of mesothelioma.[28] As is known from medical
research, the incidence of this form of lung cancer reaches its peak only
several decades after exposure.

Ships
contains large amount of hazardous materials which are not treated in an environmentally
sound manner thus creating negative impacts

According to estimates from the World Bank,
more than 80 000 tons of asbestos, 256 000 tons of PCB, 224 000 tons of Ozone
Depleting Substances (ODS) and around 74 000 tons of heavy metals are expected
to be sent in ships for dismantling to Bangladesh and Pakistan over 2010-2030.
Since there are no formal waste disposal sites in these countries, the waste
mainly remain in the facilities and pollutes the water, the beach sediments,
the soil of the seashore and coastal habitats[29]. A
small part is sold in equipments (PCB or ODS) or sent to rerolling mills
(paints)[30].

The dismantling of ships in South Asia
takes place on sandy beaches without concrete covering or any other containment
other than the hull of the ship itself. One of the traditional
"cleaning" methods is the drilling of holes into the beached ship
through which sea water can wash out oil-contaminated tanks at high tide.
End-of-life ships are rarely pre-cleaned before their arrival. As shown in a
study undertaken on behalf of the Commission[31], pre-cleaning is indeed costly
and raises particular safety concerns as a ship which is properly pre-cleaned
usually has to be towed to the recycling facility. While some stakeholders (European
Ship Recycling facilities, environmental NGOs) still insist on pre-cleaning
prior to sending the ships for dismantling, others (academia, shipowners)
consider that any "pre-cleaning" is better
and more economically done close to the site of eventual demolition and not in
areas like the EU prior to a lengthy towing.

Whereas in
Alang (India) a landfill for hazardous waste (mainly asbestos and glass wool)
was built in 2005, and waste reception facilities and asbestos removal cells
are in operation on some of the facilities, no such facilities exist currently
in Pakistan nor in Bangladesh. In Bangladesh, asbestos
is crushed and handled without protective equipment and permeates the
demolition zone. In Pakistan, it is buried on-site and the locations are not
marked30. Waste oils are dumped into
unsealed holes in the ground from where a large part of the toxic material
seeps away within a few days.[32]

The current
and long term impacts of these unsound practices on the environment

It
is often difficult to document the impact of these practices on the environment
in detail. Indications exist mainly for the impacts on the marine environment
rather than on land conditions or air emissions[33].

In
India the responsible regional authority (Gujarat Maritime Board) conducted
sampling and analysis of various parameters in coastal water in 2005, and found
only "low" or "moderate" levels of hazardous substances[34]. In the context of its recent
study commissioned by the World Bank30, soil samplings have been
collected and analysed in Pakistan and Bangladesh. They show a widespread
varying contamination of the ship dismantling facilities at Chittagong
(Bangladesh) with cadmium, chromium, lead and mercury and less contamination at
Gadani (Pakistan).

Significant
restoration/decontamination would be required in Bangladesh to allow for any
change of the land use and to prevent the loss of the pollutants in the event
of sea level rise[35],
leading to loss of biodiversity and negative impacts for other economic sectors
such as fisheries, fish and shrimp farms as well as hatcheries.

2.2.        What
are the underlying drivers of the problems?

2.2.1.     Driver
1: insufficient dismantling capacity within the OECD

According to the Waste Shipment Regulation,
end of life ships are hazardous waste and should be dismantled in the OECD only[36].

Several stakeholders mentioned the lack of
sufficient dismantling capacity (shipowners, Member States) as one of the main
reasons leading to a lack of implementation of the current legislation and,
consequently, as one of the main issues to resolve in any possible legislation.
At the same time, trade unions also mentioned the need to maintain the existing
dismantling capacity and employments in the EU which is mainly devoted to small
and navy ships. It is noteworthy that even the limited existing European
recycling capacity is not entirely used and that a number of investment projects
for green ship recycling in Europe did not materialise. A majority of ship
owners indeed prefers to have ships dismantled where the revenue from selling
the ships is higher, thus making the establishment of a business case in the EU
extremely difficult.

The EU flagged ships represented in 2009 a
volume of more than 0,81 million LDT[37].
The existing dismantling capacity in the EU (0,2 million LDT) is sufficient to
treat the fishing vessels, navy vessels and other government owned vessels but
not all the EU flagged merchant ships. A total of 0,06 millions tons LDT of
ships (mainly navy ships and small ships) have been dismantled in the EU in
2009 and only 44 % of these ships were EU flagged ships. During the period
2012-2030, an estimated average volume of 1,64 million LDT of EU flagged ships
would need to be dismantled each year31.The existing capacity in the
EU is therefore able to treat around 12 % of the volume of all EU flagged ships
going for dismantling. The existing capacity is able to treat small ships and
government owned ships (including navy ships) but not the total volume
commercial EU flagged ships which are expected to be sent for dismantling in
the coming years.

According to a study conducted for the Commission[38], the existing
capacity is of 60 000 LDT/year in Belgium, 30 000 in the Netherland, 25 to 30
000 in Denmark and 150 000 in the UK while an estimated average volume of 1,64
million LDT of EU flagged ships would need to be dismantled each year during
the period 2012-2030. In addition, the existing capacity in the EU is adapted
to small and medium sized ships but not to very large ones like Very Large
Crude Carriers and Ultra-Large Crude Carriers[39].
In 2009, the largest EU flagged ships which have been sent for dismantling had
a draught of 14,5 meters. According to the report of the French
Interdepartmental Committee on the Dismantling of Civilian and Military
End-of-Life Ships[40],
the largest facilities located in the EU could accommodate ships only up to
10-12 meters. The dismantling capacity within the EU is therefore not able to
accommodate the largest EU flagged ships.

The dismantling capacity within the EU is
therefore not able to accommodate the whole range and the total volume of the
commercial EU flagged ships.

Apart from Turkey, the other OECD countries
tend to reserve their capacity for the dismantling of their own flagged ships.
Turkey can provide for some dismantling capacity (conservatively estimated at
0,05 million LDT per year) even if the total number of facilities is not
expected to increase due to geographical limitations.

It is argued that a significant dormant capacity
could exist in the EU and in Turkey[41].
But this capacity has not really materialized since it can compete neither with
environmentally sound dismantling in countries benefiting from low labour costs
nor with unfair practices of unsafe and unsound dismantling.

A significant recycling capacity exist
outside the OECD in China, India, Pakistan and Bangladesh.

Responsible European shipowners have
invested in safe and sound recycling facilities located in China and applying
EU standards. The current existing capacity available in China (2,83 millions
LDT in 2009 ) is already largelly sufficient to treat all EU flagged ships by 2030
(the maximum yearly volume in the period 2012-2030 will be of 1,88 million LDT)
and a new facility with a capacity of 1 million LDT will shortly start its
activities.

2.2.1.     Driver
2: An unfair competition in favour of poor quality dismantling

The current situation of the ship recycling market is characterised
by fierce competition between the major recycling states Bangladesh, India and
(to a lesser extent) Pakistan. According to the prices paid in 2009, the most
competitive country is Bangladesh (299 $/LDT) followed by India (273$/LDT ) and
Pakistan (271$/LDT )[42].

Other competitors with higher technical standards are only able to
occupy market niches for special types of ships like small ships and government
vessels including warships [43]
(EU and Turkey) or the fleet of committed shipowners (Turkey and China). China,
Turkey and EU facilities offered respectively 251, 181 and 82 $/LDT in 2009[44]. Facilities in China, Turkey
and the EU are considered to be compliant already with the standards set up in
the Hong Kong Convention. Limited investment will be needed in India where
facilities have improved after the Supreme Court had decided to turn some key
requirements of the, at the time draft, Hong Kong Convention into domestic law.
As highlighted in the study from the World Bank30, significant
investments in infrastructure, training and protective equipements would
however be necessary in Pakistan and Bangladesh.

Contrary to other type of waste, shipowners
are paid for getting their ships recycled. From a shipowner's point of view,
ship recycling is beneficial and depend mainly upon the price offered by the
ship recycling facility or by an intermediate (the "cash buyer").

The costs of transport for the last journey
of a vessel to the recycling facility are indeed very limited and not accounted
for in general. The final journey is usually relatively short, as the shipowner
of, for instance, a cargo ship will often succeed in arranging a last transport
of cargo from near his ships present location to a destination close to the
recycling facility[45].

Ship owners do usually not sell directly
the recycled materials. This task is undertaken by the ship recycling
facilities themselves.

As explained in the Impact
Assessment accompanying the EU Strategy for better ship dismantling[46], shipowners decide at what
point in time a ship will be sent for dismantling based on an economic
comparison between the costs (maintenance, renewal of certificates..) and
benefits (freigh rates) of maintaining an ageing ship in operating conditions
and the benefits of sending it for dismantling. According to Clarkson, the
average earnings per days were of 12 674 $ (or 380 220 $ per month).

The choice of the
dismantling location is then influenced, in particular, by the price a facility
can offer to the intermediary “cashbuyer”or to the ship owner. This price in
turn depends on:

·
Labour costs: operators in South Asia employ
many unskilled labourers at extremely low wages of about 2,5 dollar per
day[47].
Detailed information about the labour costs are provided in Table 14 in Annex
VII.

·
Costs of infrastructure for worker's safety and
environmental protection which are linked with the dismantling methods employed
as well as the existence and the level of implementation of national and
international regulations regarding workplace safety and environmental impacts.

Table 1:Dismantling locations
of large EU flagged commercial ships in terms of percentage of total recycling
(GT[48] based) in 2009 23.

Dismantling location for EU flagged - ships || Main dismantling method || Dismantling fraction of total

India, Pakistan, Bangladesh || Beaching || 69,81%

China || Afloat || 22,75%

OECD non EU || Landing, afloat || 6,36%

EU || slipway, docking || 0,85%

Other || 0,23%

Total || 100,00%

In terms of method and infrastructure, more
than 2/3 of large commercial EU flagged ships[49]
(in terms of tonnage) have been dismantled in 2009 in India, Bangladesh and
Pakistan in “beaching” facilities which do not require heavy machinery. According
to the World Bank30, there are virtually no obligations applied to
ship dismantling facilities in Pakistan and Bangladesh in terms of compliance
with any health or environmental standards or inspection by the authorities. So
investment in permanent structures and machinery at the facilities continues to
be very limited. Only India has developed some central infrastructure for
hazardous waste management, workers’ training and health care[50]. The Chinese government has
prohibited beaching some years before and closed down all the existing
facilities using this method. Important investments notably from European
shipowners have been made in order to develop the existing facilities which are
operated largelly according to EU standards, to create new ones, to train the
workers and regarding the handling of hazardous waste[51].

Other factors affecting costs include:

·
The domestic market demand for steel scrap and
goods present on board ships. Scrap steel from ship is indeed a valuable raw
material and higher price for metal can be paid if it can be recycled “cold”,
without energy-intensive and thus expensive re-melting in electrical furnaces,

·
Tariffs and duties.

The better price for steel scrap[52] from ships are paid by
operators in Bangladesh where the standards of workers’ safety and pollution
prevention are the lowest[53],
and most steel was processed without melting in re-rolling mills. India and
Pakistan offer similar prices while China and Turkey offer lower prices.

There is thus a strong economic incentive
for ship owners who are not willing to act responsibly to choose recycling
facilities with a particularly poor social and environmental standard. Other
countries like China, Turkey and several EU Member States with capacity for
ship dismantling in dry docks, at piers and on hard slipways only account for a
smaller fraction of the market as they are typically priced out of the market.

Current situation and likely evolution
of the ship recycling market:

According to one of the major "cash buyers"
(GMS), Bangladesh was the most competitive country in August 2011. It offered
prices comprised between 500 and 525 US$/LDT. India is ranking second with
prices comprised between 495 and 520 US$/LDT, followed by Pakistan (485 to 510
US$/LDT) and finally China (450 to 465 US$/LDT). Since large commercial vessels
are currently not sent for dismantling in Europe, it is difficult to collect
updated information. Using as a proxy the price recently paid by Turkey for a
large navy vessels from the UK, the prices offered are in the range of about
150 $/LDT.

Forecasting the evolution of the market and
in particular the share between the different recycling countries is linked
with a great uncertainty. The dismantling costs offered by the facilities are indeed
fluctuating strongly since they depend upon the economic situation (evolution
of the shipping market) as well as upon the legal situation in the countries
(the dismantling facilities have, for example, been closed in Bangladesh for
the last months by the High Court).

According to the latest information
available:

- the facilities located in China and Turkey
are already operating under the standards of the Hong Kong Convention. The ship
recycling capacity in China will expand significantly since a very large
recycling facility is about to start operating in Dalian. It will be able to
receive 75 ships per year including the largest ships of the world fleet.

- India has already made some improvements
after the judgment from its Supreme Court which included some requirements of
the (at the time) draft Hong Kong Convention into domestic legislation. It has
benefited during the last months from the administrative closure of the
dismantling facilities in Bangladesh. A recent inspection showed however that
the landfill for hazardous waste is almost full[54] and that a new one should rapidly
be developed.

- Bangladesh has been closed for several
months and is expected to invest in upgrading its facilities following recent judgments
from its High Court which has made some of requirements of the Hong Kong
Convention mandatory. From an economic perspective, the investments needed to
upgrade the facilities to a level of compliance with the Hong Kong Convention
are of about 10 to 11 $/LDT[55]
while the profits generated by the facilities are of 62 $/LDT. Bangladesh is
therefore expected to upgrade its facilities because:

·
ship recycling is the major source of raw
material for the industry,

·
it will be necessary in order for the facilities
to be allowed to continue their operations,

·
facilities would continue to be profitable and
competitive after the improvements.

- Pakistan has already benefited from
technology transfer and is willing to improve its facilities. For several
years, it was virtually driven out of the recycling market in particular due to
its taxes and duties. Ship recycling has started again notably because of closure
of the facilities in Bangladesh. Investments have been estimated at around 10
$/LDT which is comparable with the current profit generated by the facilities.
It might therefore be slightly more difficult for Pakistan than for Bangladesh
to make the necessary improvements for compliance with the Hong Kong Convention
while staying competitive. Facilities located in Pakistan
already encounter taxes and duties which are 2,6 times more important than those
located in Bangladesh.

According to a recent study conducted by
the World Bank30 the likelihood of seeing new countries emerging as
major ship scrapping destinations once the standards and therefore the costs of
existing facilities have been upgraded is limited.

Three possibilities for a relocation from
the ship dismantling industry from Pakistan and Bangladesh were assessed: a
relocation to another "pollution haven", a relocation back to Europe
or an industrialized country and the pre-cleaning in country of ownership. The
two latest options were considered as highly unlikely for economic reasons (the
lower revenue and higher costs associated with dismantling in European and
industrialised countries and the importance of the additional cost induced by
pre-cleaning).

The first option was studied in more
details and is also considered as unlikely although it cannot be ruled out. The
necessary characteristics of a potential candidate country are the following:

- Strong domestic demand for steel plate
and re-bars not readily available from other sources,

- A market for equipment and consumables,

- Few, if any, enforced regulations on
workers’ health and safety and environmental pollution,

- Wages as low as in Bangladesh or lower. Cambodia
and Myanmar both have lower wage rates than in Pakistan, whereas Bangladesh
might still be able to compete with them. Hence, the risk of relocation from a
wage point of view seems more threatening for Pakistan

- Natural hydrographical conditions to
allow beaching (or similar capital-extensive methodology). Few states meet
these requirements, and the need for a considerable tidal gauge itself is an
obstacle for most of Africa or other candidate countries in the Bay of Bengal
or the South China Sea (such as Myanmar or Cambodia).

Given the relatively low likelihood of
meeting all these conditions in other locations, the study did not considered
it likely to see relocation on a large scale of ship recycling from Bangladesh
and Pakistan in the immediate future. This does however not totally rule out
the possibility of seeing new ship recycling countries emerging with a small
share of the market. The Philippines have expressed interest during the last
months in developing ship recycling and ratifying the Hong Kong Convention.

Building upon the experience gained during
the last decade, the following drivers have stimulated the upgrading of ship
recycling facilities:

–
Political willingness from the public
authorities to promote specifically the green ship recycling market (Turkey,
China),

–
Court cases imposing new requirements (India, Bangladesh),

–
Investments and contractual requirements of
commited shipowners (Turkey, China),

–
Collaboration between facilities in order to
jointly invest in the infrastructure (Turkey),

–
Public pressure through, for example, reports
from NGOs (Turkey , India, Pakistan).

A couple of years before, Chinese
authorities decided to close down all their substandard facilities and to focus
on the green ship recycling market. Beaching was therefore prohibited by the
law. Strategic partnerships have been developed between Chinese facilities and
responsible shipowners (in particular European and Japanese ones). The later
invested in the upgrading of the facilities which would reserve a certain ship
recycling capacity for them in case of huge recycling demand. China continues
to develop its ship recycling capacity within its approach of a circular
economy. Contrary to other recycling countries, the scrap metal is indeed used
strategically to produce new ships and not for construction work.

2.2.2.     Driver
3: the regulatory failure of a legislation not well adapted to the particular
characteristics of ship.

The experience gained regarding the
implementation of other waste-related legislative instruments with enforcement
problems bring only limited pertinent information for ship recycling due to the
specificities of ships and international shipping. Compared to electronic
waste, ships can, for example, change their location since they are
self-movable (thus rendering the notion of "state of export"
difficult to apply) and can change their legal regime (by changing flags).
Another important difference is that while a significant effort, triggered by
EU legislation, is being made to develop recycling capacity for WEEE and
end-of-life vehicles in the EU, the recycling capacity for ships in the EU is
(and will remain) clearly insufficient.

When asked during the public consultation
about the ways to improve the enforcement of the current legislation, several
stakeholders (shipowners, Member States, academia) insisted that this
legislation is not adapted to the particularities of ships as waste. In
particular, this is due to the difficulty to identify when a ship becomes waste
and the possibility to change its flag[56].
Indeed, there have been very few clear-cut cases where ships became waste while
being under EU jurisdiction and being in EU waters and were still send to
facilities outside the OECD countries.

Identifying when ships turns into waste.

As explained before, shipowners decide to
send their ships for dismantling based on an economic comparison between the
costs and benefits of maintaining a ship in operating conditions and the
benefits of sending it for dismantling.

If this decision is taken while the ship is
in international waters or in waters under the juridiction of the recycling
state, it is very difficult or impossible to apply the procedures of the Waste
Shipment Regulation, in particular for ships which are registered under non-EU
flags. Moreover, commercial ships leaving European ports and waters usually
optimize their last voyage by delivering goods in Asia prior to going for
dismantling. If the ship-owner does not declare the intention to dismantle its ship
when leaving an EU port, the relevant authorities can in general not intervene.
It is also not uncommon to sell a ship to another operator under the pretence
that the ship would continue trading when it is then actually transferred
directly to a ship dismantling facility.

As announced in the Communication, the Commission took steps during
the last years when it was alerted that specific ships would go for
dismantling. It has contacted the Member States concerned (flag state, port
state and even state of nationality of the owner) in order to verify that these
individual ships would not go for dismantling. However, in a certain number of
cases, shipowners declared that the ships would continue to be used and that it
was not intended to be sold. Since port states can not block unduly ships
without justification, Member States had to release the ships based on the
evidence produced by the owners. Some Member States even informed recycling
states about the risk of seeing a particular EU flagged ship illegally arriving
in their facilities. Recycling countries have however not required these ships
to be reimported to the EU as they are entitled to do according to the Basel
Convention. Most recycling
countries — with the exception of Turkey — are indeed reluctant to use the
Basel Convention's procedures of notification and consent for ships imported
for dismantling, as it goes against their financial interests.

The possibility to change flag.

Every ship has to be registered under a
flag. The flag state, as defined by the United Nations Convention on the Law of
the Sea, has overall responsibility for the implementation and enforcement of
international maritime regulations for all ships granted the right to fly its
flag. Changing flag, which can be done with very limited effort in time and
expenditure, allows the shipowners to change the legal regime for the ship.

The large majority of stakeholders
(shipowners, Member States, environmental NGOs...) commented on the difficulty
for enforcing legislation given the ease with which owners can change flags.

The current Waste Shipment Regulation is
applicable to EU flagged ships as well as ships which are in the exclusive
economic zone with regard to the protection and preservation of the marine
environment within this zone. This Regulation would therefore not allow EU
Member States to prohibit the export of a non-EU flagged ships (irrespective of
whether they are owned or not) based on the possibility that this ship would
create environmental negative impacts in third countries.

Change of flag prior to dismantling is
already a reality since EU flagged ships represented
17,6 % of the active fleet[57]
but only 8 % of the ships at the time of dismantling[58] in 2009 and 15,1 % in 2008. It
is driven by several factors which are presented in Annex VI. Certain flags offer
specific short term/single voyage registration for around 10 000 dollars (for a
Panamax ships this would represent 1 $/LDT) which is a negligible cost compared
with prices offered by the recycling facilities. The difference in offer prices
between facilities in OECD countries and Asian beaching facilities can amount
to several hundreds of dollars depending on the actual market situation and on
the type of ships[59].
In addition, some shipowners prefer to sell their ships to brokers (called
"cash buyers") instead of negotiating directly with ship dismantling
facilities[60].

2.3.        Who
is affected, in what ways, and to what extent?

2.3.1.     EU
Member States as flag states, port states and recycling states

EU Member States have to apply the existing
legislation (Waste Shipment Regulation) and are expected to become Parties to
the Hong Kong Convention which will have implications on them as flag states
(17% of the world fleet is EU flagged), recycling states (mainly for small
ships and military vessels) and port states (for port state control).

2.3.2.     EU
ship owners

EU ship owners want to sell their ships at
the best possible price. Faced with the lack of recycling activities in the
OECD, some responsible shipowners have invested in green facilities located
outside the OECD (China) to secure sufficient capacity while benefiting from
low labour costs. Others are choosing their recycling facilitiy by only taking
into account the price offered for their ships by the dismantling facilities
and by totally disregarding the environmental and social impacts.

The implementation of the Hong Kong
Convention will imply administrative costs and reduced benefits from selling
their ships for dismantling since dismantling facilities are expected to pass
on the majority of the additional costs linked with the improvement of their
practices.

2.3.3.     EU
ship dismantling facilities

The implementation of the Hong Kong
Convention will have very limited implications since they are already complying
with labour and environmental requirements which are stricter than the Hong
Kong Convention. They are expected to continue to dismantle small ships which
are not expected to be sent in South Asia for safety (navigation in high seas)
and economic reasons. Governement and navy vessels are not per se in the scope
of the Hong Kong Convention but Members of the IMO have to ensure that such
ships act in a manner consistent with the Convention "so far as is
reasonable and practicable"[61].

2.3.4.     Third
countries (recycling countries)

Ship dismantling provides for employment
and is a source of raw materials and used goods but is associated with
significant impact on the human health of workers in the dismantling facilities
as well as on the environment of the communities (see section 2.1).

2.4.        How
would the problem evolve, all things being equal?

Large numbers of ships are expected to be
sent for dismantling in the coming years as a result of an overcapacity of the
world fleet which is estimated to remain for at least 5 to 10 years30. Before 2008, old ships were kept in
service[62]
and significant amount of ships were ordered in order to benefit from the high
freight rates. As a follow-up of the financial crisis, the demand for maritime
transport has decreased and the freight rates have sharply decreased. On top of
sending ships for dismantling, several actions have been taken by shipowners in
order to reduce the overcapacity of the world fleet: cancellation of orders for
new ships (482 in 2009 and 929 in 2010) 20,
laying up of ships (around 1000 ships139 in January 2011) or
voluntary slowing down ships ("slow steaming"). They are however
insufficient as the world fleet in service has grown by 10.1 % in terms of
carrying capacity in 2010 compared to 200920. In 2009 and 2010,
around 3 new ships were delivered for each ship sent for dismantling. The
evolution of the world fleet from 2004 to 2009 is presented in Figure 8 in Annex
VIII.

In addition, the
coming peak in ship recycling around the phasing-out dates for single-hull
tankers (2015) is expected to essentially benefit the most primitive
sub-standard facilities.

The expected evolution of ship recycling in
the major recycling state has been presented in section 2.2.

If the Hong Kong Convention does not enter
into force and if the European legislation is not modified, it is highly
probable that the current market situation and important level of
non-compliance will persist. A peak in dismantling activity is bound to lead to
a resurgence of lethal accidents and occupational diseases, as the new staff
will be recruited among the poorest and usually inexperienced rural labourers.

Even in the scenario of a recovery of the
economy - and a resorption of the world fleet's overcapacity, fewer ships will
be sent for dismantling thus leading to a. more fiercely competition amongst ship
recycling facilities in favour of the substandards ones.

2.5.        International
and national policy approaches

The
Hong Kong Convention was adopted in May 2009 but is not expected enter into
force and to start producing effects before 2020. Conventions from the IMO
usually contains entry into force provisions related to flag states only
(number of states and/or, percentage of the world fleet) and take an average of
6 years to enter into force[63].
But the Hong Kong Convention needs to to be ratified by both major flags states
and recycling states which will take longer. More detailed information about
the entry into force requirements of the Convention is provided for in Annex IV.

According to the latest information
available[64],
China is expected to ratify the Hong Kong Convention in 2012 and Japan in 2013.
Turkey is making good progress, but seems reluctant to be the first recycling country
to ratify. India has the support of the government executive for ratification,
but is facing problems with its recycling associations.

In June 2011, 11 Member States plus Norway
reported on their progress towards ratification. Two countries are aiming at
ratification by the end of 2011. Several Member States agreed that EU legislation
would be helpful for ratification. Some countries cannot though ratify without
having legislation in place.

The
Council conclusions[65]
adopted in 2009, encouraged strongly EU Member States to ratify the Hong Kong
Convention as a matter of priority so as to facilitate its entry into force as
early as possible and to generate a real and effective change on the ground.

The Hong Kong Convention applies to most
privately owned and commercial ships. The Convention does not apply to small
ships (less than 500 GT), warships, naval auxiliary or other state-owned or
operated vessels which are used only on non-commercial service or ships used
exclusively for domestic transport throughout their life. However, the
Convention requires that these ships act in a manner consistent with the
Convention, "as far as reasonable and practicable".

The Hong Kong Convention requires ships
flying the flag of a Party ("Party ships") to be dismantled only in
authorized recycling facilities located in another Party to the Convention
("Party facilities"). Party facilities would be allow to treat also
non-Party ships provided that they treat them similarly to Party ships (clause
of "no more favourable treatment").

To be authorized, facilities will have to
comply with the detailled requirements of the Convention regarding safety, the
protection of human health and the environment and they will have to be subjet
to a site inspection from the authorities. The Hong Kong Convention does not
contain requirements which would explicitely rule out the "beaching"
method which has been controversial because of its environmental and health
impacts. Ships will have to minimize and document (Inventory of Hazardous
Materials) the amount of hazardous waste present on board. Based on this
inventory and on its authorization, the ship recycling facility will develop a
ship-specific document (Ship Recycling Plan) to describe how this particular
ship will be dismantled and how the hazardous waste will be managed in the
facility. The shipowner will have to inform in writing its flag state about the
intention to recycle the ships and then to provide the Inventory of Hazardous
Materials (IHM) and the Ship Recycling Plan (SRP) to its flag state. The latter
will conduct a final survey on board the ship to verify that the IHM is
complete, that the SRP properly reflect the IHM and about the maintenance of
safe working conditions for workers and, finally, that the ship recycling
facility is authorized. The ship recycling facility will inform its authorities
of the start and the completion of the recycling. The authorities will inform
back the flag state of the completion of the dismantling.

The Parties to Basel Convention have been
invited to assess the equivalency between the levels of control and enforcement
of the Hong Kong Convention and the Basel Convention and to transmit the
outcomes of the assessment to the 10th Conference of the Parties
"for consideration and action, as appropriate"[66]. The assessment developed by
the European Commission and the Member States has been submitted on the 15
April 2011 concludes that "as a preliminary assessment and taking into
account a life cycle perpective the Hong Kong Convention provides a level of
control and enforcement at least equivalent to the Basel Convention's one"[67].

Since it does not contain any geographical
limitation, the Hong Kong Convention will allow ships flying the flag of
Parties to be dismantled worlwide in facilities authorized by other Parties.

The Hong Kong Convention is adapted to the
specificities of shipping since it relies on the system of international
surveys and certification for ships during their life cycle, on port state
controls. Moreover, it contains an obligation for shipowner to inform in
writing and in advance their flag state of their intention to recycle their
ships, thus resolving the current problem of identifying when a ship turns into
waste.

Facilities located in Parties to the Hong
Kong Convention will have to treat similarly ships flying the flag of Parties
to the Convention and ship not flying the flat of Parties ("no more
favourable" clause) thus limiting the incentive of changing flags only in
order to benefit from a more favourable legal regime. As long as the 5 major
ship recycling states which represent more than 90 % of the dismantling
activity are Parties to the Convention, there will be major improvements
compared to the current situation. One possible problem would be faced if one
or two recycling countries decides not to join the Hong Kong Convention. In
this case, there will continue to be two markets competing which each other:
one with substandards facilities offering better prices for shipowners and
another one compliant with the Convention. And since changing flag is legal,
easy and negligible[68],
one can expect that some shipowners would continue to change flags in order to
circumvent the legislation. In order to help countries lagging behing to
improve their facilities, financial and technological support is therefore
currently provided through specific programms undertaken under the Global
Programme for Sustainable Ship Recycling jointly set up by the IMO, the ILO and
the Secretariat of the Basel Convention.

The development of the Hong Kong Convention has already had a
positive influence on the evolution of the legislation in Bangladesh and India
where the High and Supreme Court have already included some requirements of the
Hong Kong Convention domestically.

However, as noted already in the Communication on better ship
dismantling, the Convention rely in particular on a system of surveys and
certificates for ships and on authorisations for ship recycling facilities
granted by the competent authorities of recycling states. This approach
reflects the high value of national sovereignty in international law.

A potential weakness of the control system is that the existing
governance problems in some developing countries and the lack of an
non-compliance mechanism in the Convention might reduce its effectiveness in
practice. As explained in the report of a recent site visit of the Standing
Monitoring Committee on Shipbreaking Yards at Alang[69], Fake
certificates have been submitted by ship owners or their agent and neither the
Gujarat Maritime Board not the customs were able to verify the
authenticity/genuineness of ship’s registry/flag in the fast in respect of some
ships referred to them.

The Hong Kong Convention is applicable only to the ship recycling
facility but not to the facilities involved in the downstream management of the
waste. The Convention contains an obligation for the facilities to identify the
facilities to which hazardous waste will be sent for treatment. It does however
not ensure that the waste will actually end up in the proper facility which had
been identified since no traceability is foreseen. This is problematic since
some recycling countries are know for not having any facilities authorize and
able to treat hazardous waste (Pakistan, Bangladesh) while the hazardous waste
landfill in Alang (India) is almost full.

Another remaining issue with the Convention is that it does not
explicitely address the "beaching" method which is currently used in
the major recycling countries and has been criticized for its environmental and
health impacts. The environmental NGOs, some associations of green recyclers
and some shipowners as well as the European Parliament have called for a total
ban on beaching. The Council has underlined in its conclusions, that the Hong
Kong Convention represents "an important step towards phasing out unsafe
and environmentally harmful working methods, including in relation to unsafe
aspects of the current practise of so called beaching of end of life ships"
but has not called for a prohibition on beaching. Shipowners and other
stakeholders have on the other hand highlighted the fact that "beaching"
is the major dismantling method.

2.6.        Industry approaches

During the public consultation, the
importance of voluntary actions by the shipping industry was highlighted by the
shipping industry itself but also by the Member States and the European Economic
and Social Committee.

The shipping industry established in 1999
an Industry Working Group on Ship Recycling which is coordinated by the International
Chamber of Shipping (ICS). Its members have been actively involved in the
development of the Hong Kong Convention. The industry has taken voluntary
action to start implementing the Hong Kong Convention once adopted.

In October 2009, this Working Group adopted
"Guidelines on transitional measures for shipowners selling ships for
recycling" providing guidance for shipowners on how to voluntarily apply
certain elements of the Hong Kong Convention before it enters into force. After
the adoption of the Guidelines on the Inventory of Hazardous Material[70], shipowners have used them on
a voluntary basis. Based on their experience, they have proposed some update
and amendments of the guidelines which have been approved in July 2011.

In addition, one association (BIMCO) will
adopt a new “green” ship recycling contract and a revised version of its
contract for the sale of second hand vessels (SALEFORM 93) in January 2012. However,
voluntary action by the Industry is limited by the facts that:

- the voluntary application of the Hong
Kong Convention is not always compliant with the current legislation (for
example, sending ships for recycling outside the OECD ).

- some stakeholders (ship recycling
facilities, environmental NGOs) have highlighted in their response to the
public consultation that they do not consider non-legislative measures to be
effective since they have had little impact so far. Prior to the development of
the Hong Kong Convention, shipowners agreed to voluntary develop the so-called
Green Passport (the ancestor of the Inventory of Hazardous Materials). But a
limited number of passports have in fact been developed. BIMCO had also
previously developed ship recycling contract which have been used by a very
limited number shipowners only. New voluntary measures are therefore most
likely to follow a similar path.

European classification societies have been
very active in the development of the Hong Kong Convention as this could
represent new business opportunities for them: for the establishment of
Inventories of Hazardous Materials, for certifying ships (as recognized
organisations on behalf of flag states) or recycling facilities (as recognized
organisations on behalf of recycling states or if asked by the facilities
themselves on a voluntary basis).

2.7.        The right of the EU to act

Treaty base

The EU competence to take action on ship
dismantling matters comes in particular from the articles of the EU Treaty
related to the protection of the environment (article 192 of the Treaty on the
Functioning of the European Union, TFUE).

The "necessity test"

Ship dismantling is already covered by
European legislation namely the Waste Shipment Regulation. But the current
legislation is not adapted to the specificities of ships and is therefore
largelly circumvented and therefore ineffective. The European legislation would
therefore need to be modifiedeven in the absence of the Hong Kong Convention.

Subsidiarity principle

The
subsidiarity principle applies insofar as the proposal does not fall under the
exclusive competence of the EU.

As
a Party to the Basel Convention, the European Union has the obligation to block
the export of hazardous waste in countries which are not able to treat them in
an environmentally sound manner. The EU has therefore an obligation to ensure
that EU flagged ships are recycled in a safe and sound manner worldwide. In
addition, it would be difficult to justify that the pollution generated by the
dismantling of ships flying the flag of EU Member States is exported to third
countries which are not equipped to deal with it in an appropriate manner. The
environmental problems generated by ship recycling are not only local since
hazardous chemicals are released directly into the sea thus affecting the
fishes and shrimps which are captured and exported also outside the country.

The Commission can not ratify the Hong Kong
Convention since only Member of the IMO are allowed to doso and become Parties
to this Convention. The EU Member States will therefore have a key role, mainly
as flag states, in the ratification and fulfillment of the entry into force
provisions of this Convention. As explained in Annex VI, the ratification and
transposition of the Hong Kong Convention by EU Member States is likely to take
place at different pace. There is a clear risk of having different legal
requirements applied to large commercial EU flagged ships depending on the
different Member States concerned. This situation could result in change of
flags and unfair competition between the Member States acting as flag states.
As highlighted by some Member States in their response to the public
consultation, a harmonised transposition at the European level ensures a more
level playing field and reduces administrative burdens for ship owners and
recycling yards in the EU, compared to the implementation of the IMO Convention
in the the European Union by 27 diverging versions of national legislation.

In addition, some Member States are not
prepared to ratify the Hong Kong Convention as long as long as the current EU
legislation is not modified and the risk of a duplication of requirements
applicable to ship recycling is not ruled out. Member States having ratified
the Hong Kong Convention could be required to apply the requirements of this
Convention through their domestic legislation as well as the requirements of
the Waste Shipment Regulation. These two sets of procedures are largelly
redundant and duplicating but also incompatible on some issues (see for example
the geographic restrictions regarding the legally accessible ship recycling
facilities). This would result in a very confusing situation and in increased
non-compliance while none of the drivers identified in section 2.2. would be
addressed.

Maintaining the current legislation would therefore not address any
of the problems currently faced but could delay or block the ratification of
the Hong Kong Convention in a number of Member States.

The
inclusion of the Hong Kong Convention's requirements into European legislation
would on the other hand promote harmonised decision-making and speed up the
ratification process amongst the Member States. During
a workshop organized in EMSA in June 2011, 11 Member States indicated that they
are in the process of ratifying the Convention, although at different stages.
The majority of EU Member States considered that an EU legislation implementing
the Hong Kong Convention would be useful for their own ratification process. A proposal for a Council decision authorising Member states to
ratify or to accede to, in the interests of the European Union, the Hong Kong
Convention for the Safe and Environmentally Sound Recycling of Ships, 2009 will
therefore be jointly presented with this proposal for a Regulation to ensure a
swift and coordinated ratification of the Convention by all Member States.

In addition, early action by the EU would
influence third countries much more than action by individual Member States and
thus is more likely to bring the Hong Kong Recycling Convention quickly into
force.

Proportionality principle

The proposal complies with the
proportionality principle. The additional burdens for economic operators and
national authorities are limited to those necessary to that ship recycling is undertaken
in a safe and environmentally sound manner. While the proposal implies
additional costs for the shipowners (development of the Inventories of
Hazardous Materials and surveys), these costs are expected to be offset by the
substantial social and environmental benefits obtained.

Going beyond the requirements – in a
limited way - of the Hong Kong Convention is needed in order to address the
limitations of the Convention presented in section 3.5 namely:

- address the current governance problems
in some recycling countries,

- ensure the proper downstream management
of the hazardous waste,

- introduce specific requirements to phase
out the current unsafe and environmentally unsound recycling methods.

3.           Policy
objectives

3.1.        General
objective:

The general objective is therefore to
reduce significantly and in a sustainable way by 2020 the negative impacts of
ship dismantling, especially in South Asia, on human health and the environment
without creating unnecessary economic burdens by facilitating the entry into
force of the Hong Kong Convention.

While EU legislation can only address ships
flying the flag of EU Member States, it is expected that it could have a
positive effect also on ships which are EU-owned but flying flag of non-EU
countries.

3.2.        Specific
objectives:

·
SO1: reduce the
human health and environmental impacts by ensuring that the EU flagged ships
are dismantled only in safe and environmentally sound facilities worldwide,

·
SO2: ensure the
availability of sufficient and economically accessible sound and safe recycling
capacity to dismantle EU flagged ships,

·
SO3: strengthen
the incentives to comply with the EU legislation,

3.3.        Consistency
of the objectives with fundamental rights

Measures designed to meet the objectives
will need to be in compliance with relevant fundamental rights and principles
embodied in the Charter of Fundamental Rights of the European Union. Aiming at
improving the impacts on human health and on the environment of the dismantling
of EU ships will have to take into account as well as the freedom of right and
association (article 12), the worker's right to information and consultation
with the undertaking (article 27), the right of collective bargaining and action
(article 28), the right to fair and just working conditions (article 31) and
the prohibition of child labour and protection of young people at work (article
32) as well as on the environmental protection (article 37).

4.           Description
of policy options

The
EU Strategy on better ship dismantling3, proposed a new EU
initiative consisting of a mixture of legislative as well as of the following
non-legislative measures. After its publication, inputs and comments have been
received from the Council, the European Parliament, the European Economic and
Social Committee as well as from stakeholders during the public consultation
and workshops. In addition, studies have been conducted in order to further
assess the feasibility of some actions. The table below presents the follow up
actions undertaken by the Commission.

Action announced in the Strategy || Actions undertaken by the Commission

Participation of the Commission, as an observer to the IMO, in the development and future implementation of the guidelines supporting the Hong Kong Convention, || The Commission has participated in the development of the guidelines supporting the Hong Kong Convention. The Commission has actively participated to the intersessional working groups developing the guidelines and was represented during the meetings of the Maritime Environment Protection Committee which reviewed and adopted them. At this stage, two guidelines (dealing with the inventories of hazardous materials and with the development of ship recycling plans)[71]. have been adopted. The Commission will continue to actively participate in the further development of the others guidelines supporting the Hong Kong Convention which are currently under development[72].

Voluntary action by the industry prior to the entry into force of the Hong Kong Convention, notably the implementation of the Convention's technical guidelines || See section 3.6

Conducting occasional research and pilot projects to assess developments and promote better ship dismantling technologies || In order to assess developments and to promote ship dismantling technologies, both research and pilot projects have been launched and are currently running: - under the 7th European Research Framework Programme, a specific project called DIVEST (Dismantling of Vessels with Enhanced Safety and Technology) is currently undertaken[73]. Information collected during this project on the composition of ships in hazardous materials have been transmitted to and taken into account by the consultant in charge of the study supporting the Impact Assessment. - a pilot project called RECYSHIP[74],financed under the LIFE+ program in the action line of “Environment Policy and Governance”,has started in 2009 and will last until 2012. It aims at addressing the issue of ship scrapping in matters of occupational safety, health and environmental protection.

Further assess: - the option to include in the ship recycling measures, amongst others, rules for the clean dismantling of warships and other government vessels. - encourage voluntary action by the industry - improve enforcement of the current waste shipment law with regard to end-of-life ships - the feasibility of developing a certification and audit scheme for ship recycling facilities worldwide. || - see option E1 in section 4, - see section 3.6 -see section 2.2.2 - see option D3 in section 4.

Additional actions have been undertaken by the Commission.

At international level, the Secretariats of the Basel Convention, of
the International Maritime Organization and of the International Labour
Organization are indeed working together under the "Global Programme for
Sustainable Ship Recycling"[75] which
aims at offering a coordinated approach in addressing the issues faced by the
ship recycling industry.

Under this programme, a Ship Recycling Technology & Knowledge
Transfer Workshop took place in Izmir, Turkey, in July 2010 to assist the
government officials and industry of Pakistan to strengthen their regulatory,
institutional, procedural and infrastructural capacity to fulfil the relevant
aspects of the Basel Convention in relation to ship recycling, particularly
those dealing with the downstream management of hazardous and other wastes, and
the Hong Kong International Convention.

The Commission provided a grant under the
Thematic Programme for the environment and sustainable management of natural
resources, including energy (ENRTP) to this program
with a view to provide support to the recycling countries wishing to improve
their practices.

The government of Norway will provide six million dollars in
bilateral aid through its development agency NORAD to Bangladesh.

Finally
a pilot project is assessing the current practices for recycling of ships not
covered by the Hong Kong Convention and abandoned vessels within the EU.

4.1.        Option
A: the baseline option

The
"baseline option" is defined here as maintaining the Waste Shipment
Regulation unchanged in the short (2015), medium (2020) and in the long term
(2025).

As announced in
the Council conclusions on better ship dismantling[76], Member
States are expected to ratify and implement the Hong Kong Convention in their
domestic legislation. This Convention is expected to enter into force in 2020.
The first positive impacts of the Hong Kong Convention are expected to be
foreseable in 2020 where ships going for recycling will have to establish
inventories of hazardous materials. But the full effect
of the new international regime is not to be expected to be seen before 2025
since there are separate deadlines for compliance with the various requirements
- for instance 5 years after entry into force for an Inventory of Hazardous
Materials to be present in existing ships (as opposed to new ships). Some
Member States explicitly mentioned in their contribution to the public
consultation the need to maintain these separated deadlines.

All recycling countries where there are
currently substandard facilities are expected to be able to be upgraded in
order to meet the Hong Kong Convention's requirements by 2020. Since the Waste Shipment Regulation would continue to be applicable,
ships flying the flag of EU Member States would however
always be prohibited to be recycled outside the OECD, even if this would be
authorized under the Hong Kong Convention. The legally accessible recycling
capacity (within the OECD) is not expected to be substantially improved and will remain inadequate. It is this therefore foreseeable that even responsible shipowners
would continue to send their ships for dismantling outside the OECD.

The level of control and enforcement from
Member States is indeed expected to remain similar as today. An increased level
of enforcement would indeed be costly and ineffective since ships can be
expected to change their flags in order to be able to be recycled outside the
OECD where the recycling capacity lies. The current situation
of large circumvention of the legislation is expected to be maintained in the
short, medium and long term. Like this is the case today, substandards
facilities are expected to benefit more than other non-OECD ones from this
situation. The assessment of the impacts of this option are therefore based on
the assumption of a high level of circumvention benefiting primarly to the
substandard facilities. Real improvements from an environmental and health
perspective are not expected prior to 2020 where all ship recycling facilities
are expected to have made the necessary investments in order to comply with the
Hong Kong Convention.

4.2.        Option
B: implementing key elements of the Hong Kong Convention in the current
European legislation.

This option was the preferred one
identified in the Communication proposing an EU strategy on ship dismantling.
It would a priori address partially the inadequacy of the current legislation
by introducing control mechanisms specifically designed for ships. It would
consist of completing the Waste Shipment Regulation by implementing some key
elements of the Hong Kong Convention by 2014 :

·
Survey and certificate requirements for ships,
in particular, to carry an Inventory of Hazardous Materials on boards and to be
certified as "ready for recycling" before going to a dismantling
facility,

·
Essential requirements for ship recycling
facilities as established by the Hong Kong Convention,

·
Communication and reporting requirements for
shipowners, recycling facilities and recycling states.

In addition, the Member States would be
encouraged to ratify the Hong Kong Convention by 2020 and the Convention is
expected to enter into force at this date.

Similarly to option A, since the Waste
Shipment Regulation will continue to constitute the core of the control
mechanism covering end-of-life ships, the prohibition to dismantle EU flagged
ships outside the OECD would be maintained even in
facilities which would be authorized under the Hong
Kong Convention.

A huge level of
circumvention of the legislation is therefore to be expected which will benefit
mostly to substandard facilities. The assessment of the impacts of this option
are therefore based on the assumption of a high level of circumvention
benefiting primarly to the substandard facilities. Real improvements from an
environmental and health perspective are not expected prior to 2020 where all
ship recycling facilities are expected to have made the necessary investments
so as to comply with the Hong Kong Convention.

4.3.        Option
C: addressing the dismantling of large commercial vessels through domestic
legislation of the EU Member States only

Under this option, ships covered by the
scope of the Hong Kong Convention (large seagoing vessels)
would be exempted from the scope of the Waste Shipment
Regulation and, contrary to the options A and B, would not be covered anymore
by European legislation. They would be covered instead by the domestic
legislation of Member States as they ratify and implement the Hong Kong
Convention. The transposition of the Hong Kong Convention will be left entirely
to European Member States.

A priori, this option has the potential to
address the lack of the available recycling facilities by removing the prohibition
to dismantle ships outside the OECD. Since they will not be subject to the
requirements of the Waste Shipment Regulation, ships will be able to be legally
dismantled worldwide prior to the entry into force of the Hong Kong Convention.
For this reason, it is assumed that 50 % of the volume of ships currently
dismantled in the EU, in Turkey and in China will be dismantled in India, China
and Bangladesh prior to the entry into force of the Convention. Since
substandard facilities would be able to legally receive more EU flagged ships,
they are expected to delay their investments in order to upgrade their
facilities. All recycling countries where there are
currently substandard facilities are expected to be upgraded and meet the
Convention's requirements by 2025 only.

In addition, in order
to remain competitive and avoid reflagging to other flags (both EU and non EU
ones), it is expected that the rate of ratification will be notably different
amongst EU Member States.

Because of these delayed ratifications by
both flag and recycling states, the Hong Kong Convention would in this scenario
not enter into force before 2025. The first beneficial effects of this
Convention would therefore be seen in 2025 and the full beneficial effects in
2030 (inventories of hazardous materials for all ships).

Once Member States will have developed
their domestic legislation tranposing the Hong Kong Convention, this option
would also ensure that the legislation applicable to the dismantling of
end-of-life ships is adapted to ships.

4.4.        Option
D: covering ship dismantling by specific rules implementing the Hong Kong
Convention

Under this option, ships covered by the
scope of the Hong Kong Convention (large seagoing
vessels) would be exempted from the scope of the Waste
Shipment Regulation. They would instead be adressed in a new ad-hoc Regulation
covering the whole life cycle of ships transposing the requirements of the Hong
Kong Convention while adapting and complementing them when necessary.

Since the Hong Kong Convention has not yet
entered into force, some adaptations would be needed (notification and
reporting by the shipowners instead of the ship recycling facility[77] and obligation to have a
contract between the shipowner and the ship recycling facility[78]). When the Hong Kong
Convention will enter into force, these provisions will not be necessary
anymore. The proposed Regulation will therefore include an invitation for the
Commission to review the implementation of the Regulation and present a
proposal for revision if appropriate when the conditions of the entry into
force of the Hong Kong Convention are met (the Convention will effectively
become applicable two years after this date).

The Hong Kong Convention allows its Parties
to take more stringent measures in order to protect human health and the
environment. It is therefore proposed to complement the criteria included in
the Hong Kong Convention for defining safe and sound recycling facilities in
order to address the issues which are insufficiently addressed by the Hong Kong
Convention as explained in section 3.5 (ensuring a proper containment of all
hazardous waste and well as their proper management in the recycling facilities
and in downstream facilities). While it is difficult to expect the current
"beaching" facilities to be able to meet these requirements, it is
not excluded that upgraded facilities might be able fulfill these criteria the
future. These requirements would continue to be applied even after the entry
into force of the Hong Kong Convention. To increase transparency, a list of
ship recycling facilities meeting the Regulation's requirements would be
established. It would contain facilities located in the EU designated by the
Member States as well as facilities located in third countries. The latter
would apply for inclusion in the list by presenting evidence that they comply
with the Regulation's requirements.

Sanctions, which would be more adapted to
ship recycling will be introduced in order to ensure compliance with the
legislation. In order to avoid confusion, overlaps and administrative burden,
ships covered by this new legislation would not be covered anymore by the EU
Waste Shipment Regulation. The Hong Kong Convention is expected to enter into
force at international level in 2020.

4.5.        Option
E: covering ship dismantling by specific rules implementing and going beyond
the Hong Kong Convention:

This option consists of option D plus the
following elements:

(1)
Option E1: addressing also government
vessels,including navy vessels, in the new legislation instrument transposing
the Hong Kong Convention.

As the option B, this option was announced
in the Communication proposing an EU strategy on ship dismantling.

Including these ships under the scope of
the specific Regulation transposing the Hong Kong Convention will imply that
these ships would be allowed to be dismantled in facilities compliant with the
Hong Kong Convention worldwide. The volume of these ships dismantled in the EU
and in the OECD is therefore expected to decrease significantly. It is however
not expected to see all these ships being dismantled outside the OECD notably
for navy ships in order to protect certain sensitive technologies.

Not all requirements of the Hong Kong
Convention would be applicable to navy ships since they benefit from specific
immunities (no port state control' inspection of their inventory of hazardous
materials could, for example, be foreseen).

Like for option D, the Hong Kong Convention
is expected to enter into force in 2020. By this date, it is expected that all
substandard facilities could be upgraded so as to meet the Convention's
requirements.

(2)
Option E2: requesting EU flagged ships to be
treated in facilities which are providing a level of protection of health and
of the environment equivalent to EU facilities[79].

This option would consist in strengthening
the option D by requiring that all ship dismantling facilities should fulfil
criteria which would imply that they have impacts on human health and on the
environment comparable to the European ones. Ships would be allowed to be
dismantled only in the EU, in China and in Turkey (investments would be
required in China and Turkey so as to reach EU standards by 2015). These requirements would continue to be applied even after the entry
into force of the Hong Kong Convention which is expected to take place in 2020
similarly to option D.

This option is compatible
with the Hong Kong Convention which allows its Parties to take more stringent
measures in order to prevent, reduce or minimize any adverse effects on human
health and on the environment.

(3)
Option E3: allowing the export of EU-flagged
ships only to a list of third party audited facilities.

The rational for introducing this option,
would be to address the governance problems faced in certain ship recycling
countries by involving third parties in the verification of the facilities.
This would respond to one of the possible weaknesses of the Hong Kong
Convention presented in section 3.5.

This option is compatible
with the Hong Kong Convention which allows its Parties to take more stringent
measures in order to prevent, reduce or minimize any adverse effects on human
health and on the environment.

This requirement for a third party audit of
facilities would continue to be applied even after the entry into force of the
Hong Kong Convention which is expected to take place in 2020 similarly to
option D.

5.           Analysis
of impacts

This section provides the qualitative and
quantitative assessment of the impacts of the options over the short (2015),
medium (2020) and long term (2025).

5.1.        Assumptions and methodology used for the quantitative assessment

The quantitative analysis provided in this
Impact Assessment is based on the best available data and information collected
by the Commission from stakeholders, Member States and the literature. However,
data remains incomplete regarding some aspects and in particular for health and
safety impacts in third countries which are either not reported or
underreported.

The methodology used to estimate the
environmental, social and economic impacts is based on the volume of EU flagged
ships going for dismantling and on the impacts of the methods used in the
different dismantling countries (beaching, landing, afloat and docking).

The volume of EU-flagged ships to be
dismantled yearly up to 2030 has been estimated based on the age profile of the
existing fleet and the life expectancy of the current fleet. The life
expectancy has been updated in order to reflect the changes implied by the
shipping crisis since 2008. This approach allows for comparison between
different options by reflecting the overall trend in
volumes. It will however not reflect e.g. the true ups and downs of the
dismantling market business cycle that comes from fluctuating freight rates.

Each recycling method is associated with a certain level of
quality in terms of safety and of protection of health and the environment. A
specific set of data has therefore been developed in order to be able to
quantify the impacts of ship dismantling based on the volume of ship dismantled
in a given recycling country and depending to the recycling method. Data are
based on pilot projets (ship's composition of hazardous and non hazardous
waste), on ratios (CO2 emissions, value of statistical life indicated in the IA
guidelines), on experts estimates (amount of hazardous waste treated in an
environmentally sound manner, administrative costs for shipowners and
authorities) and on theoretical benchmark based on EU statistics regarding
accidents and incidents in facilities. Using the theoretically based accident
data is necessary to take into account the underreporting practices in south
Asian third countries. This is of course associated with a considerable
uncertainty in terms of actual numbers, but is however expected acceptable for comparing
the relative differences between the scenarios. More information about the
data, the hypothesis and the methodology are provided in Annex V.

The environmental, social and economic impacts of the baseline
scenario are developed in section 5.3. The quantitative impacts are summed up
in Table 2. As recommended by the IA guidelines, the report will focus only on
the additional impacts of the other options compared to the baseline scenario.

Table 2: Quantification of the
additional impacts of the different scenarios compared to the baseline scenario
in the short, medium and long term.

Impacts || Environmental || Social || Economic

Hazardous waste treated in an ESM manner[80] || Work load EU[81] || Workload (protected workers)81 || Workload (not protected workers) 81 || Workload (not protected children workers) 81 || Fatal accidents (adults)[82] || Non fatal accidents (adults)82 || Fatal accidents (children) 82 || Non fatal accidents (children) 82 || Social costs[83] || Revenues ships owners83 || Administrative costs (Member States) 83

Short term (2015) || B || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || -1 952 011 || 378 604

C || -6% || -5 || 189 || 468 || 159 || 1 || 184 || 0 || 29 || 969 792 || 12 540 267 || 0

D || 23% || 0 || 1 423 || -2 246 || -764 || -2 || -473 || -1 || -133 || -3 372 237 || -22 019 545 || 356 430

E2 || 30% || 0 || -938 || -2 385 || -811 || -4 || -1 105 || -1 || -148 || -5 401 791 || -66 349 943 || 356 430

E3 || 23% || 0 || 1 423 || -2 246 || -764 || -2 || -473 || -1 || -133 || -3 372 237 || -22 221 755 || 356 430

Medium term (2020) || B || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || -112 036 486 || 640 117

C || -20% || -6 || -2 497 || 3 244 || 1 103 || 1 103 || 3 || 633 || 1 || 5 993 494 || 31 192 613 || -436 341

D || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || -112 036 486 || 617 943

E2 || 16% || 0 || -3 778 || 0 || 0 || 0 || -2 || -833 || 0 || -2 820 429 || -189 916 941 || 617 943

E3 || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || -112 266 395 || 617 943

Long term (2025) || B || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 149 062 972 || 22 174

C || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 159 369 991 || -879 612

D || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 149 062 972 || 0

E2 || 16% || 0 || -3 428 || 0 || 0 || -2 || -756 || 0 || 0 || -3 114 124 || 63 072 738 || 0

E3 || 0% || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 148 854 325 || 0

5.2.        The impact of options on
where ships are dismantled

Options A and B consist in maintaining the
current prohibition for EU flagged ships to be dismantled outside the OECD will
imply that there will be a continuous gap between the need and the legally
available recycling capacity for large commercial EU-flagged ships. Even
responsible shipowners can therefore be expected either to not inform their
flag state of their intention to dismantle their ships thus circumventing the
Waste Shipment Regulation or to change their flag in favour of countries which
are not Parties to the Hong Kong Convention. A larger proportion of ships could
also be sold to "cash buyers". A large reflagging from EU to non-EU
flag is to be expected if there is an attempt to strongly enforce the
prohibition to dismantle ships outside the OECD. It is therefore expected that the current level of low enforcement of the legislation will be
maintained as well as the current share of the market between the dismantling
locations. Large EU-flagged ships are therefore expected to continue to be
dismantled in South Asian countries (India, Pakistan and Bangladesh): in
substandard facilities in the short term and in upgraded ones meeting the
requirements of the Hong Kong Convention in the medium and long term. As it is
currently the case, some responsible shipowners are expected to continue
sending their ships to facilities located in Turkey and China. No Member State
is expected to be specifically impacted as a flag state.

Large commercial EU flagged ships would not
be covered anymore by European legislation under option C. These ships would therefore be allowed to be dismantled in any facility and
any country of the world prior to the entry into force of the Hong Kong
Convention. In the short and medium term, it is conservatively assumed that
half of the volume currently dismantled within the EU, Turkey and China will be
sent for dismantling in substandard facilities located in South Asian countries
(India, Pakistan and Bangladesh). More Member States can therefore be expected
to send their ships to South Asian countries and those which are already doing[84] so are expected to increase
the volume of their ships send in these countries. Taking into account only the
difference between the dismantling prices, these ships should theoretically all
be sent to South Asia. However, since a significant volume is nowadays
dismantled in China, it seems reasonable to assume that part of these ships
will continue to be dismantled there by responsible shipowners. The facilities
located in the EU and Turkey treat mainly small and medium-sized ships which
are not expected to be largely exported to South Asia either because they are
not able to sail in high seas or because the costs of transport would be too
important. Turkey is in a particular situation as an OECD country (thus legal
recipient of EU flagged vessels for dismantling) with low labour costs compared
to the EU but higher costs than non-OECD countries and is likely to lose part
of its market share to non-OECD facilities. By 2025 onwards, it is expected
that the facilities located in South Asian countries will have invested so as
to meet the requirements of the Hong Kong Convention. Under this option, it is
not expected to see large number of shipowners replacing their EU flags by
non-EU flags since the legally available recycling capacity will always be
largely sufficient.

Under option D,
ships would be allowed to go for dismantling worldwide in facilities meeting
the requirements of the Hong Kong Convention. In these
cases, owners would be incentivised to use upgraded facilities while accepting a
lower profit from the sale. Taking into account the
investments needed, Indian facilities are expected to
meet the Convention's standards by 2015 while installations in Pakistan and
Bangladesh would not be able to do so before 2020. Facilities located in the
EU, Turkey and China are considered as already meeting the requirements of the
Hong Kong Convention. In the short term (2015), it is assumed that the ships
currently dismantled in South Asian countries would be dismantled in upgraded
facilities in India. A limited volume of ships might however either be sent to
higher standard facilities (China) or to lower standard facilities (Pakistan,
Bangladesh). Reflagging is expected to be limited since the available
dismantling capacity in the EU, Turkey, China and upgraded Indian facilities
will be sufficient to treat all EU flagged ships. The maximum volume of EU
flagged ships to be dismantled in the period 2012-2030 will be of 1,88 million
LDT while the Chinese facilities alone treated 2,83 millions LDT in 2009 with
an announced extension of 1 million LDT. In the short term, the Member States[85] which are currently sending a
significant part of their ships to facilities located in Pakistan and
Bangladesh would be affected more than the other Member States. In the medium
and long term, the impacts are expected to be similar for all Member States.

Option E1 focuses on governmental vessels
including navy ships. These ships are currently dismantled within the EU and
Turkey only. Including them in a specific ad-hoc regulation based on the Hong
Kong Convention, would allow them to be dismantled also outside the OECD. It is
assumed that these ships would be dismantled in the same proportion than large
commercial ships namely in the EU, Turkey, China and India in the short term
and in all upgraded facilities in all recycling states worldwide the medium and
long term. Since governments do usually not largely change the flags of theirs
ships, reflagging is not expected to be a significant problem. Member States
are expected to be affected in the same manner by this option.

Option E2 consists in requiring that all
ship dismantling facilities should have impacts on human health and on the
environment comparable to the European ones. In the short, medium and long
term, large commercial EU flagged ships would be allowed to be dismantled in
the EU, in China and in Turkey only. As explained before, the legally
accessible recycling capacity will be largely sufficient. Responsible
shipowners which are already sending their ships for dismantling in China are
expected to continue to do so. Shipowners which are currently sending their
ships to South Asian countries might potentially reflag their ships to continue
to do so, in particular, if the facilities there have been upgraded and meet
the Hong Kong Convention's requirements. This option would indeed imply that EU is imposing stricter requirements that the ones agreed upon at
international level. The South Asian countries might consider this as a trade
barrier. The Member States which are sending their ships to India, Bangladesh
and Pakistan can be expected to be affected more than those which are sending
their ships in China[86].

Option E3 will have the same impacts on the
dismantling locations as option D.

5.3.        Baseline scenario

Option A is based on the assumption that
the Hong Kong Convention will enter into force in 2020. In order to test the
sensitivity of this assumption, a scenario consisting in maintaining the
current legislation unchanged and considering that the Hong Kong Convention
will not enter into force before 2030 has been studied in Annex X. This
scenario would have the worst social and environmental impacts in the medium
and long term compared all other options.

5.3.1.     Environmental
impacts

5.3.1.1.  Generation
of non-hazardous and hazardous waste

The prohibitions to use certain material on
board ships contained in the Hong Kong Convention are already applicable
through EU legislation[87].
The impacts of the phasing out of hazardous substances like asbestos, PCB, TBT
and ozone depleting substances has been taking into account in the calculation
of the projected amount of hazardous and non-hazardous waste generated by ship
dismantling. The amounts of hazardous and non hazardous waste generated in the
short, medium and long term are the following:

|| 2015 || 2020 || 2025

Non hazardous waste (t) || 1 197 346 || 1 361 366 || 1 235 460

Hazardous waste (t) || 72 847 || 82 806 || 75 060

Total (t) || 1 270 193 || 1 444 172 || 1 310 520

There will not be any substantial
difference between the scenarios regarding the generation of non-hazardous and
hazardous waste since they are all related to the volume of EU flagged ships going
for recycling.

5.3.1.2.  Management
of hazardous waste

The percentage of hazardous waste which
will be treated in environmentally sound manner (ESM) instead of being released
directly into the environment (air, soil, water) will be of 70 % in the
short term and 84 % in the medium and long term.

5.3.2.     Social
impacts

5.3.2.1.  In
the EU

Since the majority of ship dismantling is
expected to take place outside the EU, the employment opportunities in the EU
are expected to remain limited (respectively 10, 11 and 10 man/years in the
short, medium and long term).

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 children
workers is prohibited.

5.3.2.2.  In
third countries

Facilities located in India, Pakistan and
Bangladesh are more labour intensive than facilities in the EU, Turkey and
China. The current insufficiency of proper protective measures for workers and
the possibility (in Bangladesh) to employ children in facilities however
implies that the workers in these facilities will suffer from high number of
fatal and non-fatal accidents. The entry into force of the Hong Kong Convention
in 2020 will result in the prohibition of work by unprotected workers and in a
reduced number of fatal and non-fatal accidents as show in the table below.

In order to be able to do a cost-benefit
comparison between the impacts of the scenarios, the costs associated by both
fatal and non-fatal accidents of children and adult workers have been monetized[88].

|| 2015 || 2020 || 2025

Labour (man years)

Total work load outside EU || 5318 || 6047 || 5488

of which protected workers || 2944 || 6058 || 5498

of which not protected workers || 2385 || 0 || 0

of which children || 811 || 0 || 0

Accidents (number of persons)

Adults life || 4 || 2 || 2

Adults - non-fatal accidents || 1345 || 1106 || 1004

Children - life || 1 || 0 || 0

Children - non-fatal accidents || 148 || 0 || 0

|| || ||

Monetized social impacts (€) || 6 101 348 || 3 788 139 || 4 182 602

5.3.3.     Economic
impacts

5.3.3.1.  Impacts
on EU shipowners

In the short term, shipowners are subject
to the administrative burden linked with the Waste Shipment Regulation. This administrative burden has been estimated at 22 174€[89] for all EU flagged ships. In the medium and long term, they will also be faced with two types
of costs related to the entry into force of the Hong Kong Convention:

- administrative costs related to new
obligations set out in the Hong Kong Convention which will affect new built
ships and ships going for recycling first and, within 5 years, all ships,

- reduced revenues from the recycling of
their ships. It is assumed that the costs resulting from an improvement of the
ship dismantling facilities so that they meet the requirements of the Hong Kong
convention will be passed on to the shipowners at the time of dismantling.

5.3.3.2.  Administrative burden for EU Member States

Taking into account the economic dynamic of
the recycling market and the current experience regarding the application of
the Waste Shipment Regulation, continuing to apply the current prohibition to
export ships outside the OECD would imply very substantial administrative costs
for EU Member States linked with inspection, enforcement and control. The
current procedures are indeed costly and difficult to apply (see for example
the re-importing of EU flagged ships which are already in Asia).

Apart from these costs linked with the
enforcement and control of the current legislation, the Member States will be
mainly affected as flag state in the medium and long term. The Hong Kong
convention indeed require the competent authorities of the EU flag states to
conduct surveys on board ships to verify the existence and correctness of
certificates as part of the port state control as shown in the table below:

Administrative costs (€) || 2015 || 2020 || 2025 || 2030

Additional controls in ports || || 19 112 || 906 816 || 1 300 974

Issuance and verification of the certificates || || 417 229 || 507 623 || 617 601

Total || || 436 341 || 1 414 439 || 1 918 575

5.3.3.3.  Impacts
on small and medium sized enterprises

EU shipowners are the main businesses
affected, but these are rarely small and medium sized enterprises (SME)[90] though no statistics are
available. According to experts, a qualitative assessment is that SMEs would be
rarely found in liner shipping but could be more relevant for ocean-going tramp
shipping (especially for older general cargo ships, some bulk carriers and
possibly tanker). Taking these elements into account, it is not considered that
small and medium sized enterprises would be more affected than big enterprises
in the baseline and in the other scenarios

5.3.3.4.  Impacts
on consumers

The costs related to the implementation of
the Hong Kong Convention for shipowners during the operating life of their
ships is negligible (around 0.01 %) compared with the benefits generated during
the life span of a ship (30 years). The costs resulting from an improvement of
the ship dismantling facilities will be passed on to the shipowner at the time
of dismantling. Compliance with the Hong Kong Convention would imply that the
most substandard facilities located in Bangladesh and Pakistan would have to
invest around 10 $/LDT during the next 10 years which represents only a small
percentage of the current prices paid by facilities to shipowners (between 450 and
525$/LDT in June 2011). The costs linked with the implementation of the Hong
Kong Convention over the lifetime of ships are negligible and no impact is
therefore expected on consumers in the baseline and in the other scenarios.

5.3.3.5.  EU
budget

In principle, none of the options envisaged
in the impact assessment report has a direct impact on the EU budget.

Option D and E3 include establishing a list
of facilities and the possibility for related inspections. In both cases, the
bulk of work would consist in desk work, reviewing information provided by 3rd-country
facilities and checking it against publicly available information. Only in a
very limited of cases will on-site inspections be necessary.

This work would be limited in scale and
time, namely being significant only in year two and three after the adoption of
the new regulation. During these two years, the task would be undertaken with
existing resources, complemented by a service contract under the ordinary
budget. After year three, only maintenance work will be needed.

5.3.4.     Impacts
on the simplification of the existing legislation.

The existing EU legislation which is not
adapted to the specificities of ships will continue to be applied in the
baseline scenario. Several stakeholders have strongly indicated during the
public consultation as well as during expert workshops that the co-existence of
two systems of control (one resulting from the Basel Convention and the other
one from the Hong Kong Convention) would be very confusing and administratively
burdensome[91].
This option will therefore have a negative impact on the simplification of the
existing legislation.

5.3.5.     Compliance
aspects

In the 2008 Strategy for better ship
recycling, it was proposed to enhance the effectiveness of the EU control
system for waste shipments by the establishment and maintenance of a list of
ships that are ready for scrapping taking into account the procedures of the
Hong Kong Convention.

The public consultation contained some
questions related to the criteria which could be taken into account for
establishing this list and their advantages/ disadvantages in order to improve
the enforcement of the legislation.

The responses received showed that most of
the stakeholders (shipowners' associations, some ship recycling facilities,
classification societies, Member States, European Economic and Social Committee
…) are not in favour of such a list and have thus not proposed such criteria.
The arguments for this are mainly that it will be very difficult to establish
objective criteria. Errors are foreseeable, would influence the negotiation
process for the selling of a ship and could ultimately raise some questions of
liability in case of wrongful inclusion of a vessel in the list. Almost all of
these stakeholders explained for example why the age of a ship is a simple but
ineffective indicator. It does not in itself reflect the level of maintenance
of the ship (for example "sister ships" built at the same time but
can have widely differing disposal ages due to their maintenance) nor its
commercial viability, which depends on the fluctuations of the freight market.

This ex-ante approach could result in the
wrongful inclusion of ships in the list which would in turn have negative
economic impacts on the market price of that ship.

As explained in section 2.2, the drivers of
the current problems of compliance with the existing legislation are legal,
technical and economical ones. Taking into account the economic dynamic of the
recycling market and the current experience regarding the application of the
Waste Shipment Regulation, continuing to apply the current prohibition to
export ships outside the OECD would imply very substantial administrative costs
for EU Member States linked with inspection, enforcement and control. The current
procedures are indeed difficult and costly to apply.

As highlighted by most of the stakeholders
(shipowners' associations, classification society, Member States), the matter
is more an implementation than an enforcement concern. Good enforcement mechanisms
are not considered likely to be implemented if they coupled with unrealistic or
unpracticable dismantling rules (current European legislation based on the
Basel Convention). These stakeholders recalled that the very reason for the
development of the Hong Kong Convention were the difficulties faced when trying
to apply the current legislation on ships.

When asked about way to improve compliance
with and enforcement of the legislation applicable to ships, some stakeholders
(shipowner associations, Member States) stressed the importance of clear
regulation of the entire process from cradle to grave in the ship’s life cycle.
They also considered that the co-existence of two systems of control would be
very confusing and administratively burdensome. Member States would, for
example, be requested to designate two types of competent authorities and focal
points for implementing the same legislative instrument. Finally they
highlighted the necessity to set up effective and deterrent sanctions.

As explained in section 5.2, large problems
of compliance are expected to be faced under option A due to the lack of
legally accessible recycling capacity as well as to the confusion created by
the application of two sets of requirements: an European regulation based on the
Basel Convention and domestic legislations in Member States based on the Hong
Kong Convention.

5.4.        Option
B: implementing key elements of the Hong Kong Convention in the current
European legislation.

5.4.1.     Environmental
and social impacts:

As for option A, there will continue to be
a discrepancy between the needs and the legally accessible recycling capacity
for large commercial EU flagged ships. The recycling locations and conditions
will be similar than the ones foreseen for option A thus leading to similar
environmental and social impacts in the short, medium and long term.

5.4.2.     Economic
impacts:

Under this option, some key requirements of
the Hong Kong Convention would become applicable at EU level prior to their
entry into force at international level. This anticipation would therefore
imply additional costs (administrative costs for new ships and ships going for
dismantling as well reduced revenues for selling ships for dismantling) and
therefore negative economic impacts for ship-owners and for EU Member States
(administrative costs) in the short and medium term. In addition, and similarly
to option A, continuing to apply the current prohibition to export ships
outside the OECD would imply very substantial administrative costs for EU
Member States linked with inspection, enforcement and control.

This option would have a positive economic
impact in the long term compared to the baseline scenario, as the costs of
establishing inventories of hazardous materials for all ships will be
anticipated. Finally this option will have similar social costs as option A in
the short, medium and long term.

5.4.3.     Impacts
on simplification of the existing legislation.

Similarly to option A, this option would
lead to the co-existence of two systems of control at European level, which would
be very confusing and administratively burdensome. This option will therefore
have a negative impact on the simplification of the existing legislation.

5.4.4.     Compliance
aspects

As for option A and as explained in section
5.2, large problems of compliance are expected to be faced under option B by
the large majority of stakeholders due to the lack of legally accessible
recycling capacity as well as to the confusion created by the application of
two sets of requirements regarding control and enforcement within the same
regulation. Some even considered that this duplication could act as a deterrent
to the ratification of the Hong Kong Convention if this Convention is not seen
as the key piece of legislation related to the safe and sound recycling of
ships. The environmental NGOs and the European Parliament consider that there
could be an added value in keeping the current legislation and complementing it
with some requirements from the Hong Kong Convention (obligation to establish and
maintain an inventory of hazardous materials).

5.5.        Option
C: addressing the dismantling of large commercial vessels through domestic
legislation of the EU Member States only

5.5.1.     Environmental
impacts:

This option would have significant negative
environmental impacts regarding the management of hazardous waste in the short
and medium term as a larger proportion of large commercial EU flagged ships
would be dismantled in substandard facilities offering better prices to the
shipowners but without any treatment facilities for their hazardous waste. In
the long term, the management of hazardous waste is expected to be similar to
the baseline scenario since all facilities worldwide are expected to meet the
requirements of the Hong Kong Convention.

5.5.2.     Social
impacts:

As for the environmental impacts, the
social impacts of option C (compared to option A) expected to be negative in
the short and medium term and comparable in the long term. In the short and
medium term, the diversion of half of the volume of ships currently dismantled
in the EU, Turkey and China to South Asia will lead to a halving of the
employment opportunities in the EU. More jobs would be created outside the EU
where the industry is more labour intensive. However, since a large proportion
of workers would not be sufficiently protected, this will lead to an increase
in the number of deaths and accidents for both adult and children workers. In
the long term, the social impacts of this scenario would be comparable to the
baseline.

5.5.3.     Economic
impacts:

Since option C would lead to a delayed
application of the requirements of the Hong Kong Convention, it will be
beneficial for ship owners (administrative burden and reduced revenues from
recycling) as well as for EU Member States (administrative burden) in the short
and medium term. In the long term, it will have similar impacts than the
baseline scenario. The EU Member States would be faced with lower
administrative costs linked with inspection, enforcement and control compared
to the baseline scenario. The social costs are related to the social impacts.
They will therefore be important in the short and medium term and similar to
the baseline scenario in the long term.

5.5.4.     Impacts
on simplification of the existing legislation.

The option C would have a positive impact
since large commercial EU flagged ships will not be covered anymore by European
legislation. This impact might be more limited in the long term if the EU
Member States have diverging national legislation implementing the Hong Kong
Convention.

5.5.5.     Compliance
aspects

No compliance problem is expected during
the short and medium term since large commercial EU flagged ships would not be
subject to any legal requirement. In the long term, the level of compliance
will be similar to the baseline except if Member States have diverging national
legislations implementing the Hong Kong Convention.

5.6.        Option
D: covering ship dismantling by specific rules implementing the Hong Kong
Convention

5.6.1.     Environmental
and social impacts:

The majority of stakeholders supported the
idea of complementing the requirements of the Hong Kong Convention with
additional criteria (European Parliament, Community of European Shipyards'
associations, environmental NGOs, Ship Recycling Facilities, classification
society, Member States, trade unions ) while some (shipowners' associations) considers
that the criteria applicable to the facilities should not go beyond the
requirements of the Convention. Their main concern is the risk of reducing the
recycling capacity legally accessible.

The proposals to go beyond the Convention
concerns the need to address beaching (European Parliament, Ship Recycling
Facilities, environmental NGOs), to strenghen requirements targetted at
workers' protection (trade unions) or to take care of the proper downstream
management of hazardous waste outside the ship recycling facility (classification
society, Member States, environmental NGOs)

Under this scenario, large EU commercial
vessels would be dismantled worldwide in (upgraded) facilities meeting the
requirements of the Hong Kong Convention in the short, medium and long term. As
explained before, the legally available recycling capacity will be sufficient
to treat all large EU commercial vessels. This will result in positive
environmental and social impacts in the short term and to similar impacts in
the medium and long term compared to the to the baseline scenario.

5.6.2.     Economic
impacts:

Similarly to option B, this option would
anticipate the application of the requirements of the Hong Kong Convention at
EU level. This would therefore imply costs and, therefore, negative impacts for
ship-owners as for EU Member States in the short and medium term compared to
the baseline scenario.

The EU Member states will be faced with
additional administrative costs when applying the requirements of the Hong Kong
Convention compared with option A in the short and medium term and with similar
costs in the long term. In the short, medium and long term, they would be faced
with lower administrative costs regarding inspection, enforcement and control
compared to the baseline scenario. The option D would have more negative
impacts for shipowners than option B because fewer ships are expected to
circumvent the legislation thereby benefiting from higher revenues for ship
recycling. The option D would have positive impacts in the long term compared
to the baseline scenario for the same reasons as option B.

5.6.3.     Impacts
on simplification of the existing legislation.

The current EU legislation, which is not
adapted to the specificities of ships, would be replaced under option D by an
ad-hoc legislation based on the requirements of the Hong Kong Convention. No
duplicating sets of requirements nor contradicting requirements related to
diverging implementation by EU Member States would be encountered. This option
will therefore have a more positive impact than the baseline option.

5.6.4.     Compliance
aspects

The option D would address the current
problems. It will firstly ensure an adequacy between the needs and the legally
accessible recycling capacity. Moreover it would also be based on a system of
control adapted to the specificities of ships. The Hong Kong Convention's
requirements for ship owners to inform in advance and in writing their flag state
about their intention to recycle their ships will solve the current problem of
determining when a ship turns into waste.

By providing the legal possibility for
ships to be dismantled also outside the OECD, sufficient ship recycling
capacity will become legally available at an attractive price. The price
difference between facilities located in China and the rest of Asia is
reasonable (50$/LDT or 10% of the price). Moreover facilities located in China
have a capacity which is sufficient to address all the EU flags ships in terms
of volume and size.

Enforcement will be more effective since
the number of shipowners who continue to circumvent the legislation will be
significantly reduced and alternatives to ship recycling in substandard
facilities will be legally available. Shipowners will indeed be legally
authorized to use the upgraded facilities located in non-OECD countries in
which the relevant investment have been made.

As explained in section 3.1 and has
identified by the majority of stakeholders, changing a flag is cheap, easy and
will constitute a serious risk of non-compliance as long as two recycling
markets (one compliant and one substandard) are co-existing and competing with
each other. The price difference in July 2011 between facilities located in
China and beaching facilities located in India was limited (50 $/LDT or 10%).
The risks of reflagging or of selling ships to "cash buyers" would
therefore be significantly reduced. all the 5 major recycling countries upgrade
their facilities and are Parties to the Hong Kong Convention, they will have to
treat ships flying the flag of Parties and non-Parties to the Hong Kong
Convention in a similar manner. This would remove the incentives to try to
circumvent the European legislation. As explained before, the likelihood of
seeing new recycling countries emerging as major recycling countries is very
limited.

In order to address the remaining risk of
reflagging, specific sanctions will be introduced in the legislation. They will
address in particular the cases where ships are sold and reflagged prior to
their recycling in order to circumvent the legislation.

This option would address the current
problems and contains specific requirements which will ensure compliance before
recycling (obligation to inform the flag state in writing) and after (sanctions
if ships are not dismantled in authorized facilities). It will therefore have a
very positive impact compared to the baseline option.

5.7.        Option
E1: addressing also government vessels, including navy vessels, in the new
legislation instrument transposing the Hong Kong Convention.

The stakeholders expressed differing views
as regards the extension of the Convention requirements to warships and other
government vessels on non-commercial service. Including such vessels in the
scope of an EU Regulation would mainly serve as a mean of demonstrating the
commitment of EU Member States in fully implementing the Convention
requirements and contribute to a better image of public authorities that should
play an exemplary role by ensuring clean dismantling of their vessels. It could
also increase the demand for clean recycling and contribute to the improvement
of recycling conditions in these countries. Others argued that all military and
government vessels should be dismantled within the EU as it could make the
existence of EU dismantling facilities more economically sustainable. It was
also pointed out that these vessels would automatically follow the requirements
for clean dismantling without necessarily being specifically covered by the new
legislative instrument.

Details about the economic, social and
environmental impacts of option E1 are provided for in Annex XV. This option
can not be compared directly to the option A since this later option only
addresses large commercial EU flagged ships. The impacts of E1 have to compared
with the continuation of the current situation (referred to as “option E0”)
where these ships are dismantled in high quality facilities located in the EU
and Turkey only.

5.7.1.     Environmental
impacts:

The generation of non-hazardous waste (32
804 tons per year) and of hazardous waste (1996 tons per year) is linked with
the volume of governmental vessels going for recycling and will be similar to
option E0. The emissions of CO2 are expected to increase since these ships
would have to travel specifically for being dismantled outside the EU. This
would result in an increase of the CO2 emissions of 26.9 tons CO2/year[92].

The recycling will take place in facilities
which are providing a level of protection of the environment compliant with the
requirements of the Hong Kong Convention but lower than the one provided for by
European and Turkish facilities. In the short term, recycling is expected to
take place in the EU, Turkey, China and in upgraded facilities in India. So 93
% of the hazardous waste are expected to be treated in an environmentally sound
manner (ESM). In the medium and long term, recyling is expected to take place
also in upgraded facilities in Bangladesh and Pakistan thus resulting in an
overall percentage of 84 % of hazardous waste treated in an environmentally
sound manner.

Including government ships including navy
ships in an ad-hoc legislation transposing the Hong Kong Convention would
therefore have overall negative environmental impacts.

5.7.2.     Social
impacts:

The governmental ships, including navy
ships, would be recycled outside the EU thus resulting in a net loss of EU jobs
(29) but to a net creation of employment worldwide (117) since facilities
outside the EU are more labour intensive. Since dismantling would only take
place in facilities compliant with the Hong Kong Convention where children work
would be prohibited and protective equipments would be provided, no fatal
accident is expected. However, since the working conditions are less strict in
upgraded and compliant recycling facilities located in South Asian countries
than in the EU facilities, it is expected that there will be an increase of
accidents (25 per year).

Including government ships and in
particular navy ships in an ad-hoc legislation transposing the Hong Kong
Convention would have negative impacts on EU employment, positive impacts on
worlwide employement and negative impacts in terms of accidents.

5.7.3.     Economic
impacts:

EU Member States, acting as ship owners,
will be allowed to sell their ships for dismantling in countries offering
higher recycling prices thus resulting in increased revenues. Implementing the
requirements of the Hong Kong Convention would result in additional
administrative burden related to the establishment of inventories of hazardous
materials (which are expected to be far more expansive for existing navy ships
than for commercial ships) and certifications. The administrative burden will
however be limited since governmental vessels including navy ships will not be
subject to port state control during their operating life as they benefit from
specific immunities.

Economic impacts for EU Member States compared to the continuation of the current situation (€) || 2015 || 2020 || 2025

5 393 397 || 6 549 011 || 7 932 318

The overall economic impact will be
positive compared to the continuation of the current situation.

5.7.4.     Impacts
on the simplification of the existing legislation

Including government and navy ships in an
ad-hoc legislation based on the requirements of the Hong Kong Convention and
not anymore under the scope of the Waste Shipment Regulation would ensure that
these ships would be covered by similar requirements by all EU Member States.

5.7.5.     Compliance
aspects

Compared to large EU flagged ships,
government vessels including navy ships have less problems of compliance with
the current legislation. There is indeed enough recycling capacity in the EU to
treat them and the risk of de-flagging is low for government vessels, as the
action of states is much more under public scrutiny than that of private
operators. The level of compliance would not be significantly modified compared
to current situation.

Many stakeholders considered that including
governmental including navy ships in ad-hoc legislation would mainly
demonstrate the commitment of EU Member States in fully implementing the Hong
Kong Convention and in ensuring that they build a level of expertise on the
issue from a shipping and recycling perspective.

5.8.        Option
E2: requesting EU flagged ships to be treated in facilities which are providing
a level of protection of health and of the environment equivalent to EU
facilities.

5.8.1.     Environmental
impacts:

The generation of hazardous and non-hazardous
waste and the CO2 emissions will be similar to the baseline scenario. Large EU
commercial vessels would be dismantled worldwide in facilities meeting higher
standards than the Hong Kong Convention (namely EU standards). All hazardous
waste would be treated in an ESM. This option would therefore have very
positive environmental impacts compared to the baseline scenario in the short,
medium and long term.

5.8.2.     Social
impacts:

Large commercial EU flagged ships would be
dismantled in facilities which are less labour intensive thus disminishing the
total number of jobs created by ship reycling. The employment opportunities
within the EU would be maintained. All workers would be protected thus
resulting in less fatal and non fatal accidents amongst adult workers (children
work would be prohibited) compared to the baseline option. This option would
therefore have overall positive social impacts compared to the baseline
scenario in the short, medium and long term.

5.8.3.     Economic
impacts:

This option would anticipate the
application of the Hong Kong Convention and would therefore imply additional
administrative costs for shipowners and for Member States in the short and
medium term compared to the baseline scenario. In addition, shipowners would
only be allowed to use high standard facilities, which will be more expensive
than facilities compliant with the Hong Kong Convention only. This will result
in additional negative economic impacts for shipowners in the short, medium and
long term. This option will have a positive impacts on the social costs
compared to the baseline scenario in the short, medium and long term.

5.8.4.     Impacts
on simplification of the existing legislation.

For the same reasons as option D, this
option will have positive impacts compared to the baseline scenario.

5.8.5.     Compliance
aspects

Since this option would be based on a
system of control based on the specificities of shipping, a better level of
compliance is expected compared to option A. Under this option, ships would be
allowed to be dismantled also outside the OECD thus resolving the current
problem of legally accessible dismantling capacity. However, it can be expected
that the legally available recycling capacity would be less important than in
option D, since option E2 would imply a reinforcing of the requirements
applicable to facilities.

It would therefore have positive impacts
compared to the baseline scenario but slightly negative compared to option D.
In addition, since it would affect very negatively the revenues of ship-owners,
there is a clear risk for ships to be reflagged, so as to be dismantled in
other facilities and, in particular, in facilities which would be compliant
with the Hong Kong Convention. Several stakeholders (academia, shipowners'
associations, Member States) considered phased approaches as more desirable so
as not to give a large financial incentive to non-compliance. Measures which
could be regarded as excessive but escapable (e.g. by reflagging) could amount
to only ‘window dressing’, rather than an effective process

Since all facilities located in third
countries including the most advanced ones would need to be upgraded, this
option might face some opposition from the recycling countries as this would
largely go beyond internationally agreed standards.

5.9.        Option
E3: allowing the export of EU-flagged ships only to a list of third party
certified and audited facilities.

This option would consist in complementing
the option D in order to improve compliance with EU legislation in particular
prior to the entry into force of the Hong Kong Convention.

When the Hong Kong Convention will be
applicable, both flag and recycling states will have to submit annual reports
in order to ensure compliance with the Convention. Lists of ships sent for
recycling including information about the name and location on the recycling
facility will have to be provided by flag states. Recycling states will provide
a list of the ships recycling facilities compliant with the Convention as well
as an annual list of ships recycled within their jurisdiction. By comparing the
list of ships sent for dismantling with the list of ships recycled, it will be
possible to ensure compliance with the Convention as well as to measure
de-flagging. Ship recycling facilities will indeed have to report all ships
dismantled wherever they will fly the flag of a Party to the Convention or not
("no more favourable treatment" clause).

However these reporting requirements will
only become applicable once the Hong Kong Convention will enter into force. In
the short time, shipowners, when selecting their facilities, and flag states,
when conducting the final survey prior to recycling, will have to ensure that
the facilities comply with the requirements set out in the EU legislation. In
order to mutualise these tasks and to ensure a level playing field at European
level, it is proposed to establish a list of third party audited facilities.
This list will contain both information contained in the yearly reports as well
as information to be compiled by the ship recycling facilities in order to be
authorized under the Hong Kong Convention and which would be helpful for
shipowners in order to select adequate facilities[93] and for EU Member States
acting as flag states.

In the medium and longer term, this option would also address the
potential weaknesses identified in the EU Strategy on ship dismantling which
are linked with the limited non-compliance mechanism of the Convention as well
as the heavy reliance of its control system on
authorities of developing countries with existing governance problems.

The audit scheme contained in the Hong Kong
Convention concerns only the mechanism to be put in place by Parties in order
to ensure that their facilities’ compliance with the Convention. It is
voluntary and will be conducted by the Parties themselves (self-audit) or by
organizations that recognized by them.

Stakeholders were consulted on the possible positive and negative
impacts of the introducing an EU audit and certification scheme as well as on
the organisations and actors which could be playing a key role in such scheme.
Several stakeholders questioned the effect of a voluntary scheme and argued
that the scheme should be made mandatory.

There were diverging views on the criteria which should be used to
certify and audit facilities. Some considered that this scheme should only rely
on the requirements of the Hong Kong Convention, other proposed additional
criteria related to transparency, human health and the environment.

Almost all stakeholders agreed that the national authorities and/or
the classification societies/accreditation organisations would have a key role to
play in such an audit and certification scheme. It was suggested that this
should be done by an independent supervision and control organisation, while
the State’s role would be to control implementation. Such an organisation must
be independent from the construction and demolition sector. Two of the
stakeholders specifically mention the European Maritime Safety Organisation
(EMSA) as having a key role to play within such system as its inspectors are
indeed already visiting third countries to verify their compliance with the
training education and certification system under the STCW Convention[94]. One stakeholder proposes that local trade unions should play a key
role in auditing and improving standards and ‘giving voice to workers’.

At the same time, some stakeholders argued that an EU specific third
party certification and audit scheme could have a counterproductive effect given
some recycling States' insistence on sovereignty rights during the negotiations
of the Hong Kong Convention. However, during the workshop organized in EMSA, it
was also mentioned that such audits would open up to the EU market and would
work as an incentive for ship recycling facilities to upgrade their facilities.
Finally, a few stakeholders argued that such EU rules could result in the
reflagging of EU ships as a result of lack of compliant recycling capacity.

It is proposed to request the recycling
facilities to be audited and certified by private European and non-European
companies (classification societies) recognized by the EU[95]. This will ensure that
potential governance issues are addressed while respecting as much as possible
sovereignty’s concerns.

5.9.1.     Environmental
and social impacts

In principle the environmental and social
impacts will be similar to option D and therefore positive in the short and
medium term compared to the baseline scenario.

5.9.2.     Economic
impacts

The additional auditing of performance indicators and the
classification would produce costs for recycling facilities in the range of
20,000-40,000 € plus internal personnel costs of 1-2 man years[96] (2160-4320 €). These costs
would be passed over to shipowners through a reduced price offered for their
ships.

A study undertaken on behalf of the Commission125
developed a list of criteria based on the Hong Kong Convention as well as a
first list of 25 facilities with a total dismantling capacity of 2,4 million
LDT. Considering that during the 5 years in which they will be certified, these
facilities will treat an yearly average of 1,6 million LDT of EU-flagged ships,
the auditing cost would represent 0.139 €/LDT and is therefore considered as
negligible compared to the current dismantling prices. It is therefore not
expected to have a noticeable impact on shipowners' revenues, on transport
costs or on consumers. In June and July 2011, the
average dismantling prices offered by ship recycling facilities was indeed
comprised between 450 (China) and 525 (Bangladesh, India) €/LDT.

5.9.3.     Impacts
on the simplification of the existing legislation.

The impacts are expected to be similar to
the ones of option D and therefore a positive impact compared to the baseline
scenario.

5.9.4.     Compliance
aspects

Several other stakeholders environmental NGOs, European Dredging
Association, some ship recycling companies, trade unions,…) insisted on the
need for third Party audit and increased transparency for an effective
implementation of the legislation applicable on ship recycling facilities. By
applying this scheme the EU would increase transparency and compliance by
providing a tool to monitor that the facilities to which EU-flagged vessels are
sent for recycling comply with the applicable standards and rules on safe and
environmentally sound recycling of ships. The participating facilities
themselves would have a better control of operations and of their compliance
with international standards namely the rules of the Hong Kong Convention.
Moreover there would be an economical incentive for these facilities to be in
the scheme so as to be legally authorized to receive EU flagged ships. The
certificate would give them an incentive to improve environmental and safety
performance. Certified facilities would serve as a benchmark for the industry
and for national competent authorities.

Several stakeholders (shipowners' associations, Member States)
however highlighted that the establishment of an international audit scheme was
strongly rejected by some recycling states during the development of the Hong
Kong Convention. Some regretted it but all considered that this would render
this option potentially difficult from a diplomatic perspective and lead to
legal and operational implications. This could hinder the acceptability of
third party audit of ship recycling facilities by the Asian recycling
countries.

This option is therefore expected to have
less positive impacts on compliance than option D taking into account a
possible lower level of support from third countries due to sovereignty issues.

6.           Comparing
the options

The options will be assessed against the
following criteria:

· effectiveness – the extent to which
options achieve the objectives of the proposal;

· efficiency – the extent to which
objectives can be achieved at least cost;

· coherence – the extent to which options
are coherent with the overarching objectives of EU policy, and the extent to
which policy options are likely to limit trade-offs across the economic,
social, and environmental domain.

This will be done based on a partial
cost-benefit analysis since the environmental impacts have been quantified but
not monetized. The summary of the quantified impacts of the different options
is shown in the table 2.

6.1.        Effectiveness

Option B has a neutral impact on the
achievement of the Specific Objective 1 (improve the human health and
environmental impacts) while options C and E1 have a clear negative impact.
Options D and E3 have a positive impact in the short term and a neutral impact
in the medium and long term. Option E2 has a high effectiveness in achieving
this Specific Objective.

Option B would have a negative impact on
the achievement of the Specific Objective 2 since large commercial EU flagged
ships would still be prohibited to be recycled within the OECD. The level of
non-compliance with the EU legislation can therefore be expected to continue to
be very important. The option E1 has a neutral impact on the achievement of the
Specific Objective 2. Option C would have a positive impact in the short and
medium term since all the dismantling facilities worldwide could be used by
EU-flagged ships during this period of time. Options D and E3 would have a very
positive impact since they would allow open the possibility for EU flagged
ships to be dismantled in facilities compliant with the Hong Kong Convention
worldwide. Option E2 would have a positive impact since it would open the
possibility for EU flagged ships to be dismantled worldwide. The impact will
however be less positive than for options D and E3 since only EU equivalent
facilities could be used by EU flagged ships.

Since the current legislation, which is not
adapted to the specificities of ships, would be maintained in option B, this
option will have a negative impact on the achievement of the Specific Objective
3. The option C would have a positive impact insofar as all EU Member States
effectively ratify and implement the Hong Kong Convention. The options D, E2 and
E3 will have positive impacts as they would replace the current legislation by
another one more adapted to the specificities of ships and introduce sanctions
specifically designed to address the current problem linked with the
circumvention of the legislation by changing flag shortly prior to recycling.
Option E1 would have a slightly positive impact.

6.2.        Efficiency

Due to the very nature of the ship
recycling market (90 % of recycling is undertaken in 5 major countries), the
expected environmental and health benefits will be encountered in a limited
number of third countries.

The option B would globally have a negative
efficiency. By implementing key elements of the Hong Kong Convention in the EU
legislation it would decrease the revenues of EU shipowners and increase the
administrative costs of Member States. In addition, EU Member States would be
faced with higher administrative costs linked with control and enforcement. And
since the current problem of the lack of legally accessible dismantling capacity
will not be solved, the Regulation would continue to be largely circumvented
thus resulting in environmental and social impacts similar to the baseline
scenario.

Option C would have positive impacts on the
revenues of ship owners as well as on the administrative costs for EU Member
States during the period considered but they will be offset by important
negative environmental and social costs in the short and medium term.

Option D contains effective measures
accompanied by limited implementation and administrative costs. It contributes
therefore efficiently to all specific objectives.

Option E1 would have a globally negative
effectiveness regarding the specific objectives. It would have positive
economic impacts for EU Member States but negative environmental and social
impacts in the short, medium and long term.

Option E2 implies very substantial costs for
shipowners mainly related to the obligation for ships to be dismantled in high
standard and more costly facilities than what would be required internationally.
They are partially offset by the important benefits in terms of social costs
resulting from the reduction of fatal and non-fatal accidents of adults and
children.

Option E3 will not bring substantial
additional costs for shipowners but would significantly improve the compliance
with the legislation proposed under option D. It contributes therefore
efficiently to all specific objectives.

6.3.        Coherence

Only options D, E2 and E3 are coherent with
all the overarching objectives of EU policy.

The analysis seems to indicate that option
E3 and to a lesser extent option E2 presents a limited trade-off between the
different types of impacts and an increased level of compliance with EU
legislation. Option E2 presents an important trade-off between: firstly, the
positive impacts on human health and on the environment on; and, secondly, the
negative impacts on the revenues of ship owners. It presents a higher risk of
non-compliance than the options D and E3.

6.4.        Recommended
option

From an effectiveness point of view, the
option D seems the most attractive. Indeed, it offers the highest potential
level of achievement of all specific goals and a higher level of compliance
than option E3.

Moreover, as shown by the analysis of
coherence, even if option D presents some trade-offs between the positive
environmental and social impacts on the one hand side, and the economic impacts
on the other, the trade-offs are lower than for option E2. In terms of
coherence, option D therefore ranks highest.

In view of the above the option D is the recommended
option.

The table below summarizes the comparison
between the options in terms of effectiveness, efficiency and coherence.

Option || B || C || D || E1 || E2 || E3

Effectiveness || || || || || ||

SO1 || negative || negative || positive in the short term and neutral in the long term || negative || positive || positive

SO2 || negative || very positive || very positive || neutral || positive || very positive

SO3 || negative || positive || positive || slightly negative || positive || positive

|| || || || || ||

Efficiency || negative || negative || very positive || negative || positive || very positive

Coherence || no || no || Yes with limited trade off || no || Yes but with important trade off and risk of non compliance || Yes with limited trade off but with risks of non-compliance

Conclusion || || || Recommended option || || ||

7.           Monitoring
and evaluation.

Given the existing compliance problems,
progress should be monitored to check the implementation and effectiveness of
the EU legislation and its contribution to the objectives.

Indicators of the progress in this context could be in particular:

·
the number of ship recycling facilities that are
fulfulling the criteria of the Regulation;

·
the number and percentage of EU-flagged ships
dismantled in such facilities compared to the worldwide number and percentage;

·
the state of ratification of the Hong Kong
Convention by the major flag and recycling states;

·
data on the type of employements in ship
recycling facilities (typology of employement, accidents, occupational
diseases) as well as date on the environmental pollution associated with ship
recycling, as available.

Taking these indicators into account, it is
necessary to review the EU policy concerning ship recycling on a regular basis
and to submit regular implementation/progress reports to the European
Parliament and the Council.

The mandatory annual reports of Member
States on ship recycling facilities and recycled ships will be the main source
of information. It could be completed by the purchase of detailed data about
the world and EU flagged ships as well as about ship dismantled worldwide. In view
of probable delays, gaps and inaccuracies it is highly recommended to contract
a study for the preparation of each policy review.

Should compliance problems continue, further
actions could be undertaken at EU level like the setting up of an EU ship dismantling
fund.

Annex I : glossary of terms. 60

Annex II: Bibliography. 62

Annex III:The Basel Convention on the control of
transboundary movements of hazardous waste and heir disposal. 69

Annex IV: The Hong Kong Convention. 71

Annex V: Data used in the Impact Assessment and general
methodology. 77

Annex VI: Flags . 87

Annex VII: Detailed information about ship dismantling. 92

Annex VIII: Detailed information about the fleet and its
evolution. 102

Annex IX: Options rejected after a first screening. 107

Annex X: Estimate of impacts if the EU legislation is not
modified and the Hong Kong Convention does not enter into force before 2030. 109

Annex XI: Estimate of impacts for option A (baseline
option). 115

Annex XII: Option B. 126

Annex XIII: Option C.. 129

Annex XIV: Option D.. 133

Annex XV: Option E1. 139

Annex XVI: Option E2. 143

Annex XVII: Option E3 list of certified facilities. 146

Annex I : Glossary of terms

Basel Convention || The Basel Convention on the on the Control of Transboundary Movements of Hazardous Wastes and their Disposal adopted in 1989 and in force since 1992

COP || Conference of the Parties

CSR || Corporate Social Responsibility

ECSA || European EU Shipowners' Associations

EMAS || European Union's Eco-Management and Audit Scheme

EMSA || European Maritime Safety Agency

EU || European Union

GT || Gross tons

HBCDD || Hexabromocyclododecane

Hong Kong Convention || The Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships adopted by the IMO in May 2009

IA || Impact Assessment

ICS || International Chamber of Shipping

IHM || Inventory of Hazardous Materials

ILO || International Labour Organisation

IMO || International Maritime Organisation

ISO || International Organization for Standardization

LDT || Light Displacement Tonnes

MEPC || Marine Environment Protection Committee

MIDN || Report of the French Inter-departmental Committee on the Dismantling of Civilian and Military End-of-Life Ships

OECD || Organisation for Economic Co-operation and Development

OJ || Official Journal (of the European Union)

PCBs || Polychlorinated biphenyls

PFOs || Perfluorooctanes

TBBPA || Tetrabromobisphenol A

TBT || Tributyl tin

TFS || TransFrontier Shipment of Waste

WSR || Waste Shipment Regulation

UNEP || United Nations Environment Programme

Annex II: Bibliography

European Community legislation and
documents

(1)
Communication COM (2010) 88 final presenting "An assessment of the link between
the IMO Hong Kong Convention for the safe and environmentally sound recycling
of ships, the Basel Convention and the EU waste shipment regulation".
Available at: http://ec.europa.eu/environment/waste/ships/pdf/report0310.pdf

(2)
Council Conclusions on an EU Strategy for better
ship dismantling http://www.consilium.europa.eu/uedocs/cms\_data/docs/pressdata/en/envir/110626.pdf

(3)
Results of the stakeholders' workshop organised
on the 9 June 2009 and on the 23 October 2009 http://circa.europa.eu/Public/irc/env/cons\_ship\_dis/library

(4)
Results of the stakeholders' consultation on the
EU Strategy for better ship dismantling (April- June 2009) http://ec.europa.eu/environment/waste/ships/pdf/summary%20of%20contributions.pdf

(5)
European Parliament resolution of 26 March 2009 on
an EU strategy for better ship dismantling http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2009-0195+0+DOC+XML+V0//EN&language=EN

(6)
Communication COM (2008) 767 final of 19
November 2008 presenting an "EU strategy for better ship dismantling, and
its impact assessment in Commission Staff Working Document SEC(2008) 2846.

(7)
European Parliament Resolution of 21 May 2008 on
Commission's Green Paper on better ship dismantling http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2008-0222+0+DOC+XML+V0//EN&language=EN.

(8)
Results of the stakeholders' consultation on the
Green Paper on better ship dismantling http://ec.europa.eu/environment/waste/ships/pdf/report\_consultation.pdf.

(9)
Green Paper of 22 May 2007 on better ship
dismantling COM (2007) 269 final, with Annex and
references in Commission Staff Working Document SEC (2007) 645.

(10)
Regulation (EC) No 1013/2006 of the European
Parliament and of the Council of 14 June 2006 on shipments of waste, OJ L 190,
12.7.2006, p. 1 ("Waste Shipment Regulation").

(11)
Commission
Regulation (EC) No 1418/2007 of 29 November 2007 concerning the
export for recovery of certain waste listed in Annex III or IIIA to Regulation
(EC) No 1013/2006 of the European Parliament and of the Council to certain
countries to which the OECD Decision on the control of transboundary movements
of wastes does not apply

(12)
Commission
Regulation (EC) No 740/2008 of 29 July 2008 amending Regulation (EC)
No 1418/2007 as regards the procedures to be followed for export of waste to
certain countries

Commission's studies and research
projects

(1)
BIO intelligence service study for DG
Environment:" Feasibility of a list of “green and Safe” ship dismantling
facilities and of a list of ships likely to go for dismantling" Final
report of January 2010, published on the Commission website at http://ec.europa.eu/environment/waste/ships/pdf/bio\_ship%20dismantling.pdf

(2)
COWI study for DG Environment: " Support to
the impact assessment of a new legislative proposal on ship dismantling" Final
report of December 2009, published on the Commission website at http://ec.europa.eu/environment/waste/ships/pdf/final\_report080310.pdf

(3)
Milieu/COWI for DG Environment " Study in
relation to options for new initiatives regarding dismantling of ships "
Final report of October 2009: published on the Commission website at http://ec.europa.eu/environment/waste/ships/index.htm

(4)
COWI/Litehauz study for EMSA, ‘Certification of
Ship Recycling Facilities’, 2008.

(5)
COWI/DHI for the European Commission, DG
Environment, Study on "Ship dismantling and pre-cleaning of ships",
Final report of June 2007, published on the Commission website at http://ec.europa.eu/environment/waste/ships//index.htm.

(6)
COWI for the European Commission, DG Transport
and Energy, Study on "Oil Tanker Phase Out and the Ship Scrapping Industry",
2004, published at: http://europa.eu.int/comm/transport/maritime/safety/doc/prestige/2004\_06\_scrapping\_study\_en.pdf

(7)
DNV/Appledore
(for DG III/Enterprise), study on ‘Technological and Economic Feasibility Study
of Ship Scrapping in Europe’, 2001, published at : http://ec.europa.eu/enterprise/maritime/maritime\_industrial/ship\_scrapping\_study/ship\_scrapping\_study\_21feb01.pdf

(8)
SHIPDISMANTL Cost-effective and environmentally
sound dismantling of obsolete vessels, 6th European Research Framework
Programme (FP6).

(9)
SHIPMATES Shiprepair to maintain transport
which is environmentally sustainable, 6th European Research Framework Programme
(FP6)

(10)
DIVEST Dismantling of Vessels with Enhanced
Safety and Technology, 7th European Research Framework Programme (FP7).

(11)
RECYSHIP (Reference: LIFE07 ENV/E/000787) ;
pilot project for the dismantling and decontamination of end of life ships

(12)
BOATCYCLE Management, recycling and recovery of
wastes of recreational boat scrapping (Reference LIFE08 ENV/E/000158

International Maritime Organisation
(IMO)

(1)
Hong Kong Convention for the Safe and
Environmentally Sound Recycling of Ships adopted 19 May 2009 available at: http://ec.europa.eu/environment/waste/ships/pdf/Convention.pdf

(2)
Existing guidelines on ship dismantling[97]

·
IMO, 2003, Resolution A. 962(23), Guidelines on
Ship Recycling International Maritime Organisation (IMO)

·
IMO, 2004, Guidelines for the Development of the
Ship Recycling Plan (MEPC/Circ.419)

·
IMO, 2005, Resolution A.980(24), Amendments to
the IMO Guidelines on Ship Recycling

·
IMO, 2005, Implementation of the IMO Guidelines
on Ship Recycling: ‘Gas-free-for-hot-work’ certification (MEPC/Circ.466)

·
IMO, 2005, Promotion of the Implementation of
the IMO Guidelines on Ship Recycling (MEPC/Circ.467)

·
IMO, 2009, Guidelines for the development of the
Inventory of Hazardous Materials. Available at: http://www5.imo.org/SharePoint/blastDataOnly.asp/data\_id=26464/179%2859%29.pdf

Basel Convention

(1)
Basel Convention on the Control of Transboundary
Movements of Hazardous Wastes and Their Disposal, concluded 22 March 1989,
entered into force 5 May 1992, 1673 UNTS 126

(2)
Basel Convention, ‘Technical Guidelines for the
Environmentally Sound Management of the Full and Partial Dismantling of Ships’,
Basel Convention series/SBC No 2003/2, ISBN 92-1-158620-8, 2003

(3)
Comments received from Parties pursuant to the
decision taken by the ninth meeting of the Conference of the Parties on the
Dismantling of Ships :

·
European Union: "Submission by the European
Community and its Member States related to decision IX/30 on Dismantling of
Ships", January 2009

·
European Union; "Preliminary
assessment pursuant to decision OEWG-VII/12 (Environmentally sound dismantling
of ships", April 2011.

(4)
European Union: Submission by the European
Community and its Member States of an "EU Assessment on ship dismantling
with particular reference to the levels of control and enforcement established
by the Basel Convention and the expected level of control and enforcement to be
provided by the draft Ship Recycling Convention in their entirety" ,
January 2008

(5)
Decisions of meetings of the Parties to the
Basel Convention on ship dismantling:

·
Decision V/28: Dismantling of ships

·
Decision VI/24: Technical Guidelines for the
Environmentally Sound Management of the Full and Partial Dismantling of Ships

·
Decision VII/25: Joint Working Group of the
International Labour Organization, the International Maritime Organization and
the Basel Convention on Ship Scrapping

·
Decision VII/26: Environmentally sound
management of ship dismantling

·
Decision VII/27: Abandonment of ships

·
Decision VIII/11: Environmentally sound
management of ship dismantling

·
Decision VIII/12: Joint Working Group of the
International Labour Organization, the International Maritime Organization and
the Basel Convention on Ship Scrapping

·
Decision VIII/13: Abandonment of ships on land
or in ports

·
Decision IX/30: Dismantling of ships

·
Decision OEWG-II/4: Legal aspects of the full
and partial dismantling of ships

·
Decision OEWG-III/3: Legal aspects of the full
and partial dismantling of ships

·
Decision OEWG-IV/5: Environmentally sound
management of ship dismantling

·
Decision OEWG-IV/6: Abandonment of ships

·
Decision OEWG-V/7: Abandonment of ships

·
Decision OEWG-V/8: Environmentally sound
management of ship dismantling

·
Decision VI/17: Environmentally sound management
of ship dismantling and the abandonment of ships on land or in ports

·
Decision OEWG-VII/12: Environmentally sound
dismantling of ships

International Labour Organization
(ILO)

(1)
‘Safety and Health in Ship Breaking – Guidelines
for Asian Countries and Turkey’ International Labour Organisation, ISBN
92-2-115289-8, 2004

Other international conventions,
guidelines and initiatives

(1)
United Nations Convention on the Law of the Sea,
concluded 10 December 1982, entered into force 16 November 1994, 1833 UNTS 3

(2)
Convention on the Prevention of Marine Pollution
by Dumping of Wastes and Other Matter 1972 (London Convention) and 1996
Protocol Thereto

(3)
International Convention on the Control of
Harmful Anti-fouling Systems on Ships, 2001

(4)
Joint ILO/IMO/Basel Convention Working Group on
Ship Scrapping, 2005 and 2008 and sessions (http://www.basel.int/ships/jimbwg.html;
http://www.basel.int/ships/ilo-imo-bc-WG3Report.pdf;
http://www.basel.int/ships/ilo-imo-bc-WG3Report.pdf)

(5)
Rotterdam Convention on the Prior Informed
Consent Procedure for Certain Hazardous Chemicals and Pesticides in
International Trade, concluded 10 September 1998, entered into force 24
February 2004, 38 ILM 1 (1999)

National ship recycling strategies
and reports

·
United Kingdom

(1)
DEFRA: UK Ship
Recycling Strategy, February 2007 (http://www.defra.gov.uk/environment/waste/strategy/ship.htm)

(2)
DEFRA study on "Potential Transitional
Technology Solutions For Environmentally Sound Ship Recycling In Developing
Countries" 2009, (http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&ProjectID=15944&FromSearch=Y&Publisher=1&SearchText=WR1110&SortString=ProjectCode&SortOrder=Asc&Paging=10#Description
)

·
France

(1)
Report of the French
Inter-departmental Committee on the Dismantling of Civilian and Military
End-of-Life Ships ("MIDN report"); French original (with annexes) and
English translation published at: http://www.sgmer.gouv.fr/article.php3?id\_article=52

(2)
Report of the Inter-ministerial
mission on ship dismantling, April 2007 (http://www.sgmer.gouv.fr/article.php3?id\_article=52)

(3)
Parliamentary report on the
dismantling of warships, January 2007 (http://www.assemblee-nationale.fr/12/rap-info/i3609.asp)

(4)
Parliamentary report on the
dismantling of ships, June 2010

Voluntary action by industry

(1)
Industry Working Group on Ship Recycling
"Guidelines on Transitional Measures for Shipowners Selling Ships for
Recycling, October 2009" available at: http://www.ilo.org/wcmsp5/groups/public/---ed\_protect/---protrav/---safework/documents/publication/wcms\_117945.pdf

(2)
Industry Working Group on Ship Recycling
recommendation concerning ‘Interim
Measures for Shipowners Intending to Sell Ships for Recycling’, July
2007

(3)
International Chamber of Shipping, Industry Code
of Practice on Ship Recycling, 2001

(4)
Standard contract for the sale of vessels for
recycling: http://www.bimco.org/Corporate%20Area/Documents/Document\_samples/Sundry\_Other\_Forms/DEMOLISHCON.aspx

Other studies, publications and
information sources

(1)
COWI for Danish EPA ‘Project Identification Note
– Options for Demonstration Projects on Green Ship Recycling’, February –
September 2007.

(2)
ECORYS, ‘The ship recycling fund. Financing
environmentally sound scrapping and recycling of sea-going ships’, February
2006.

(3)
EMSA, Workshop Report: ‘Ship Recycling – the
draft IMO Convention on the safe and environmentally sound recycling of ships’,
Lisbon, 24 April 2007.

(4)
Knapp S, Kumar S, Bobo Remijnc A., ‘Econometric
analysis of the ship demolition market’, Vol 32 Marine Policy (Elsevier),
November 2008.

(5)
Mikelis N., ‘Developments and Issues on
Recycling of Ships’, East Asian Seas Congress, Haikou City, Hainan Province, PR
China, December 2006.

(6)
Mikelis N., ‘A statistical overview of ship
recycling’, International symposium on maritime safety, security and
environmental protection, Athens, September 2007.

(7)
Ormond T., ‘Enforcing EU environmental law outside
Europe? The case of ship dismantling’ Environmental Law Network International
No. 1/2009

(8)
Andersen AB, ‘Worker safety in the ship-breaking
industries. An issue paper’ Geneva, ILO, 2001:
http://www.ilo.org/public/english/dialogue/sector/papers/shpbreak/wp-167.pdf

(9)
Danish Environmental Protection Agency
‘Shipbreaking on OECD’ Working Report No. 17, 2003:
http://www.mst.dk/homepage/default.asp?Sub=http://www.mst.dk/udgiv/publications/2003/87-7972-588-0/html/kap01\_eng.htm

(10)
Det Norske Veritas, ‘Decommissioning Guidelines
the GUEDEC Approach’ DNV Report No 2000 3156 and ‘Third Party Environmental
Verification Ship Decommissioning (ENVER)’ Report No 2000 3157.

(11)
Det Norske Veritas, ‘Ship recycling: Industry
concern, industry response: The way forward, challenges, DNV response’, 2000: http://www.skibstekniskselskab.dk/download/F2005\_DNVShipRecycling.pdf#search='ship%20recycling%202001'

(12)
Environment Canada, Environmental Protection
Branch, Pacific and Yukon Region: ‘Cleanup Standards for Ocean Disposal of
Vessels’ and ‘Cleanup Guidelines for Ocean Disposal of Vessels’, February 1998:
http://www.artificialreef.bc.ca/AResources/cleanup\_guidelines.html and
http://www.artificialreef.bc.ca/AResources/cleanup\_standards.html

(13)
Environment, Food and Rural Affairs Committee
(UK), ‘Dismantling defunct ships in the UK, 11 November 2004:
http://www.publications.parliament.uk/pa/cm200304/cmselect/cmenvfru/834/83402.htm

(14)
Environmental Protection Agency (EPA) (USA), ‘A
guide for ship scrappers: Tips for regulatory compliance’, Washington, D.C,
EPA, 2000:
http://www.epa.gov/Compliance/resources/publications/civil/federal/shipscrapguide.pdf

(15)
Greenpeace International, ‘Destination unknown:
European singlehull oil tankers: No place to go’, December 2004:
http://www.greenpeaceweb.org/shipbreak/destination.pdf

(16)
International Chamber of Shipping (ICS),
‘Industry code of practice on ship recycling’: http://www.marisec.org/recycling/

(17)
International Organization for Standardization
(ISO), ‘Ships and marine technology: Ship recycling management systems:
Specifications for management systems for safe and environmentally sound ship
recycling facilities’ Geneva, ISO, 2008 (ISO/PAS 3000).

(18)
Occupational Safety and Health Administration
(OSHA) (USA), ‘OSHA fact Sheet on shipbreaking’, US Department of Labor -
Occupational Safety and Health Administration, 2001: http://www.ilo.org/pubcgi/links\_ext.pl?http://www.osha.gov/OshDoc/data\_MaritimeFacts/shipbreakingfactsheet.pdf

(19)
Rahman A/ Ullah AT, ‘Ship breaking: A background
paper prepared for the ILO’s Sectoral Activities Programme. Dhaka, 1999 : http://www.ilo.org/public/english/protection/safework/sectors/shipbrk/shpbreak.htm

(20)
Sawyer, JF, ‘Shipbreaking and the North-South
debate: Economic development or environmental and labor catastrophe?’ Penn
State International Law Review, Vol. 20/No. 3, pp 535-562, 2002.

(21)
US Environmental Protection Agency, Office of
Enforcement and Compliance Assurance: ‘A Guide for Ship Scrappers – Tips for Regulatory
Compliance’, EPA 315-B-00-001, Summer 2000: http://es.epa.gov/oeca/fedfac/scrap.pdf

(22)
US Department of Transportation – Maritime
Administration (MARAD): ‘Environmental Assessment of the sale of national
defence reserve fleet vessels for scrapping’, Report No. MAENV-820-96003, July
1997 (including Appendix D: Sampling and analysis, Appendix E: Survey of ships
and materials, and Appendix F: The markets, cost and benefits of ship breaking/
recycling in the United States).

(23)
US Department of Transportation - Report to
Congress on the progress of ship disposal, 2005 http://www.marad.dot.gov/Publications/Fy%2006/ReportToCongress11\_05%20Final%20ver%202-21-2006.pdf

(24)
United Nations Environment Programme (UNEP) -
Technical Working Group of the Basel Convention, 16th Session 3-5 April 2000 –
Dismantling of ships. Geneva, UNEP, 2000 (UNEP/CHW/TWG/16/3 &
UNEP/CHW/TWG/16/3/Add.1):
http://www.basel.int/meetings/twg/twg16/predocs/twg16\_3.pdf & http://www.basel.int/meetings/twg/twg16/predocs/twg16\_3a1.pdf

Annex III: The Basel Convention on the control of transboundary
movements of hazardous waste and heir disposal.

The Basel
Convention on the control of transboundary movements of hazardous wastes and
their disposal was adopted in 1989. All individual Member States and the EU are
Parties to the Basel Convention.

The Basel Convention to regulate the
movements of hazardous waste across international frontiers. The overall goal
of the Convention is to protect human health and the environment against
adverse effects which may result from the generation, management, transboundary
movements, and disposal of hazardous wastes.

The Convention applies to hazardous wastes
and certain other wastes (mixed waste collected from households and residues
arising from the incineration of household waste). In decision VII/26, Parties
to the Basel Convention noted that a ship may become waste as defined in Article
2 of the Convention while at the same time being defined as a ship under other
international rules. Due to their content of hazardous materials, when ships
are waste, they have to be considered as hazardous wastes. The Basel Convention
thus applies to all ships which are "waste" as defined by the
Convention.

In 1995, an amendment to the Convention, the so-called
"Basel Ban" was adopted. It prohibits all shipments of hazardous
waste from a group of countries (European Union, OECD countries and
Lichtenstein) to countries which do not belong to this group.

The European Union transposed the provisions of this
amendment in the EU Waste Shipment Regulation[98]. However, internationally the Ban amendment
has not yet entered into force due to an insufficient number of ratification by
Parties to the Basel Convention.

In order to break the deadlock, Indonesia and Switzerland
have launched an initiative with key Parties to the Basel convention and will
propose a draft decision for consideration ad adoption at the next Conference
of the Parties to the Basel Convention[99] .

Faced with the difficulties to implement the Basel
Convention to ships and in order to cover the whole life cycle of ships, the
Parties to the Basel Convention welcomed the intention of the International
Maritime Organisation (IMO) has developed an ad-hoc Convention. The Hong Kong
Convention for the Safe and Environmentally Sound Recycling of Ships
(thereafter referred to as the Hong Kong Convention) provides
a system of control and enforcement over a ship's lifetime from design, through
construction, operation and up to the recycling stage.
Parties to the Basel Convention welcomed its adoption in May 2009.

During the negotiation of the Hong Kong
Convention, Parties to the Basel Convention invited the International Maritime
Organization to ensure that the new Convention to be adopted by it would
establish an equivalent level of control as that established under the Basel
Convention, noting that the duplication of regulatory instruments that have the
same objective should be avoided[100]. Durig the ninth Conference of the Parties to
the Basel Convention, it was decided[101] to carry out a preliminary assessment on
whether the Hong Kong Convention as adopted, establishes an equivalent level of
control and enforcement as that established under the Basel Convention, in
their entirety, after having developed the criteria necessary. The EU has
submitted criteria in January 2009[102] and a set of criteria and a methodology have
been agreed upon during the 7th Open Ended Working Group of the
Basel Convention[103]. On this basis, Parties and stakeholders have
been invited to conduct their assessment ant to transmit the results to the
eleventh Conference of the Parties to the Basel Convention "for
consideration and action, as approptiate".

The EU has completed its assessment in April
2009 (see: http://www.basel.int/ships/oewg-vii12-comments/comments/eu.doc) and concluded that the Hong Kong Convention
appears to provide a level of control and enforcement at least equivalent to
that one provided by the Basel Convention for ships which are waste under the
Basel Convention and for ships to which the Hong Kong Convention applies and to
ships treated similarly pursuant to article 3(4) of this latter
Convention.

In addition, the system of control and
enforcement for transboundary movements of hazardous waste through the Prior
Informed Consent Procedure of the Basel Convention is considered as strict and
functioning relatively well for most hazardous wastes, but as difficult to
enforce in relation to end-of-life ships. The Hong Kong Convention takes a
rather different approach to control and contains other elements of control and
enforcement which are more adapted to the specificities of the maritime world.

Annex IV: The Hong Kong Convention.

General presentation of the Hong Kong Convention:

The International
Convention for the Safe and Environmentally Sound Recycling of Ships[104] aims at addressing in a legally binding instrument, the
environmental, occupational health and safety risks related to ship recycling,
taking into account the particular characteristics of maritime transport and
the need to secure the smooth withdrawal of ships that have reached the end of
their operating lives. To this end, it regulates:

·
The design, construction, operation and preparation
of ships so as to facilitate safe and environmentally sound recycling without
compromising their safety and operational efficiency;

·
The operation of ship recycling facilities in a
safe and environmentally sound manner; and

·
The establishment of an appropriate enforcement
mechanism for ship recycling (certification/reporting requirements).

The Hong Kong Convention basically requires
ships flying the flags of Parties to the Convention to be recycled only in
recycling facilities authorized by other Parties to the Convention.

Structure of the Ship Recycling Convention

The Convention is divided into the main
text containing 21 Articles and an Annex which forms an integral part of the
Convention. Articles provide for general requirements while the Regulations
contained in the Annex contain more detailed requirements. If there is a need
for the Convention to evolve (for example to add new prohibitions to use
certain hazardous substances on board), it will be easier to modify the
Regulation than the Articles of the Convention.

Article 1 || General obligations

Article 2 || Definitions

Article 3 || Application

Article 4 || Controls related to ship recycling

Article 5 || Survey and certification of ships

Article 6 || Authorization of Ship Recycling Facilities

Article 7 || Exchange of information

Article 8 || Inspection of ships

Article 9 || Detection of violations

Article 10 || Violations

Article 11 || Undue delay or detention of ships

Article 12 || Communication of information

Article 13 || Technical assistance and cooperation

Article 14 || Dispute settlement

Article 15 || Relationship with international law and other international agreements

Article 16 || Signature, ratification, acceptance, approval and accession

Article 17 || Entry into force

Article 18 || Amendments

Article 19 || Denunciation

Article 20 || Depositary

Article 21 || Languages

Annex: Regulations for Safe and Environmentally Sound Recycling of Ships

 Chapter 1 (General Provisions)

Regulation 1 || Definitions

Regulation 2 || General applicability

Regulation 3 || Relationship with other standards, recommendations and guidance

Chapter 2 (Requirements for Ships)

Part A - Design, construction and maintenance of ships

Regulation 4 || Controls of ships’ Hazardous Materials

Regulation 5 || Inventory of Hazardous Materials

Regulation 6 || Procedure for proposing amendments to Appendices 1 and 2

Regulation 7 || Technical Groups

Part B – Preparation for Ship Recycling

Regulation 8 || General requirements

Regulation 9 || Ship Recycling Plan

Part C – Surveys and certification

Regulation 10 || Surveys

Regulation 11 || Issuance and endorsement of certificates

Regulation 12 || Issuance or endorsement of a certificate by another Party

Regulation 13 || Form of the certificates

Regulation 14 || Duration and validity of the certificates

Chapter 3 (Requirements for Ship Recycling Facilities)

Regulation 15 || Controls on Ship Recycling Facilities

Regulation 16 || Authorization of Ship Recycling Facilities

Regulation 17 || General requirements

Regulation 18 || Ship Recycling Facility Plan

Regulation 19 || Prevention of adverse effects on human health and the environment

Regulation 20 || Safe and environmentally sound management of Hazardous Materials

Regulation 21 || Emergency preparedness and response

Regulation 22 || Worker safety and training

Regulation 23 || Reporting on incidents, accidents, occupational diseases and chronic effects

Chapter 4 (Reporting requirements)

Regulation 24 || Initial notification and reporting requirements

Regulation 25 || Reporting upon completion

||

Appendices

Appendix 1 || Controls of Hazardous Materials

Appendix 2 || Minimum List of Items for the Inventory of Hazardous Materials

Appendix 3 || Form of the International Certificate on Inventory of Hazardous Materials

Appendix 4 || Form of the International Ready for Recycling Certificate

Appendix 5 || Form of the Authorization of Ship Recycling Facilities

Appendix 6 || Form of Report of Planned Start of Ship Recycling

Appendix 7 || Form of the Statement of Completion of Ship Recycling

The Convention is supplemented by the
following IMO guidelines providing clarifications, interpretations, and uniform
procedures for technical issues arising from the provisions of the Convention.

Existing guidelines

Guidelines on Ship Recycling Guidelines for the Development of the Ship Recycling Plan Amendments to the IMO Guidelines on Ship Recycling Implementation of the IMO Guidelines on Ship Recycling: ‘Gas-free-for-hot-work’ certification Promotion of the Implementation of the IMO Guidelines on Ship Recycling Guidelines for the development of the Inventory of Hazardous Materials

Guidelines supporting the Hong Kong Convention

Guidelines for the development of the Inventory of Hazardous Materials (adopted in July 2009) Guidelines for survey and certification; Guidelines for inspection of ships; Guidelines for the authorization of Ship Recycling Facilities (expected date of adoption July 2011); Guidelines for safe and environmentally sound ship recycling (expected date of adoption July 2011); Guidelines for the development of the Ship Recycling Plan (expected date of adoption July 2011); Other guidelines or circulars as may be identified by the Marine Environment Protection Committee of the IMO

Entry into force requirements of the Hong Kong Convention[105] (article 17):

In
order to enter into force and to start producing effects, the Hong Kong
Convention needs to be ratified by both major flags states and recycling
states.

As of May 2011, no IMO Member has ratified
the Hong Kong Convention. This Convention has been open for signature subject
to ratification from 1 September 2009 to 31 August 2010. In that time, France,
the Netherlands, Italy, Turkey and Saint Kitts & Nevis signed the
Convention subject to ratification.

"This Convention shall enter into force 24 months after the
date on which the following conditions are met:

.1 not less than 15 States have either signed it without reservation
as to ratification, acceptance or approval, or have deposited the requisite
instrument of ratification, acceptance, approval or accession in accordance with
Article 16;

.2 the combined merchant fleets of the States mentioned in paragraph
1.1 constitute not less than 40 per cent of the gross tonnage of the world’s
merchant shipping;

and

.3 the combined maximum annual ship recycling volume of the States
mentioned in paragraph 1.1 during the preceding 10 years constitutes not less
than 3 per cent of the gross tonnage of the combined merchant shipping of the
same States."

First criteria: number of States.

This
criterion will be relatively easy to meet since the ratification of EU Member
States alone would be sufficient to reach it. Since the European Union is not a
Member but only an observer to the IMO, only EU Member States can ratify the
Hong Kong Convention.

Second criteria: fleet.

In
2009, the world merchant's shipping of ships under 500 GT is of 993 404 439 GT23.
To meet the criteria, ratifying states will need to provide for at least 397
361 776 GT.

The
EU flagged ships above 500 GT represent 165 507 822 GT23 or 16,66 %
of the world fleet. Ratification by major flag states outside the EU will
therefore be necessary to meet this criteria.

Third criteria: combined recycling capacity.

Based
on the world merchant fleet above 500 GT in 2009, this means that countries
ratifying the Convention should represent 11 920 853 millions GT.

As
shown in Figure 1, this implies that ratification by the most advanced
recycling countries (China and OECD) would not be sufficient. Ratification by
India, Pakistan or Bangladesh would be required for this Convention to enter
into force.

The
figure below shows the maximum recycled volume of the major recycling states
during the last ten years.

Three
of them have large recycling capacities: China, India and Bangladesh. Pakistan
has a medium and Turkey a small capacity.

Ratification
by two large recycling capacity countries is presently more than sufficient to
fulfill the Convention's entry into force requirements. With an average annual
increase of the world fleet by 4 %, ratification by two large recycling
capacity countries should be sufficient until 2015 or even beyond.

If
there is an increase in recycled volumes in 2011 or in 2012, it might become
possible to the recycling criterion to be met with ratifications by one large,
one medium and one small recycling capacity countries.

Dismantling country || Maximum recycling volume (millions GT) for the period 2000-2010

Bangladesh || 6 608 531

China || 7 737 730

India || 7 561 258

Pakistan || 2 351 964

Turkey || 645 150

Rest of the world || 472 221

Figure 1: World disposal by
dismantling country 2000-2009 [106]

Annex V: Data used in the Impact Assessment and general
methodology.

The analysis provided in this Impact
Assessment is based on the best available data and information collected by the
Commission from stakeholders and the literature.

Publicly available data on all aspects of
ship dismantling is rather limited in particular since the majority of ship
dismantling takes place in non-EU countries. A specific methodology was
developed to complete and update the existing information as well as to assess
the quantitative impacts of different options in a dedicated study undertaken
on behalf of the Commission12 which has been published on Internet[107].

A great number of representatives of
industry, national and international authorities, NGOs and other stakeholders
have been interviewed and contributed information to this study. The
methodology, main base data and the preliminary results were presented at the
stakeholder workshop held on 23 October 2009 in Brussels. Views and specific
comments expressed during and after the workshop are reflected in the relevant
parts of the study.

Sources:

The above-mentioned study drawn on existing
studies on ship dismantling.

EMSA had also provided an extensive amount
of data for instance updates on ship dismantling and distribution of flags at
the time of dismantling and during operation, which has been used for address
the size of reflagging. Further data and information have been provided by
stakeholders following the expert workshop on the 23 October 2009 and by DG
ENV.

A number of representatives of industry,
national and international authorities and other stakeholders have been
contacted in relation to contribute information to the study. The contacted
representatives include:

·
International Ship Recycling Association, ISRA

·
International Chamber of Shipping

·
European Ship Recycling Facilities such as Van
Heygen Recycling S.A., Belgium and Scheepssloperij Nederland B.V., the
Netherlands,

·
Turkish Ship Breakers Association

·
International Labour Organization, ILO (safety
and health statistics)

·
Gujarat Maritime Board.

While comments and specific data submitted
by stakeholders have been reflected in the analyses to further qualify the
estimates and support the findings, the estimates, including the base data are
best estimates subject to some uncertainty, given that publicly available data
on various aspects of ship dismantling data is rather limited.

The analyses of impacts have been carried
out using a dedicated Excel model and a base data set[108] for assessing the impacts of
each of the scenarios. This Excel model is available at this address: http://ec.europa.eu/environment/waste/ships/pdf/Appendix\_A.xls

In order to reflect the impacts of the
shipping crisis in 2008, the data set was enriched and updated on the basis of
two additional sets of data identified below.

Updates and improvement based on new
sets of data

In 2011, DG Environment brought some
specific data about the age profile of the world fleet, of the EU fleet and
detailed information about ships sent for dismantling in 2008 and 2009. For the
world fleet and for the EU flagged ships, the number of ships and GT of ships
above 100 GT have been provided for the following age ranges: [0-9 years];
[10-14 years]; [15-19 years]; [20-22 years]; [23-25 years]; [26-28 years];
[29-30 years]; more than 31 years.

Regarding ship dismantling, the following
information have been provided: ship's unique IMO's Ship Identification Number;
ship name; GT; the type of ship, the date of built, the flag at the time of
dismantling, the nationality of the owner at the time of dismantling, the date
of arrival in the dismantling yard, the date when the dismantling started, the
date when the dismantling was completed, the dismantling country and location.

In addition, data about ship dismantling
published by one prominent shipbroker, Cotzias, have been used in the context
of this report. Each month, this broker publishes a list of all the ships sold
for dismantling with the following information: ship's unique IMO's Ship
Identification Number, Ship name, type of ship, date of built, DWT, LDT, price
paid by the dismantling facility (in dollars per LDT), dismantling country. The
owners of certain ships do not sell them directly to the dismantling facilities
but use the services of so-called "cash-buyers". In the database
published by Cotzias, the dismantling country of these ships is therefore not
indicated since it is not known at the time of selling. The words "as is"
are indicated instead[109].
Finally, this database focuses mainly on large seagoing vessels going to the
largest dismantling countries. Information about dismantling in the EU or in
the OECD (with the exception of Turkey) is pretty limited.

On the basis of this two set of data, it
was possible to make detailed estimations in particular about the volume of
ships and the price paid by the major dismantling counries in 2009. For some
ships, there was no information about the LDT and/or the price in the
information published by Cotzias. Estimations were therefore made by DG
Environment.

In order to estimate the missing LDT[110], a ratio between the GT and
LDT was calculated for each type of the ships dismantled in 2009. These ratios
are presented in the table below. The LDT of each of these ships was then
estimated by dividing their GT by the relevant ratio.

Table 3: ratio GT/LDT per type
of ships dismantled in 2009.

Type of ships || Average GT/LDT || Number of ships on which the calculation was made

Bulkers || 2,562925079 || 182

Containers || 2,21126458 || 159

Gas Carriers || 1,934994284 || 19

General Cargo || 1,967171755 || 143

Navy Ships || 2,563676705 || 3

Offshore || 2,962036788 || 4

Other Tankers || 1,713076923 || 1

Passenger Ships (cruise ships,ferries) || 1,225658922 || 4

Ro-Ro Ships || 3,204804212 || 76

Specialised Cargo Ships || 1,597326529 || 26

Tankers (oil,chemical) || 2,672323709 || 96

Average for all ships || 2,389772035 || 713

In order to estimate the missing prices[111], the LDT (provided by Cotzias
or calculated as explained before) was multiplied by the average price per LDT
paid in each dismantling country in 2009. In the cases where the dismantling
country was not known or in the cases where there was no average price, a
conservative approach was taken and the estimate from COWI for ships dismantled
in the EU was used (81,6 euros/LDT) was used.

Metholodogy for determining future
dismantling projections:

An important input for the impact
assessment is the expected future dismantling volumes and countries of EU
flagged ships. Due to the fluctuations in the ship dismantling activities and
in the world fleet, it is difficult to project dismantled volumes.

Dismantling volumes of EU flagged ships

The decision to dismantle a ship depends
heavily on current market conditions, in particular, on the freight market. As
freight rates fluctuate heavily so do the dismantling volumes. In 2005-2007
when freight rates where high almost no dismantling took place. Since 2008,
with the low freight rates, dismantling volumes are rising. However, conditions
can change quickly and therefore the projected yearly dismantling volumes
should be interpreted with care.

The dismantling volumes are calculated and
presented in Light Displacement Tons (LDT). The volumes are historical volumes
up till year 2009 and projection from hereon until 2030.

The projections of future dismantling
volumes have been made based on a simple assessment of the age profile of the fleet[112] and the lifetime expectancy[113]. The projections have been
made following this procedure:

(1)
The age profile of the existing fleet for
each vessel type is estimated.

(4)
A decommissioning frequency function,
which shows the share of vessels scrapped at a certain age, has been estimated.
A decommissioning frequency function from the COWI/DHI (2007)31
study has been used. The frequency function was established based on historical
scrapings of all ship types.

(5)
The conditional decommissioning frequency
function has been estimated on the basis of the decommissioning
frequency function. The conditional decommissioning function expresses the
probability that a vessel is scrapped in the following year conditional on
being in operation at the beginning of the year.

(6)
Combining the estimated age profile and the
conditional decommissioning frequency function for vessel, estimates of the
future dismantling volumes are obtained.

(7)
By adding the dismantling volumes for all type,
the aggregate estimates of future volumes of dismantling are reached.

It should be noted that by applying the
approach described above of estimating the future decommissioning volumes by
year (e.g. when ships are scrapped), the projections will only reflect the
overall trend in volumes. Moreover, the projections will not reflect e.g. the
true ups and downs of the dismantling market business cycle that comes from
fluctuating freight rates and future political initiatives. However, using the
estimated age profile and the fitted conditional decommissioning frequency
function to estimate the future decommissioning volumes the trend in the medium
and long term will is reflected.

The Table 21 in the Annex VIII shows the
projected future volumes of dismantling of vessels not covered by the Hong Kong
Convention by year of scrap in terms of number of ships and total volume in GT
as the total of all ship types.

Dismantling countries of EU flagged ships

The longer historical trend for the last 30
years period within recycling location are seen for the last 30 years trends
(1978 - 2009) in the Figure 3 in the Annex VII. Ship dismantling in South Asia
started in 1912 in India, in 1947 in Pakistan and in 1960 in Bangladesh. But
these South-East Asian countries together with China only took over around the
mid 1980's and have since completely dominated the recycling business. This
pattern within dismantling locations is anticipated maintained for the
projections of the impact assessment.

For the dismantling projections, the
dismantling locations are grouped according to the dismantling methods applied
and geography like shown in the Table 1. The dismantling percentages are
calculated from the dismantling data for 2009 for the world fleet received from
IHS Fairplay by summing up the percentages for the individual countries.

Metholodogy for assessing the impacts of the
different options:

General methodology:

An approach based on the dismantling method
was used in order to make projections about the potential impacts and the different
compliance level for dismantling facilities. The active dismantling countries are
generally be characterised by the recycling method applied, as defined in the
Table below for the four overall recycling methods: beaching, landing, afloat
and docking.

Table 4: Recycling methods
applied in present recycling countries

Recycling method || Recycling countries

Docking || Few places in Europe

Afloat || China, Europe and US

Landing || Turkey

Beaching || South-east Asia: Bangladesh, India and Pakistan

Each of the four different dismantling
methods is associated with a certain Health, Safety and Environment  (HSE)
quality level, which is used as basis for assessing the HSE impacts of the different
policy scenarios. The quality levels of the present beaching facilities are
below the proposed Convention standards, whereas the three other methods in
general characterise three different compliant levels.

The three-levelled compliance system, as
proposed in the 2008 EMSA study[114], forms input to
the generation of data for the impact assessment where no historical statistics
exist. This three-levelled system operates with three quality levels A, AA and
AAA where an A level indicates implementation of IMO minimum levels – in the
adopted Convention text and guidelines this includes beaching – and two more
compliant levels: the top level (AAA) is indicative of the full standard with
double containment in dry dock facilities and the medium level (AA) comprising
the existing pier and slipway breaking such as carried out in Europe and in
China, and represent the ultimate (innovative) upgrading possibility for
beaching and landing facilities.

The environmental, health and safety impacts
of the different EU policy scenarios are estimated by means of a base data set
for HSE performance for the different dismantling methods and locations which
can be found in the Worksheet entitled "Baseline Case HSE + Costs" of
the Excel-sheet model[115].

As explained before, these impacts are
estimated per volume of ship recycled. The percentages of protected workers
(including child wokers) has been estimated per dismantling location and method
as show in the table below:

Labour || Unit || AAA EU || AA EU || AA China etc. || A Turkey || A Upgraded India || Substandard India || A Upgraded Pakistan and Bangladesh || Substandard Bangladesh, Pakistan

Workers needed per 100.000 LDT || Nb || 73 || 73 || 138 || 138 || 455 || 455 || 455 || 455

of which protected workers || % || 100 || 100 || 100 || 100 || 100 || 100 || 100 || 50

not protected workers || % || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 50

children || % || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 17

The number of accidents (both fatal and non
fatal) for adult and children workers has been estimated per man-years involved
in the recycling of ships as shown in the table below.

Accident || Unit || AAA EU || AA EU || AA China etc. || A Turkey || A Upgraded India || Substandard India || A Upgraded Pakistan and Bangladesh || Substandard Bangladesh, Pakistan

Adults life || Nb of persons/100000 man-years || 13 || 13 || 26 || 39 || 39 || 39 || 39 || 112,88

Adults - non-fatal accidents || Nb of persons/100000 man-years || 6000 || 6000 || 12000 || 18000 || 18000 || 18000 || 18000 || 31450

Children - life || Nb of persons || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 23,12

Children - non-fatal accidents || Nb of persons || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 5347

Finally, the economic impacts of accidents
have been estimated based on the average duration of an accident and the cost
of a worker per day as show below:

Economic impacts || Accident/ million LDT || Days/accident || Costs (€)/day || Costs (€)/million LDT

EU facilities || || || ||

AAA || 43,8 || 21,9 || 154,3 || 148 242

AA || 43,8 || 21,9 || 154,3 || 148 242

A || || || ||

Substandard facilities not meeting Convention's criteria || || || ||

Non EU OECD facilities || || || ||

AAA || || || ||

AA || 165,6 || 21,9 || 13,3 || 48 270

A || 248,4 || 21,9 || 13,3 || 72 405

Substandard facilities not meeting Convention's criteria || || || ||

Other facilities || || || ||

AAA || || || ||

AA || 165,6 || 21,9 || 7,5 || 27 298

Upgraded India || 819,0 || 21,9 || 6,9 || 124 228

Upgraded Pakistan + Bangladesh || 819,0 || 21,9 || 2,5 || 44 557

Substandard India || 819,0 || 21,9 || 6,9 || 124 228

Substandard Pakistan + Bangladesh || 1674,2 || 21,9 || 2,5 || 91 087

|| || || ||

Environmental impacts:

The amounts of hazardous and non
hazardous waste generated from recycling of EU-ships up to 2030 are
calculated by multiplying the predicted recycling amounts (LDT) within the
different countries with the base data set on different material amounts per
LDT within ships. The calculations are done by use of the Excel-sheet model
where can also be seen the detailed results of the analyses.

The base data set on materials within ships
are presented in the Worksheet entitled "Baseline Case HSE + Costs".
The base data set are split between merchant and navy vessels.

The base data set for merchant vessels are
primarily based on data from the 1999 Norwegian study[116] supplemented with on oily
sludge provided by the DIVEST project in Turkey. Data for navy vessels are
based on data from Clemenceau[117]
supplemented with the merchant vessel data for copper, non-ferrous and heavy
metals, TBT and ODS.

The phasing out of asbestos, PCB, TBT and
ozone depleting substances have been taken into account in the projections of
the generation of hazardous waste.

The proportion of each of the hazardous
waste treated in an environmentally sound manner for the facilities located in
the different dismantling countries are provided for in the Worksheet entitled
"Baseline Case HSE + Costs".

Detailed information about the waste
management practices in the dismantling countries and their compliance with EU
waste management requirements and with the obligation of the Hong Kong
Convention can be found on pages 47 to 61 of the COWI study for DG Environment12
as well as on pages 31 to 33 of the World Bank study30.

Social impacts

In the study commissioned by the Commission
to support this Impact Assessment12, it was noted that it is very
difficult to obtain quantitative information on the health and safety
performance, i.e. the number of fatal and non-fatal accidents, at the different
recycling facilities. For almost all recycling facilities and nations, these
data are neither collected by national authorities nor publicly available.

Even when data is available a comparison
between the different sources having reported some data on the number of
accidents, fatal and non-fatal has been made. It helped in highlight an additional
problem linked with the different practices applied in for classifying an
incident as an accident in Europe and in Asia.

As highlighted in table
3-9 of this study the calculated accident rates for India are lower than the
once for Turkey, which are again lower than the rates for EU. This is opposite
to what is expected based on reports on the general safety culture and
recycling practises on the different recycling locations. This trend obviously
illustrates a mismatch, which is most likely related to different definitions
and classifications of non-fatal accidents between the recycling sites where
more also smaller accidents and incidents are registered in EU than in India.
This will lead to an underestimation of the total accidents in India

In order to not underestimate the number of
injuries and deaths associated with ship dismantling and in view of the quality
of the available quantifiable data and the general information on the health
and safety status and performance of the different ship recycling locations, the
approach retained for the impact assessment was to apply the theoretical health
and safety benchmarks as described in a study commissioned by EMSA114.

This benchmark is based on EU accident
statistics from the most dangerous occupations (agriculture and construction)
and an assumption that the combination of geography and recycling method
results in that accident rates increase from EU facilities to afloat facilities
in China and again to Turkeys landing facilities and finally to beaching facilities
in South-East Asia. For the impact assessment, it has thus been assumed that
the Indian facilities at present have a better health and safety performance
than the facilities in Bangladesh and Pakistan.

Using the mostly theoretically based
accident data are of course associated with a considerable uncertainty in terms
of actual numbers, but is however expected acceptable for comparison of the
relative differences between the scenarios.

The ratios used are indicated in the
Worksheet "Accidents" of the Excel model (http://ec.europa.eu/environment/waste/ships/pdf/Appendix\_A.xls
).

The following information are calculated
for each scenario: the workload required in the EU and outside the EU, the
number of protected and unprotected workers, the number of children workers. In
terms of accidents, the number of fatal and non non-fatal accidents are
provided both for adult and for children workers.

Economic impacts

The assessment of the economic impacts been
carried out by estimating the extra cost and benefit related to the change in
the different scenarios as a result of implementation of the Hong Kong
Convention. The timeframe for the analysis is 2000 to 2030.

The analysis focuses mostly on the cost and
benefits directly related to Europe. However some benefits are also included
even if they do not have direct impact on Europe, e.g. CO2-emissions in Asia.

Costs are expressed as the cost in the year
presented by applying a discount rate of 4% p.a.

The calculation is based on calculated unit
costs, e.g. per ship, per death, per unit saved CO2 etc. Details on the unit
costs are described in pages 64 to 69 of the study supporting the Impact
Assessment12.

The main costs identified and
included in the economic analyses are the following costs for ships in operation:

(1)
Establishing Inventory of Hazardous Materials
(IHM)

(2)
Issuing and checking of certificates based on
the IHM

(3)
Port state control of certificates for ships
calling EU ports

(4)
Flag-state control for EU Member State flags

(5)
Checking of IHM certificates for ships calling
European ports.

Costs for preparing ships for recycling:

(6)
Update of the IHM's

(7)
Issuing and checking of the Ready to recycle
certificates

(8)
Issuing and checking of ship recycling plans
from EU recycling facilities

(9)
Costs (loss of net revenue) for selling a ship
for recycling at a facility with a certain minimum HSE standard.

Costs for EU recycling facilities:

(10)
Preparation and issuing of ship recycling
facility management plan and emergency preparedness and response plans for EU
ship recycling facilities

(11)
Authorisation of EU ship recycling facilities

(12)
Issuing and checking of Statement of completion.

The benefits identified are the following:

(1)
Reduced emissions of CO2

(2)
Fewer accidents[118] at the ship recycling
facilities

(3)
Fewer death[119]
directly related to work activities at recycling facilities

7.1.1.1.  Distribution
of cost and benefits

The analyses undertaken in the study
supporting the Impact Assessment12 include estimation of the
distribution of the costs between the ships owners and the public
administration. More specifically, the following elements are provided: the
cost revenue for EU shipowners when selling their ships, the administrative
burden for shipowners and for the Member States, the benefits resulting from
limited number of accidents and deaths.

The costs for the ships owners are linked
with the administrative burden induced by the requirements of the hong Kong
Convention. In order to avoid double-counting, the additional direct costs for
the recycling facilities have not been included in the analysis. The cost
effect for the recycling facilities is indeed captured by the lower price paid
for the ships when being dismantled at a facility that fulfils the higher
requirements.

The administrative costs are borne by the
public authorities and consist of the costs of administrating, validating and
checking of inventories and certificates.

The external costs and benefits can, for
example, be in the form of environmental improvements or less use of child
labour. These costs and benefits will not be valued (monetised) in this study.
If one were to undertake a valuation of the environmental impacts, this would
call for a mapping off the affected areas and the related changes that would
occur as a result of the dismantling process.

Annex VI: Flags .

Every ship has to be register under a
certain flag. The flag state, as defined by the United Nations Convention on
the Law of the Sea (UNCLOS), has overall responsibility for the implementation
and enforcement of international maritime regulations for all ships granted the
right to fly its flag. Changing flag allows the shipowners to change the legal
regime for the ship.

The challenge that represent the
possibility to change flag for the effectiveness of any legislation at
national, European and International level covering the dismantling of ships
was mentioned by the large majority of the stakeholders (shipowners, Member
States, environmental NGOs...).

It was therefore carefully assessed in the
study undertaken on behalf the Commission to support this impact assessment12.
The impact on the flag state regime is especially important when evaluating a
regional regulatory approach, e.g. a different regime at EU and international
level, which could lead to a reflagging of ships, whereby ships would simply
change their flag and exploit the available legal loopholes outside EU for
instance. It is equally relevant to address the reflagging issue in which case
ratification and transposition of the Hong Kong Convention by EU Member States
is likely to take place at different pace. EU flagged ships could have an
incentive to change flag to another EU Member State not (yet) Party to the
Convention or to non EU flag states.

The current state of play in terms of
reflagging.

Table 5: Comparison between the
percentages of ships EU owned an EU flagged in the active fleet and at the time
of dismantling (in 2009).

Percentage (in GT) || of EU owned ships || of EU flagged ships || EU owned – EU flagged

In the active fleet || 37 || 16,7[120] || 20,3

At the time of dismantling in 2008 || 33,1 || 15,1 || 18

At the time of dismantling in 2009 || 32,6120 || 8,0120 || 24,6

As shown in the table below, the part of
ships flying an EU flag was slightly lower at the time of dismantling than in
the active fleet in 2008 but significantly lower in 2009.

|| Volume (GT) || Number of ships

At the time of dismantling || 2008 || 2009 || evolution 2009/2008 || 2008 || 2009 || evolution 2009/2008

EU owned || 2 718 956 || 7 834 033 || 288% || 139 || 349 || 251%

EU flagged || 1 269 298 || 1 965 361 || 155% || 70 || 197 || 281%

Total volume || 8 242 348 || 24 015 087 || 291% || 549 || 1 299 || 237%

Looking at the number of ships going for
dismantling, the evolution of EU-flagged ships is similar to the evolution of
EU-owned ships and of the entirety of the fleet going for dismantling. Looking
at the volumes sent for dismantling, it is however clear that the volume of EU
flagged ships going for dismantling has increased but largelly less than the
volume of EU-owned ships or of the global volume of ships worlwide.

Drivers behind the change of flag.

The first factor is that changing of flag is
a natural part of a ship's life.

When a ship is sold to foreign owner it is often
associated with a change of flag. The difference between the part of the active
fleet and the part of the fleet at the time of dismantling which is EU-owned is
of 4,2 %.

Moreover the option chosen by the shipowner
to sell its ships also has an impact on the flag at the time of dismantling. Ships are indeed committed on one of the two terms –
"delivered" or "as is"[121].

On a delivery basis, a owner typically
sails a vessel to the port at which it has been organised to be dismantled
within and the ship is anchored. Once the vessel changes hands from the owner
at the recycling yard, it must be deregistered, as is the case with any change
in vessel ownership.

Short-term registration, on the other hand,
most commonly comes into play when ships are sold on an "as is"
basis. In this case, cash buyer, acting as a middle man between owners and
dismantlers takes ownership of vessels at common pick up points such as
Fujairah and Singapore. They are then required to deflag the ship for one last
voyage to the major dismantling nations121.

St Kitts-Nevis, Kiribati, Mongolia and
Tuvalu are ones of the handfuls of states that offer single-voyage registration
to owners. Some of these flags had been identified by some environmental NGOs
in their response to the public consultation. While St Kitts-Nevis, one of the
signatories of the Hong Kong Convention, openly advertises short-term
registration ranging from one to three months, Mongolia, Kiribati and Tuvalu
are less open about their offers. The pricing structure of these flags is not
openly available121 but, according to experts, the cost for a ship to change flag is estimated at about $ 10 000 (7190
€) or less, which represents a negligible cost for many shipowners[122].

A study 12 comparing the 25 major flag states in the global fleet and the 25
major flag states at the time of dismantling in 200812 and 2009[123], has showed an
overrepresentation of flags such as Tuvalu, St.
Kitts-Nevis St. Vincent & Grenadines, Mongolia, Comoros or Cambodia. An
updated comparison is available in Table 13.

The flag is also linked with the age of the
ship. Certain shipowners choose to change the flag of their when they reach a
certain age for economic reasons (maintenance cost, surveys and other). As
shown in Figure 6 in Annex VIII, EU flagged ships are usually younger than the
global fleet.

The second main reason to change flag is to
evade certain legal obligations that certain flag States may fall under. In the
case of the Waste Shipment Regulation, two main reasons can be identified as
explained before: the lack of dismantling capacity in the OECD and the loss in
net revenue depending on the dismantling practices and locations.

Table 6: Calculated reflagging
in 2009 depending on the main dismantling locations.

Dismantling country || EU owned || EU flagged || Reflagging[124]

China || 22,0% || 5,8% || 4,2%

India || 32,6% || 12,1% || -0,2%

Bangladesh || 40,2% || 4,1% || -15,7%

Pakistan || 46,2% || 11,0% || -14,8%

Turkey || 52,3% || 23,6% || -8,3%

Average for all dismantling locations || 32,6% || 8,0% || -4,2%

This table shows that there are no real
reflagging in China and India while Bangladesh and Pakistan are characterized
by a large reflagging.

As a conclusion, reflagging before
dismantling is already a reality. It differs depending on the year considered
and is driven by several factors notably the lack of sufficient dismantling
capacity as well as by the difference of costs between substandard and
acceptable dismantling facilities. The reflagging rates are different depending
on the dismantling countries.

The expected evolution of reflagging.

The extent of reflagging of ships to evade
a future EU legal dismantling regime, or that of individual Member States
having transposed the Hong Kong Convention, will depend on the availability of
sufficient safe and sound dismantling capacity as well as on the eventual loss
in net revenue from dismantling the ships in environmentally sound dismantling
facilities in accordance with the Convention requirements compared to
traditional substandard facilities.

Faced with more stringent legislation,
shipowners would have three main possibilities:

·
Sell their ships to non-EU owners including to
cash buyers is legal but relatively costly,

·
Continue to hide their intention to send the
ship for dismantling when leaving EU ports. This option is illegal and would be
more risky in the future than it is today since the Hong Kong Convention
explicitly oblige shipowners to inform their flag state of their intention to dismantle
their ships in advance and in writing.

·
Change flag to a flag which is not a Party to
the Hong Kong Convention and in particular to flags allowing single-voyage registration. This option would be legal and
relatively inexpensive as explained before as long as the ship is not going to
call anymore at European Ports. However, the flags which are overrepresented at
the time of dismantling are all targeted by Port State Controls125.
Changing a flag "prematurely" before going for dismantling, could
lead to additional operational costs for the shipowners as their ships would be
blocked more frequently in port for port state control.

Even after the entry into force of the Hong
Kong Convention, it likely that some reflagging will take place as long as some
dismantling countries are not Party to the Convention and therefore as long as
two markets, one compliant with the Convention and one non compliant, are
competing with each other. The co-existence of these markets is likely to
happen if the countries practicing substandard dismantling do not make the
necessary investments to be compliant with the Hong Kong Convention (Bangladesh30),
if they can not remain competitive after making these investments (Pakistan30)
or if the industry relocates in others countries.

The possibility of relocation from the ship
dismantling industry from Pakistan and Bangladesh has been assessed in the
study from the World Bank30. Three options have been studied: the
relocation to another "pollution haven", the relocation back to
Europe or an industrialized country and the pre-cleaning in country of ownership.
The two latest options were considered as highly unlikely for economic reasons
(the lower revenue
and higher costs associated with dismantling in
European and industrialised countries and the importance of the additional cost
induced by pre-cleaning).

The first option was studied in more
details and is also considered as unlikely although it cannot be ruled out. The
necessary characteristics of a potential candidate country are the following:

·
Strong domestic demand for steel plate and
re-bars not readily available from other sources,

·
A market for equipment and consumables,

·
Few, if any, enforced regulations on workers’
health and safety and environmental pollution,

·
Wages as low as in Bangladesh or lower,

·
Natural hydrographical conditions to allow beaching
(or similar capital-extensive methodology).Few states meet these requirements,
and the need for a considerable tidal gauge itself is an obstacle for most of
Africa or other candidate countries in the Bay of Bengal or the South China Sea
(such as Myanmar or Cambodia).

Regarding the wages, the information
indicates that Cambodia, for instance, and especially Myanmar both have lower
wage rates than in Pakistan, whereas Bangladesh might still be able to compete
on wages. Hence, the risk of relocation from a wage point of view seems more
threatening for Pakistan.

Annex VII: Detailed information about ship dismantling

Evolution of the average age of dismantling
from 1998 to 2009.

Ships have a normal life span of about 30
to 40 years after which they are send for dismantling. The average dismantling
age varies over time (it increased slowly from 2000 to 2008 and decreased since
then as show in Figure 2 below) and depending on the type of ships and on their
size[125].

Figure 2: Average age of dismantling
per type of ship 1998 - 2009 [126]

On the basis of data on the vessels
dismantled during 2008-2009, the average lifetime for all ship types have been
calculated and are presented in the table below.

Table 7: Dismantling volumes in
2008 and 2009 by size - number of ships and total volume in GT

Ship type || Average lifetime (years)

Bulkers || 31,1

Containers || 27,3

Gas Carriers || 30,4

General Cargo || 33,9

Navy Ships || 48,2

Offshore || 35,4

Other Tankers || 35,0

Passenger Ships (cruise ships,ferries) || 37,9

Ro-Ro Ships || 32,3

Service Ships || 34,3

Specialised Cargo Ships || 31,4

Tankers (oil,chemical) || 28,8

Tugs || 44,5

(blank) 31,7

Grand total || 31,7

The table shows that the calculated average
lifetime for vessels scrapped in 2008 and 2009 varies between 27 and 47 years
dependiong on the type of ship. These lifetimes are high compared to the historical
lifetimes estimated in previous studies[127]
undertaken for the Commission. This is partly due to the fact that the high
freight rates encountered  in 2007 and 2008 make it attractive for shipowner to
keep as many ships as possible in operation including the oldest ones.

In 2009, the average dismantling age of EU
flagged ships (30,0 years) was slightly lower than the dismantling age of
non-EU flagged ships (30,6 years)[128].
In 2010, the average age of dismantling was 31 years[129].

Dismantling in 2008 and 2009:

Table 8 : Dismantling volumes
in 2008 and 2009 by size - number of ships and total volume in GT

Note: Large ships are ships of 500 GT and above. Small ships are ships
of 500 GT and below (ships down to 100 GT).

|| Total number of ships || Gross Tonnage

Dismantling year || Large || Small || Total || Large || Small || Total

2008 || 549 || 195 || 744 || 8 191 256 || 51 092 || 8 242 348

2009 || 1 155 || 144 || 1 299 || 23 977 722 || 37 365 || 24 015 087

Grand total || 1 704 || 339 || 2 043 || 32 168 978 || 88 457 || 32 257 435

The Table 8 shows that only few large
vessels were scrapped in 2008. This should be seen in the light of high freight
rates in 2007 and most of 2008. The dismantling volume almost increased by 200%
in 2009 reflecting the dramatic drop in freight rates following the world wide
financial crises that began in the end of 2008.

Table 9: Dismantling volumes in
2008 and 2009 by vessel type - number of ships and total volume in GT (for all
ships)

|| Total number of ships || Gross Tonnage

Ship type || Large || Small || Total || Large || Small || Total

Bulkers || 312 || 1 || 313 || 8 179 359 || 169 || 8 179 528

Containers || 252 || 0 || 252 || 6 669 265 || 0 || 6 669 265

Gas Carriers || 54 || 0 || 54 || 1 142 758 || 0 || 1 142 758

General Cargo || 390 || 41 || 431 || 3 125 288 || 14 908 || 3 140 196

Navy Ships || 13 || 0 || 13 || 160 327 || || 160 327

Offshore || 17 || 7 || 24 || 1 060 180 || 2 760 || 1 062 940

Other Tankers || 11 || 2 || 13 || 59 483 || 571 || 60 054

Passenger Ships (cruise ships,ferries) || 15 || 21 || 36 || 177 459 || 4 322 || 181 781

Ro-Ro Ships || 177 || 7 || 184 || 3 987 886 || 1 877 || 3 989 763

Service Ships || 6 || 10 || 16 || 7 743 || 2 805 || 10 548

Specialised Cargo Ships || 75 || 5 || 80 || 614 882 || 1 766 || 616 648

Tankers (oil,chemical) || 251 || 3 || 254 || 6 700 168 || 851 || 6 701 019

Tugs || 2 || 38 || 40 || 3 284 || 7 823 || 11 107

(blank) 129 || 204 || 333 || 280 896 || 50 605 || 331 501

Grand total || 1 704 || 339 || 2 043 || 32 168 978 || 88 457 || 32 257 435

The table shows that Bulkers, Tankers and
Containers account for largest share of the dismantling volumes of large ships.
For small ships the largest share are for General Cargo ships and Tugs.

Table 10: Dismantling volumes in
2009 by dismantling location - number of ships and total volume in GT(for all
ships)

|| Total number of ships || Gross Tonnage

Dismantling location || Large || Small || Total || Large || Small || Total

Bangladesh || 184 || 0 || 184 || 6 471 508 || 0 || 6 471 508

India || 375 || 1 || 376 || 6 922 965 || 468 || 6 923 433

China || 284 || 0 || 284 || 7 474 511 || 0 || 7 474 511

Pakistan || 96 || 1 || 97 || 2 155 345 || 398 || 2 155 743

Turkey || 108 || 4 || 112 || 515 509 || 1 506 || 517 015

Other OECD || 13 || 9 || 22 || 69 813 || 2 480 || 72 293

Unknown || 35 || 58 || 93 || 188 755 || 14 847 || 203 602

EU || 35 || 61 || 96 || 121 848 || 15 146 || 136 994

Other || 25 || 10 || 35 || 57 468 || 2 520 || 59 988

Grand total || 1 155 || 144 || 1 299 || 23 977 722 || 37 365 || 24 015 087

Bangladesh, India, China and Pakistan
accounted for more than 95% of the total volume of large ships scrapped (GT) in
2009. However, the same countries only accounted of less than 3 of the total
volume of small ships scrapped (GT). EU countries accounted for approximately
41 of the dismantling of small vessels in 2009. This share is significantly
higher than the share of EU flagged small vessels (12%). Spain, and Belgium is
by far the three largest countries of dismantling of small ship in EU and in
the world as a whole.

Evolution of the dismantling locations from
1978 to 2009

Figure 3: World disposal by
dismantling country 1978-2009 [130]

Dismantling countries in 2009 depending
for EU flagged and non-EU flagged ships:

Figure 4: Dismantling
countries in 2009 depending on the flag (in Gross Tonnage) 23.

The proportion of EU-flagged ships
dismantled in India, Pakistan and Turkey is higher than the proportion of
non-EU flagged ships.

Figure 5: Dismantling countries
in 2009 depending on the ownership (in Gross Tonnage) 23.

The proportion of EU-owned ships dismantled
in Bangladesh, Pakistan and Turkey is higher than the proportion of non-EU
owned ships.

Table 11:Dismantling locations
of large EU flagged and EU owned commercial ships in terms of percentage of
total recycling (GT[131] based) in
2009 23.

Dismantling location for EU flagged or EU controlled ships || Main dismantling method || Dismantling fraction of total

India, Pakistan, Bangladesh || Beaching || 73,91%

China || Afloat || 21,89%

OECD non EU || Landing, afloat || 3,44%

EU || slipway, docking || 0,71%

Other || 0,05%

Total || 100,00%

Table 12: Total volume (GT131
based) of ships dismantled in non-OECD countries per Member State in 2009 23.

Member State || China || India || Pakistan || Bangladesh || Others

Malta || 140 729 || 366 360 || 167 736 || 171 617 || 0

Cyprus || 86 316 || 238 518 || 52 140 || 47 292 || 677

Greeece || 43 595 || 170 748 || || || 0

United Kingdom || 108 629 || || || 45 256 || 0

Bulgaria || 23 363 || 23 363 || 16 166 || || 0

Spain || || 37 049 || || || 1 309

Italy || 32 861 || || || || 1 022

Estonia || || || || || 1 305

Table 13: Comparison of top 25
flag states by dismantling and operation in 2009.

Country Flag || Gross Tonnage (GT) || Number of ships || Percentage of world total (GT) 23 || Cumulative percentage (GT) || Top flag states by tonnage[132] || Number of ships132 || Percentage of world total (DWT) 132 || Cumulative percentage (DWT) 132

Panama || 8 452 753 || 364 || 35,2% || 35,2% || Panama || 8 065 || 23,0% || 23,0%

Liberia || 2 826 278 || 94 || 11,8% || 47,0% || Liberia || 2 306 || 10,6% || 33,5%

Bahamas || 1 084 148 || 36 || 4,5% || 51,5% || Marshall Islands || 1 265 || 5,7% || 39,3%

Singapore || 1 020 227 || 21 || 4,2% || 55,7% || Hong Kong, China || 1 371 || 5,4% || 44,7%

Marshall Islands || 995 886 || 30 || 4,1% || 59,9% || Greece || 1 498 || 5,3% || 50,0%

Malta || 849 681 || 38 || 3,5% || 63,4% || Bahamas || 1 446 || 5,2% || 55,2%

Tuvalu || 725 200 || 18 || 3,0% || 66,4% || Singapore || 2 451 || 5,1% || 60,3%

St Kitts & Nevis || 700 157 || 39 || 2,9% || 69,3% || Malta || 1 532 || 4,2% || 64,5%

Norway || 677 745 || 24 || 2,8% || 72,2% || China || 3 916 || 3,4% || 67,9%

Hong Kong, China || 582 472 || 22 || 2,4% || 74,6% || Cyprus || 1 016 || 2,6% || 70,5%

St Vincent & The Grenadines || 521 503 || 39 || 2,2% || 76,8% || Republic of Korea || 3 001 || 1,9% || 72,4%

Cyprus || 432 761 || 23 || 1,8% || 78,6% || Norway (NIS) || 601 || 1,7% || 74,1%

India || 321 412 || 13 || 1,3% || 79,9% || Germany || 961 || 1,5% || 75,6%

Sierra Leone || 317 693 || 14 || 1,3% || 81,2% || United Kingdom || 1 676 || 1,3% || 76,9%

Korea, South || 265 978 || 15 || 1,1% || 82,3% || Japan || 6 316 || 1,3% || 78,2%

United States Of America || 261 135 || 20 || 1,1% || 83,4% || India || 1 460 || 1,3% || 79,5%

China, People's Republic Of || 237 600 || 16 || 1,0% || 84,4% || Isle of Man || 345 || 1,2% || 80,7%

Greece || 230 468 || 17 || 1,0% || 85,4% || Italy || 1 588 || 1,2% || 81,9%

Unknown || 216 820 || 20 || 0,9% || 86,3% || Denmark (DIS) || 470 || 1,0% || 83,0%

Mongolia || 216 246 || 12 || 0,9% || 87,2% || Antigua and Barbuda || 1 195 || 1,0% || 84,0%

Cambodia || 196 710 || 43 || 0,8% || 88,0% || United States || 6 435 || 1,0% || 85,0%

United Kingdom || 191 116 || 13 || 0,8% || 88,8% || Bermuda || 153 || 0,9% || 85,9%

Vanuatu || 189 223 || 5 || 0,8% || 89,6% || Malaysia || 1 238 || 0,8% || 86,7%

Philippines || 179 638 || 7 || 0,7% || 90,3% || Turkey || 1 301 || 0,6% || 87,3%

Chinese Taipei || 163 662 || 5 || 0,7% || 91,0% || Saint Vincent & the Grenadines || 1 009 || 0,6% || 87,9%

The states identified in italics in the Table 13 are states which offer single-voyage registration
to owners.

Country || Sector /comments || Monthly wage || Yearly wage

Europe[133] || Average labour cost || 3.704 euro || 44.449 euro

Turkey133 || Minimum wage || 319 euro || 3.828 euro

India[134] || Basic metal, wage || 113 euro || 1.357 euro

Bangladesh[135] || Ship dismantling || 54 euro || 648 euro

Pakistan135 || Ship dismantling || 66 euro || 792 euro

China133 || Construction, wage || 180 euro || 2.160 euro

Table 14: Labour costs in
dismantling countries in 2009[136]

Impacts of the dismantling of EU flagged
ships in 2009.

In 2009, almost 200 EU flagged ships have
been sent for dismantling representing 8,2% of the total volume of ships sent
for dismantling. Detailled information about the volume and number of ships
dismantled by individual Member States are provided for in Table 15.

Table 15: Proportion of EU
flagged ships for ships dismantled in 200923.

EU flag || Gross Tonnage || Number of ships || Percentage of the world volume (Gross Tonnage)

Malta || 849 681 || 38 || 3,5%

Cyprus || 432 761 || 23 || 1,8%

Greece || 230 468 || 17 || 1,0%

United Kingdom || 191 116 || 13 || 0,8%

Bulgaria || 88 968 || 6 || 0,4%

Spain || 78 525 || 36 || 0,3%

Italy || 43 093 || 6 || 0,2%

Portugal || 17 873 || 5 || 0,1%

Latvia || 13 730 || 1 || 0,1%

Slovakia || 4 043 || 1 || 0,0%

France || 3 958 || 21 || 0,0%

Belgium || 2 972 || 10 || 0,0%

Denmark || 2 802 || 8 || 0,0%

Netherlands || 2 495 || 3 || 0,0%

Estonia || 1 544 || 3 || 0,0%

Sweden || 650 || 3 || 0,0%

Ireland || 301 || 1 || 0,0%

Germany || 238 || 1 || 0,0%

Poland || 143 || 1 || 0,0%

Total || 1 965 361 || 197 || 8,2%

In 2009, EU owned ships represented 32,6 %
of the volume of ships (expressed in Gross Tonnage) dismantled worldwide as
shown in Table 16.

Table 16: Ownership and flag
states of ships dismantled in 200923for all ships).

Ownership || Flag || Gross Tonnage || Number of ships

Non EU owned || Non EU flagged || 15 672 352 || 850

EU flagged || 508 702 || 100

Total || 16 181 054 || 950

EU owned || Non EU flagged || 6 377 374 || 252

EU flagged || 1 456 659 || 97

Total || 7 834 033 || 349

Grand Total || 24 015 087 || 1 299

Environmental impacts

Generation of non-hazardous waste:

Non hazardous waste (t)

Steel || 602 672

Copper || 81

Non-ferrous metals || 65 154

Total || 667 907

Generation of hazardous waste and part
treated according in an environmentally sound manner (ESM):

Hazardous wastes || Not treated in ESM manner || Treated in ESM manner || Total

Asbestos (t) || 87,24 || 63,84 || 151,08

PCB (kg) || 0,21 || 0,09 || 0,30

Heavy metals (kg) || 0,97 || 4,65 || 5,62

Oil (t) || 0,00 || 6 806,11 || 6 806,11

Oil sludges (t) || 11 504,44 || 21 884,04 || 33 388,48

Tri butyl tin (t) || 17,85 || 8,05 || 25,90

Mercury (kg) || 0,22 || 0,10 || 0,32

Ozone Depleting Substances (t) || 13,39 || 6,04 || 19,42

Total (t) || 11 624 || 28 772,73 || 40 396,61

Social impacts:

Employment:

Labour (Man years) || 2009

Workers load required || 2 867

Work load EU || 20

Work load outside EU || 2 846

of which protected workers || 1 598

of which not protected workers || 1 269

of which children || 431

Accidents:

Accidents || Non fatal || Fatal || Total

Adult || 615 || 2 || 617

Children || 48 || 1 || 49

Total || 663 || 3 || 666

Economic impacts:

The requirements of the Hong Kong
Convention (inventories, certifications...) are neither legally binding nor in
place. They do not bring any cost for shipowners and the administration. Table 17: Revenues generated by the selling of
ships for dismantling in 2009

Dismantling country || Average dismantling in 2009 (dollars per LDT) [137] || Total volume (LDT) || Volume of EU flagged ships (LDT)[138] || Volume of non-EU flagged ships (LDT)138 || Total shipowners' revenue (euros) || Shipowners' revenue for EU flagged ships (euros) || Shipowners' revenue for non-EU flagged ships (euros)

China || 251 || 2 831 564 || 170 101 || 2 661 463 || 511 009 561 || 30 608 264 || 480 311 636

India || 273 || 3 080 131 || 360 741 || 2 719 390 || 604 589 696 || 70 601 994 || 533 780 889

Bangladesh || 299 || 2 242 527 || 106 675 || 2 135 852 || 482 100 661 || 22 866 133 || 459 167 546

Turkey || 181 || 244 849 || 53 062 || 191 787 || 31 864 437 || 6 885 311 || 24 958 958

Pakistan || 271 || 858 659 || 89 032 || 769 627 || 167 308 843 || 17 297 143 || 149 961 032

Others || 82 || 202 462 || 29 741 || 172 721 || 11 936 742 || 1 748 330 || 10 183 290

Total || 255 || 9 460 192 || 809 352 || 8 650 840 || 1 734 478 933 || 147 957 269 || 1 586 088 256

The fatal and non fatal accidents
represented a social cost of 1 978 603 €.

Annex VIII: Detailed information about the fleet and its
evolution.

Table 18: The world fleet of
small vessels not covered by the Hong Kong Convention (500 GT and below) by
type - number of ships and total volume in GT

|| Total Number of Ships || Total Volume (GT)

|| All || EU flagged || All || EU flagged

Bulkers || 394 || 10 || 150 601 || 2 472

Containers || 17 || 0 || 6 531 || 0

Gas Carriers || 45 || 4 || 17 331 || 1 290

General Cargo || 4 739 || 198 || 1 586 783 || 56 867

Offshore || 1 205 || 99 || 379 429 || 26 750

Other Tankers || 145 || 23 || 41 492 || 6 611

Passenger Ships || 2 732 || 641 || 648 597 || 150 604

Recreational Boats || 1 123 || 441 || 323 406 || 111 741

Ro-Ro Ships || 1 458 || 191 || 447 623 || 60 255

Service Ships || 1 806 || 343 || 421 907 || 78 816

Specialised Cargo Ships || 1 091 || 39 || 291 966 || 7 660

Tankers (oil,chemical) || 2 465 || 145 || 799 385 || 47 397

Tugs || 12 856 || 1 672 || 3 018 250 || 422 204

Navy Ships || 68 || 39 || 16 103 || 8 627

Grand Total || 30 144 || 3 845 || 8 149 404 || 981 294

The Table 18
shows EU flagged ships account of approximately 13% of all small vessels not covered
by the Hong Kong Convention (measures by GT). The share varies with the ship
type. It is highest for Navy ships, Recreational Boats and Passenger Ships and
lowest for Containers, Bulkers and Specialised Cargo Ships and Tankers (oil,
chemical).

The table
below shows the world fleet of large vessels covered by the Hong Kong Convention
(500 GT and above) by type in terms of the number of ships and total volume in
gross tonnage.

Table 19: The world fleet of
large vessels covered by the Hong Kong Convention (500 GT and above) by type -
number of ships and total volume in GT

|| Total Number of Ships || Total Volume (GT)

|| All || EU flagged || All || EU flagged

Bulkers || 8 571 || 778 || 294 470 965 || 31 929 263

Containers || 4 882 || 954 || 158 589 939 || 39 732 381

Gas Carriers || 1 524 || 178 || 49 119 204 || 6 034 917

General Cargo || 12 172 || 1 245 || 56 592 532 || 5 913 765

Offshore || 4 575 || 511 || 34 637 567 || 2 299 465

Other Tankers || 248 || 30 || 791 068 || 79 449

Passenger Ships (cruise ships,ferries) || 959 || 178 || 17 326 379 || 3 481 945

Ro-Ro Ships || 3 890 || 93 || 59 706 547 || 95 008

Service Ships || 1 098 || 1 021 || 3 595 384 || 17 756 592

Specialised Cargo Ships || 2 285 || 228 || 14 858 202 || 674 967

Tankers (oil,chemical) || 12 742 || 120 || 298 188 122 || 991 710

Tugs || 766 || 1 651 || 766 137 || 55 962 046

Navy Ships || 160 || 107 || 4 133 251 || 141 469

Recreational Boats || 438 || 34 || 629 142 || 414 845

Grand Total || 54 310 || 7 128 || 993 404 439 || 165 507 822

The Table 19 shows EU flagged ships account
of approximately 17% of all large vessels covered by the Hong Kong Convention
(measures by GT). The highest is for Ro-Ro Ships, Containers and Passenger
Ships. The lowest share is for Offshore, Specialised Cargo Ships and Other
Tankers.

Table 20: Projected future
volumes of dismantling of vessels not covered by the Hong Kong Convention (500
GT and below) by flag state and year of scrap - number of ships and total
volume in GT

|| Total Number of Ships || Total Volume (GT)

Year || All || EU flagged || All || EU flagged

2011 || 2 011 || 307 || 514 857 || 69 906

2012 || 1 455 || 216 || 373 967 || 49 645

2013 || 1 104 || 158 || 285 719 || 36 891

2014 || 878 || 120 || 229 057 || 28 739

2015 || 720 || 94 || 189 562 || 23 036

2016 || 635 || 80 || 168 639 || 19 927

2017 || 598 || 73 || 159 937 || 18 403

2018 || 585 || 69 || 157 069 || 17 662

2019 || 588 || 67 || 158 539 || 17 377

2020 || 600 || 65 || 162 182 || 17 140

2021 || 620 || 64 || 168 274 || 16 912

2022 || 641 || 63 || 174 158 || 16 724

2023 || 653 || 62 || 177 682 || 16 603

2024 || 658 || 61 || 179 225 || 16 597

2025 || 653 || 61 || 177 931 || 16 841

Grand Total || 12 399 || 1 560 || 3 276 798 || 382 403

Average per year || 827 || 104 || 218 453 || 25 494

The Table 20
shows that dismantling volumes in 2011 to 2013 are high compared to the average
volume per year from 2011 to 2025. This reflects the fact that the average age
of small vessels is high. More than 35% are 31 years or older. This means that
there is a large backlog of small vessels for dismantling if the assumed
expected lifetimes holds true. The approach applied consequently project that
the old vessels will be dismantled in the first years to come.

However, it
should be stressed that if the expected lifetimes do not hold true for the
small vessels then there might not be a backlog. In this case, the estimated
average volume of 220,000 GT (or 825 ships) per year is a better estimate of
the expected volume of dismantling of small vessels.

The table also
shows that the EU share of the future expected dismantling volumes are in line
with the estimated share of ships flying EU flags.

The table
below shows the projected future volumes of dismantling of vessels covered by
the Hong Kong Convention by year of scrap in terms of number of ships and total
volume in GT as the total of all ship types.

Table 21: Projected future
volumes of dismantling of vessels covered by the Hong Kong Convention (500 GT
and above) by flag state and year of scrap - number of ships and total volume
in GT

|| Total Number of Ships || Total Volume (GT)

Year || All || EU flagged || All || EU flagged

2011 || 2 432 || 185 || 16 797 322 || 1 226 626

2012 || 1 976 || 147 || 15 299 574 || 1 120 831

2013 || 1 716 || 126 || 14 815 968 || 1 092 456

2014 || 1 510 || 112 || 14 262 342 || 1 059 575

2015 || 1 331 || 100 || 13 719 386 || 1 025 190

2016 || 1 203 || 95 || 13 436 167 || 1 022 313

2017 || 1 131 || 94 || 13 594 890 || 1 097 820

2018 || 1 076 || 97 || 13 925 593 || 1 215 671

2019 || 1 042 || 102 || 14 524 801 || 1 390 370

2020 || 1 036 || 108 || 15 500 369 || 1 627 742

2021 || 1 055 || 115 || 16 952 215 || 1 954 519

2022 || 1 080 || 124 || 18 616 769 || 2 356 147

2023 || 1 098 || 131 || 19 826 292 || 2 662 886

2024 || 1 115 || 139 || 21 055 142 || 3 020 968

2025 || 1 138 || 153 || 22 572 195 || 3 523 800

Grand Total || 19 939 || 1 828 || 244 899 025 || 25 396 914

Average per year || 1 329 || 122 || 16 326 602 || 1 693 128

The Table 21
shows that on average 1325 vessels accounting to 16,3 million GT will be
dismantling per year in the period from 2011 to 2025. The EU flagged ships only
account of approximately 10% of the expected average volume in the period even
through they account of 17% of the world fleet of large vessels. This is due to
the fact that the EU flagged vessels are much younger than the average vessels.
The vast majority of EU flagged vessels are below 15 years.

Overall, the
average age of large vessels is much lower than the average age of small
vessels - especially the large vessels. Consequently, the backlog volume of
large vessels for dismantling is not as high as for small vessels.

The table also
shows that the total dismantling volume will increase steadily from 2020 to
2025. This reflects the fact more approximately 80% of the vessels (measured in
GT) are under 20 years old. A large proportion of these vessels are expected to
be dismantled 10 to 15 years from today.

Age profile of the fleet

Figure 6: Age profiles of the
world fleet and of the fleet registered under EU flags (percentages expressed
in Gross Tonnage)

Figure 7: Age profile of EU
flagged ships in 2010 (Gross Tonnage) 23

Evolution of the world fleet: comparison
between the number of new ships delivered and the number of number of ships
dismantled from 2004 to 2009.

Figure 8: Increasing capacity of
the world fleet 2004-2009 (in GT)[139].

Annex IX: Options rejected after a first screening.

Options already rejected in the previous impact assessment:

Some
options proposed by stakeholders had already been discarded in the impact
assessment supporting the EU Strategy on better ship dismantling for their lack
of effectiveness. They have therefore not been further assessed in this impact
assessment:

· Complementing the Waste Shipment Regulation by introducing a
stricter pre-cleaning obligation for EU-flagged ships,

· Complementing the Waste Shipment Regulation by introducing a ban on
beaching for EU-flagged ships,

· Option for a purely voluntary approach.

Options rejected after a first screening of the options:

Extending the provisions of the Hong Kong
Convention to small ships in the short term.

The majority of stakeholders agree that
extending the scope to ships of less than 500 GT is unlikely to have a
noticeable effect on the recycling habits of the EU’s smallest vessels as these
are already recycled under acceptable conditions in Europe. If the scope is
extended to such ships, this is seen as a mid-term measure.

Such vessels are mostly pilotage ships and
offshore supply vessels. Additional requirements would disadvantage them in
terms of international competition or would be an incentive for them to
register under non EU-flags. The potential impact of such an extension would most
likely fall on fishing vessels and smaller coastal vessels. It would lead to
additional administrative costs for owners of smaller fishing vessels without
clear environmental gain. Should the scope be extended, a lower limit would
need to be set for vessels such as yachts, pleasure crafts and canoes. Another
proposed solution is to develop a less stringent system for these ships e.g.
one that does not include a certification system.

The dismantling of these small ships is not
considered as creating significant negative impacts on human health and on the
environment since they are dismantled within the EU. Imposing additional
requirements on them would on the other hand create negative economic impacts
and administrative burden. This option has therefore been rejected after a
first pre-screening.

Ensuring sustainable funding.

The Communication proposing an EU strategy
on ship dismantling, proposed to assess the feasibility of establishing a
"ship dismantling fund". Setting up a mandatory fund was seen as a possible
option to be put in place in the future, if the implementation of the Hong Kong
Convention and the reactions by market participants do not deliver the desired
results.

At international level, the option of
setting up a fund at international level was discussed but not further pursued
during the negotiations of the Hong Kong Convention.

The International Maritime Organization
established instead in May 2006 a multi-donor trust fund, the International
Ship Recycling Trust (ISRT) Fund as a dedicated source of financial support for
technical co-operation activities on ship recycling and, in particular, for
encouraging developing nations towards safe and environmentally sound
management of ship recycling.

It was envisaged that the resources of the
ISRT Fund will be used for the development and implementation of technical
co-operation activities directly related to the enhancement of safe and
environmentally sound ship recycling capacity in developing countries, thereby
providing a financial mechanism to support national initiatives with respect to
legal, administrative and operational matters aimed at strengthening their
capacity for safe and environmentally sound ship recycling.

A study was undertaken on behalf of the
Commission to assess the feasibility of setting up a mandatory EU ship
dismantling fund which could further on be turned into global fund.

Three scenarios were assessed: an up front
environmental charge for new built vessels, a recurrent tax on shipping and a
revolving fund based on recurrent charges on ships calling at EU ports. The
latest was supported as the preferred option and the study provided further
information about the funding requirements and charge per call at EU ports. Calculations
were conducted regarding the funding requirements (115 million €), the size of
the charge which would heave to be paid by shipowners when calling at EU ports
(0.03 /GT) which would represent between 7 and 10 % of the port fees.

A majority of stakeholders (ship owners,
Member States, some NGOs) expressed their scepticisms with regard to the
general idea of an EU fund either because they emphasized the need for global
action for a global problem or because they consider that this would go against
the "polluter-pays" principle. The idea of setting up an EU fund was,
in particular, strongly opposed by shipowners. Others NGOs believed that a fund
combined with mandatory regulations, would provide ship breakers and ship
breaking countries worldwide with real incentive to invest in best practice
facilities.

This feasibility study was not
intended to provide a fully developed proposal for a ship dismantling fund and
information is lacking notably regarding the administrative burden that it
would entail. The currently available information is not sufficient regarding
the economic, social and environmental impacts of setting up a mandatory fund
at EU level to allow for a complete assessment of these impacts. The option has
therefore not been further considered in this impact assessment.

Annex X: Estimate of impacts if the EU legislation is not
modified and the Hong Kong Convention does not enter into force before 2030.

General consideration.

The assessment is based on the volumes of
EU flagged ships subject to the Hong Kong Convention (above 500 GT). Under this
scenario, the current legislation at European and international level would
remain unchanged.

Taking no
additional action at EU level would mean that, until the Hong Kong Convention
enters into force and transposed by Member States, the current trends in ship
dismantling would continue unabated.

Since the Waste
Shipment Regulation would continue to be applicable, end of life ships would
continue to be required to be dismantled in the OECD while the recycling
capacity will remain insufficient in this geographic area. As explained in the
impact assessment, this is one of the drivers for the non-compliance with the
current legislation. The ship dismantling locations
would remain the same as of today and only very limited is foreseen to take
place in the sub-standards facilities located in South Asia which would not be
encouraged to reach the Hong Kong Convention's levels in terms of protection of
the human health and of the environment.

Some Member States and some recycling
countries would ratify the Hong Kong Convention but the entry into force
provisions of the Hong Kong Convention would not be met before 2030.

Dismantling locations and volumes (million LDT) || 2015 || 2020 || 2025 || 2030 ||

EU facilities || || || || ||

AAA || 0,0009 || 0,0010 || 0,0009 || 0,0011 ||

AA || 0,0129 || 0,0147 || 0,0133 || 0,0163 ||

A || 0 || 0 || 0 || 0 ||

Substandard facilities not meeting Convention's criteria || 0 || 0 || 0 || 0 ||

Non EU OECD facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0 || 0 || 0 || 0 ||

A || 0,0737 || 0,0838 || 0,0760 || 0,0929 ||

Substandard facilities not meeting Convention's criteria || 0 || 1 || 2 || 3 ||

Other facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0,3244 || 0,3688 || 0,3347 || 0,4091 ||

Upgraded India || 0,0000 || 0,0000 || 0,0000 || 0,0000 ||

Upgraded Pakistan + Bangladesh || 0,0000 || 0,0000 || 0,0000 || 0,0000 ||

Substandard India || 0 || 1 || 0 || 1 ||

Substandard Pakistan + Bangladesh || 1 || 1 || 1 || 1 ||

|| || || || ||

Environmental impacts:

The environmental concerns of
non-environmentally sound ship dismantling are primarily related to the harmful
substances in the ships and the lack of containment of these during the
dismantling processes, storage and transport, which allows the toxic compounds
to enter the environment.

Generation of non hazardous waste:

Below is shown the amount of materials
generated from dismantling of EU-ships in the period 2015 - 2030. The amounts
are calculated by multiplying the predicted dismantling amounts (LDT) within
the different countries with the base data set on different material amounts
per LDT within ships. The calculations and the detailed results of the analyses
can be found in the study supporting the Impact Assessment12.

The following table presents the amounts of
non-hazardous waste generated from recycling of EU flagged ships for the period
2015-2030.

Table 22: Amounts of non
hazardous waste generated from recycling of merchant EU-ships

Non-hazardous waste (tons) || 2015 || 2020 || 2025 || 2030

Steel || 1 080 400 || 1 228 400 || 1 114 792 || 1 362 728

Copper || 146 || 166 || 151 || 184

Non-ferrous metals || 116 800 || 132 800 || 120 518 || 147 322

Generation
of hazardous waste:

The negative
effects of various materials on board ships for the aquatic environment and for
climate are to continue, in so far as they are not already banned by other
legal instruments. Such a ban is in place within the EU for PCBs through the
Stockholm Convention and Regulation (EC) No 850/2004[140], for organotin compounds
(from 17 September 2008 also on foreign-flagged ships entering the EU) through
the Anti-Fouling Systems - AFS - Convention and Regulation (EC) No 782/2003[141] and for the production and
use of ozone-depleting substances through Regulation (EC) No 2037/2000[142]. Similarly, prohibitions with
certain exemptions exist in the EU for perfluorooctane sulfonates (PFOS) as
from June 2008 by virtue of Directive 2006/122/EC[143] and for trichlorobenzene
(TCB) since June 2007 on account of Directive 2005/59/EC.

Treatment of
hazardous-waste:

The following
table presents the amounts of hazardous waste generated from recycling of EU
flagged ships for the period 2015-2030. The total amount is split between the
amounts managed according to and not according to environmental sound
procedures.

The table
below presents the amount of hazardous materials generated as a result of
dismantling of EU-ships.

Hazardous waste || Units || 2015 || 2020 || 2025 || 2030

Asbestos || t not according to ESM || 175,11 || 199,10 || 135,52 || 110,44

t according to ESM || 97,42 || 110,76 || 75,39 || 61,44

|| || || || ||

PCB || kg not according to ESM || 0,27 || 0,24 || 0,16 || 0,12

kg according to ESM || 0,11 || 0,10 || 0,06 || 0,05

|| || || || ||

Heavy metals || t not according to ESM || 1,82 || 2,07 || 1,88 || 2,30

t according to ESM || 8,32 || 9,46 || 8,58 || 10,49

|| || || || ||

Oil || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 12 277,61 || 13 959,48 || 12 668,44 || 15 485,97

|| || || || ||

Oil sludges || t not according to ESM || 21 620,17 || 24 581,84 || 22 308,40 || 27 269,91

t according to ESM || 38 609,63 || 43 898,62 || 39 838,67 || 48 699,01

|| || || || ||

Tri butyl tin || t not according to ESM || 18,45 || 15,25 || 8,65 || 4,23

t according to ESM || 7,25 || 5,99 || 3,40 || 1,66

|| || || || ||

Mercury || kg not according to ESM || 0,42 || 0,48 || 0,43 || 0,53

kg according to ESM || 0,16 || 0,19 || 0,17 || 0,21

|| || || || ||

Ozone Depleting Substances || t not according to ESM || 22,64 || 17,16 || 7,79 || 0,00

t according to ESM || 8,90 || 6,74 || 3,06 || 0,00

|| || || || ||

Total || not according to ESM || 21 838,20 || 24 815,43 || 22 462,23 || 27 386,87

|| according to ESM || 51 009,13 || 57 991,06 || 52 597,55 || 64 258,58

The
continuation of substandard practices of waste management will result in the
pollution of water, soil and habitats in South Asia which would at least remain
unchanged and increase during peaks of ship scrapping (follow up of shipping
crisis and phasing out of single-hull oil tankers around 2015).

The
accumulation of hazardous substances in the environment would lead to a further loss of biodiversity and to negative impacts for other
economic sectors such as fisheries, fish and shrimp farms as well as
hatcheries. The costs for the restoration/decontamination of the soil which would be required in
Bangladesh or Pakistan to allow for any change of the land use and to prevent
the loss of the pollutants in the event of sea level rise would also increase.

The likeliness
of natural disasters might increase due to the further destruction of coastal
mangrove forests in Bangladesh.

Atmospheric
emissions

The dismantling of EU flagged ships will
lead to atmospheric emissions of CO2 and other pollutants. These emissions will
result from both the actual dismantling process, e.g. energy consumption for
transportation, crane operation etc. and from the following energy consumption
for reprocessing the metals generated from the dismantling process. The
emissions related to the reprocessing of the metals are the most significant.

The following table shows the calculated
CO2-emissions from recycling of the steel generated from dismantling of the
EU-flagged vessels. As all steel generated from the ship dismantling industry is reused the recycling of metals
from the ships replaces the need for production of new steel from virgin ore
material, which is associated with considerably higher CO2-emissions. The
"savings" in CO2-emissions from generation of steel from scrap steel
compared to from virgin material are also presented in the table. As no
detailed information on emissions from steel generation within the different
countries are available, the calculation of emissions are instead based on average
emissions factors of CO2 from primary (ore based) and secondary (scrap based)
production of steel[144].

Table 23: CO2-emissions from
recycling of steel generated from EU-flagged ships including the
"savings" in CO2-emissions stemming from use of scrap instead of
metal ore for generation of steel

Reduced use of virgin material (tons CO2) || 2 015 || 2 020 || 2 025 || 2 030

Direct emissions || 1 105 249 || 1 256 653 || 1 140 432 || 1 394 070

Savings from use of scrap metal compared to virgin material || 688 215 || 782 491 || 710 122 || 868 057

CO2-emissions from
transportation of ships to the dismantling facility - the final journey of a
vessel to the dismantling facility, e.g. from EU to a ship dismantling facility
in South-East Asia - are not accounted for here, as they are deemed negligible
because the final journey is most often relatively short. For example, the ship
owner of a cargo ship will often succeed in arranging a last transport of cargo
from near his ships present location to a destination close to the dismantling
The above figures of the direct emissions show the emission of CO2
as a result of generation of new steel from the steel scrap from the vessels.
Recycling of the steel from the ships is replacing an amount of metal ore for
generation of an equivalent amount of the steel. Steel generation from metal
ore is more energy consuming than scrap based steel generation wherefore the
recycling of steel results in "savings" of CO2-emissions
as indicated in the lower row of the table.

Social impacts:

EU ship
recycling activities

Employment in
the EU recycling sector would remain at the current low level.

Third
countries:

The high safety
hazards and accident rates for workers in South Asian shipbreaking facilities
would remain unchanged and increase in peak times, as more inexperienced
labourers are then employed. Apart if the Supreme Court judgement is
effectively implemented, child labour would continue in Bangladesh, with
sometimes fatal consequences.

The existing
criminal structures in part of the Asian shipbreaking industry are not likely
to change. The low or medium safety hazards associated with dangerous
substances on board for shipyard workers and seafarers worldwide might slowly
decrease in so far as vessels built until the 1980s with asbestos as flame
retardant are increasingly being decommissioned. As for the substances
mentioned above in the environmental context, the use of asbestos in
shipbuilding is already today prohibited under the IMO SOLAS Convention and in
the EU since 2005 for all types of asbestos (including chrysotile)[145]. There is however some
indication that asbestos might continue to be used on board[146].

The estimated workload (man-years) of
adults involved in dismantling of EU-flagged ships including annual numbers of
fatalities and non-fatal accidents amongst these is shown in the following
table for each fifth year in the period 2015 - 2030.

Table 24: Workload (man-years)
of adults involved in dismantling of EU-flagged ships including numbers of
fatalities and incident amongst these

Labour (Man years) || 2015 || 2020 || 2025 || 2030

Workers load required || 5329 || 6058 || 5498 || 6721

|| || || ||

Work load EU || 10 || 11 || 10 || 13

Work load outside EU || 5318 || 6047 || 5488 || 6708

|| || || ||

of which protected workers || 2944 || 3347 || 3038 || 3713

of which not protected workers || 2385 || 2711 || 2460 || 3008

of which children || 811 || 922 || 837 || 1023

Additional social impacts of the baseline
scenario are the existence of child labour in the South-East Asian dismantling
facilities. The number of children (man-years) involved in dismantling of the
EU-flagged ships are calculated and presented in the table below together with
estimated numbers of accidents and deaths amongst these[147].

Table 25 : Children (man-years)
involved in dismantling of EU-flagged ships including numbers of fatalities and
incident amongst these

Accidents (number of persons) || 2015 || 2020 || 2025 || 2030

Adults fatal accidents || 4 || 5 || 4 || 5

Adults - non-fatal accidents || 1345 || 1529 || 1388 || 1697

Children - fatal accidents || 1 || 1 || 1 || 1

Children - non-fatal accidents || 148 || 168 || 153 || 187

Finally some studies and reports are also
addressing the poor working conditions of the workers at the ship dismantling
facilities and reports high instances of sexual transmitted diseases AIDS
amongst the labourers.

Economic impacts:

EU ship
recycling activities

The competitive
disadvantages of EU recycling facilities are certain to continue, with the
large cost and price disparity to Asian facilities allowing them to occupy only
niches in the market.

The revenues of
EU shipowners for the sale of scrap ships would continue to be high,
depending on developments on the freight and steel markets.

Revenues - ship owner (€) || 2015 || 2020 || 2025 || 2030

Total (+/-) || 376 906 056 || 521 380 813 || 575 672 781 || 856 165 415

Their operating
costs would remain largely unaffected, as would transport and consumer prices,
administrative costs and intellectual property rights in the EU. Some
shipowners might invest early and create business and job opportunities in
classification societies by anticipating the Hong Kong Convention's
requirements on certificates and inventories of hazardous materials.

Administrative
burden for EU Member States will continue to be
limited as the existing legislation will continue to be largely circumvented.

The supply of
steel scrap and used ship equipment for the South Asian economies of third
countries, the revenues of shipbreaking yard owners and the job
opportunities for workers would stay at the current level or increase in peak
times. The social costs associated with fatal and non fatal injuries of workers
will remain important.

Social costs (€) || 2015 || 2020 || 2025 || 2030

Total || 6 101 348 || 8 440 102 || 9 318 979 || 13 859 588

Local fishing
and agriculture would continue to lose in quality and quantity, especially in
Bangladesh.

Annex XI: Estimate of impacts for option
A (baseline option).

General consideration.

The assessment is based on the volumes of
EU flagged ships subject to the Hong Kong Convention (above 500 GT). Under this
scenario, the current legislation at European and would remain unchanged.

The EU Member
States are expected to ratify the Hong Kong Convention which is expected to
enter into force in 2020. All recycling countries where there are currently
substandard facilities are expected to have upgraded them so as to be able to
reach the minimum quality criteria (A level) of this Convention.

The Hong Kong Convention contains separate deadlines for compliance
with the various requirements - for instance 5 years after entry into force for
an Inventory of Hazardous Materials to be present in existing ships (as opposed
to new ships) - the full effect of the new international regime is not to be
expected before 2025.

Taking no
additional action at EU level would mean that, until the Hong Kong Convention
enters into force and transposed by Member States, the current trends in ship
dismantling would continue unabated.

Since the Waste
Shipment Regulation would continue to be applicable, end of life ships would
continue to be required to be dismantled in the OECD while the recycling
capacity will remain insufficient in this geographic area. Continuing circumvention of the Waste Shipment Regulation is
therefore expected.

The dismantling locations and volumes are
indicated in the table below.

Dismantling locations and volumes (million LDT) || 2015 || 2020 || 2025 || 2030

EU facilities || || || ||

AAA || 0,0009 || 0,0010 || 0,0009 || 0,0011

AA || 0,0129 || 0,0147 || 0,0133 || 0,0163

A || 0 || 0 || 0 || 0

Substandard facilities not meeting Convention's criteria || 0 || 0 || 0 || 0

Non EU OECD facilities || || || ||

AAA || 0 || 0 || 0 || 0

AA || 0 || 0 || 0 || 0

A || 0,07 || 0,08 || 0,08 || 0,09

Substandard facilities not meeting Convention's criteria || 0 || || ||

Other facilities || || || ||

AAA || 0 || 0 || 0 || 0

AA || 0,32 || 0,37 || 0,33 || 0,41

Upgraded India || - || 0,50 || 0,45 || 0,56

Upgraded Pakistan + Bangladesh || 0 || 0,69 || 0,63 || 0,77

Substandard India || 0,44 || - || - || -

Substandard Pakistan + Bangladesh || 0,61 || - || - || -

|| || || ||

In the short term (2015), all the impacts
will be similar than in the scenario presented in Annex X.

In the medium and long term, the impacts
will be the following:

Environmental impacts:

The main environmental concerns of the
current ship dismantling are primarily related to the harmful substances in the
ships and the lack of containment of these during the dismantling processes,
storage and transport, which allows the toxic compounds to enter the
environment.

Generation
of non-hazardous waste:

The generation
of non-hazardous waste will not be affected by the entry into force of the Hong
Kong Convention. It can be found in Table 22.

Generation
of hazardous waste (prohibition to use certain hazardous material on board
ships):

The Hong Kong
Convention's prohibition to use certain hazardous material on board ships will
be the first to be applicable. It is however expected to have limited impacts
in the time frame considered. The Hong Kong Convention prohibits the use of
certain hazardous materials (asbestos, ozone-depleting substances, PCBs and
organotin compounds) on ships directly after its entry into force. Improvements
would be limited here to ships produced in or flying the flags of countries
that do not yet have relevant legislation in place (unlike the EU).

This prohibition
will indeed have positive environmental impacts in so far as countries that are
not yet Parties to other relevant international agreements like the Stockholm
(POPs) Convention or the AFS Convention decide to bind themselves for the first
time with the Hong Kong Convention. The number of such countries is not likely
to be very high. For ozone-depleting substances the Hong Kong Convention would
hardly make any difference, as similar obligations have been accepted already
by the 191 Parties of the Montreal Protocol. In essence, the Convention's
provisions on hazardous materials alone would lead only minor substantial
improvements for the environment during the operating life of ships.

The obligation
to carry an Inventory of Hazardous Materials (IHM) would in parallel become
applicable for new ships which are defined as ships for which the building
contract is placed after that point in time or for which the delivery is 30
months later. For existing ships, the IHM requirement would become mandatory
not later than 5 years after the Convention's entry into force.

Treatment of
hazardous waste (requirements for ship recycling facilities):

The Hong Kong Convention[148] contains in its Annex a broad set of requirements for ships and
ship recycling facilities. The leading principle is that ships flying the flag
of one Party to the Convention can only be recycled in facilities located in
another Party to the Convention.

The Convention requires ship dismantling
facilities to be authorised. This mandatory authorisation is to be given after
inspection by the Party or a responsible organisation to facilities managed in
compliance with the national implementation of the Convention and its
Guidelines.

Further requirements include the
preparation of a Recycling Facility Management Plan and the utilisation of
procedures for accident prevention, safe removal of hazardous materials,
emergency response, workers' training and reporting of incidents and
occupational diseases.

The possibilities for the facilities, the
shipowners and other stakeholders to assess and follow the performance of the
ship dismantling facilities are prepared for in the Convention, which states
that a facility must have: "A system for (regular) monitoring of the
performance of the ship recycling operations". The issue of monitoring of
the facilities is addressed in the guidelines supporting the Hong Kong
Convention dealing specifically with the Recycling Facility Management Plan.
This plan has to be prepared by the dismantling facility to specify the manner
in which each ship will be recycled, depending on its particulars and its
inventory.

The new elements of the Convention for
operators, including the Recycling Facility Management Plan, could improve
compliance of an operator with environmental and safety rules, as it is
supposed to be ship specific and be based on details on the specific hazards
related to dismantling of that ship, e.g. IHM data as incorporated in the Ship
Recycling Plan.

Impacts on
EU facilities

The requirement for ship dismantling
facilities to obtain a permit from the competent authority is already covered
under national legislation in EU 27 transposing EU legislation. A recycling facility management plan does
not however exist as a legal obligation under existing national or EU law.

As strict requirements for water protection
and waste management are already in place for dismantling facilities in EU 27,
transposition of the specific Convention requirement would not substantially
alter the environmental conditions for these facilities in the EU.

The only new
element of the Convention for EU operators is the requirement of a Recycling
Facility Management Plan, insofar as they do not follow a similar procedure
already under country-specific rules, EMAS or ISO standards. This management
plan could improve compliance of an operator with environmental and safety
rules.

Impacts on third
countries:

The
Convention's requirements for ship recycling facilities will become applicable
when the Convention will enter into force.

The ship
recycling facilities located in Turkey and Chine are already managed in a
manner which is considered as meeting the requirements of the Hong Kong
Convention.

In South Asia,
since the Convention does not prohibit the beaching method as such,
improvements would also be limited and depend on the strict implementation of
its provisions on environmentally sound management by recycling states, taking
into account also the guidelines supporting the Hong Kong Convention[149].

In the case of
India, the Convention apparently has some anticipatory effects on account of a
Supreme Court decision of September 2007 which obliged shipbreaking facilities
to meet certain environmental and safety requirements modelled on the draft
Convention. India's government is of the opinion that the industry in Alang
complies today already with 90% of the Convention requirements[150].

India has
already improved the management of its facilities and is expected to be able to
meet the Convention's requirements by 2015 if necessary. Operators in India
would need some additional investment in environmental and safety equipment,
for example asbestos removal installations and equipment (concrete covering,
strong pumps) to contain oil spills. In addition, it should be ensured that the
capacity of the only existing landfill for hazardous waste is extended.

Pakistan and
Bangladesh will have to invest and develop infrastructure (in particular to
manage the hazardous waste) and are not expected to meet the requirements of
the Convention before 2020.

The study from the World Bank about ship
dismantling in Pakistan and Bangladesh30,
lists and quantify the actions and investments[151] needed
in order to ensure compliance with the Hong Kong Convention within 10 years.
These investments would cover the costs of 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).

The higher range of the total investments
costs have been evaluated at 53.5 millions $ in Bangladesh, and 43 millions in
Pakistan. The World Bank had estimated the price per LDT based on the
respective volumes dismantled by the two countries. But in 2010, Pakistan
recycled 81% of the volume of ships dismantled in Bangladesh. The investments
needs will be higher in Bangladesh but the country is expected to recycle more
ships than Pakistan. Taking these elements into account, the average costs of
the measures necessary to achieve compliance has been estimated at 10 $ (7 €)
per LDT for both countries.

The same study showed that facilities
located in Bangladesh are curently making a profit estimated at 62 $ (44,6 €)
per LDT while in Pakistan, the profit is only of 11 $ (7,9 €) per LDT. The
facilities located in Bangladesh could therefore easily make the necessary
improvements to be able to meet the Hong Kong Convention's within 10 years
while this might be slightly more difficult to remain competitive for Pakistan.

Actions to help these countries have
already been undertaken with the organisation by the Secreteriat of the Basel
Convention of a Ship Recycling Technology & Knowledge
Transfer Workshop in Turkey for Pakistanis authorities and recyclers. More than
5 millions dollars of bilateral aid will be provided to Bangladesh in order to
improve the current situation.

Impacts in
terms of environmentally sound management of the hazardous waste generated by
EU flagged ships:

The table below presents the amount of
hazardous materials generated as a result of dismantling of EU-ships. The total
amount of materials is split between the amounts managed in environmentally sound manner (ESM) or those
which are not.

Table 26: Amounts of hazardous waste
generated from dismantling of EU-flagged ships split between amounts managed in
environmentally sound manner (ESM) or those which are not.

Hazardous waste || Units || 2015 || 2020 || 2025 || 2030

Asbestos || t not according to ESM || 175,11 || 108,45 || 73,81 || 60,15

|| t according to ESM || 97,42 || 201,42 || 137,09 || 111,72

||   || || || ||

PCB || kg not according to ESM || 0,27 || 0,16 || 0,10 || 0,08

|| kg according to ESM || 0,11 || 0,18 || 0,12 || 0,09

|| || || || ||

Heavy metals || t not according to ESM || 1,82 || 2,07 || 1,88 || 2,30

|| t according to ESM || 8,32 || 9,46 || 8,58 || 10,49

|| || || || ||

Oil || t not according to ESM || - || - || - || -

|| t according to ESM || 12 277,61 || 13 959,48 || 12 668,44 || 15 485,97

|| || || || ||

Oil sludges || t not according to ESM || 21 620,17 || 13 274,19 || 12 046,53 || 14 725,75

|| t according to ESM || 38 609,63 || 55 206,27 || 50 100,54 || 61 243,17

|| || || || ||

Tri butyl tin || t not according to ESM || 18,45 || 15,25 || 8,65 || 4,23

|| t according to ESM || 7,25 || 5,99 || 3,40 || 1,66

|| || || || ||

Mercury || kg not according to ESM || 0,42 || 0,23 || 0,21 || 0,26

|| kg according to ESM || 0,16 || 0,43 || 0,39 || 0,48

|| || || || ||

Ozone Depleting Substances || t not according to ESM || 22,64 || 11,69 || 5,30 || -

|| t according to ESM || 8,90 || 12,21 || 5,54 || -

|| || || || ||

Total || not according to ESM || 21 838,20 || 13 411,66 || 12 136,18 || 14 792,43

according to ESM || 51 009,13 || 69 394,83 || 62 923,59 || 76 853,02

Atmospheric
emissions:

End of life
ships going for dismantling are expected to continue to load goods for their
final voyage before going for dismantling. The atmospheric emissions would
therefore mainly be linked with recycling of steel and therefore be similar to
the baseline scenario (see Table 23).

Social impacts:

Impacts in
the EU

In principle,
no impacts of the Hong Kong Convention is to be expected for the working
conditions in EU dismantling facilities, due to the more stringent provisions
in existing EU directives on workers' health and safety at work and protection
against exposure to asbestos which the Member States have to respect.

The new surveys and certificates would have
a limited job effect particularly for classification societies. In order to
deal with the approximately 54,000 ships of the world fleet (of which about
7,000 are EU-flagged), it is estimated that the major 5 or 6 European societies
would each require about 100 additional staff (mainly engineers and chemists)
in the first 5 years and about half of this on a more permanent basis.

Impacts in
third countries:

For the same
reasons as for the EU installations, limited positive impacts are expected in
facilities in other OECD countries (including Turkey) and China.

In the other
Asian ship dismantling countries, depending on strict implementation of the Convention's
safety requirements by recycling facilities and competent authorities, accident
rates and occupational health hazards for workers are expected to go down. The
quality of implementation, however, would in turn depend on awareness, public
attention and effective sanctions in case of non-compliance. The weak position
of trade unions and the tendency of certain governments in Asia to refuse
access of the media and independent observers to the facilities favour
implementation deficits.

Structures of
organised crime which are reported to exist in part of the shipbreaking
industry in South Asia would probably recede with the increasing regulation and
higher operating costs in those countries that implement the Convention.

The
occupational health hazards for shipyard workers and seafarers are altogether
expected to diminish over the next decades, provided that at least the major
flag states implement the Convention and order the substitution of hazardous
materials on board ships by less dangerous substances. However, the effect
would be limited particularly in the EU, as all relevant materials in the
Convention are already covered by prohibitions under other EU legislation.

The Inventory of Hazardous Materials (IHM)
would in general raise awareness and open the way for realistic risk
assessments and better precautions for shipyard workers, seafarers and
labourers in recycling facilities. On the basis of the inventories, informed
decisions can be taken by shipowners and flag states on the choice of a suitable
recycling facility and the need for prior decontamination, and by the scrapping
facility and the recycling state on necessary waste management measures.

For the baseline scenario the estimated
workload (man-years) of adults involved in dismantling of EU-flagged ships
including annual numbers of fatalities and non-fatal accidents amongst these is
shown in the following table for each fifth year in the period 2015 - 2030.

Table 27: Workload (man-years)
of adults involved in dismantling of EU-flagged ships including numbers of
fatalities and incident amongst these

Labour (Man years) || 2015 || 2020 || 2025 || 2030

Workers load required || 5329 || 6058 || 5498 || 6721

|| || || ||

Work load EU || 10 || 11 || 10 || 13

Work load outside EU || 5318 || 6047 || 5488 || 6708

|| || || ||

of which protected workers || 2944 || 6058 || 5498 || 6721

of which not protected workers || 2385 || 0 || 0 || 0

of which children || 811 || 0 || 0 || 0

Additional social impacts of the baseline
scenario are the existence of child labour in the South-East Asian dismantling
facilities. The number of children (man-years) involved in dismantling of the
EU-flagged ships are calculated and presented in the table below together with
estimated numbers of accidents and deaths amongst these[152]. The
entry into force of the Hong Kong Convention will imply that all workers are
protected and that child labour is effectively prohibited thereby diminishing
the number of accidents for adult workers and stopping them for children
workers.

In Bangladesh,
the Supreme Court has required improvements in the industry including the
prohibition for child labour. This judgment is unfortunately not available in
writing and it remains to be seen how far it will be implemented in practice.

Table 28 : Children (man-years)
involved in dismantling of EU-flagged ships including numbers of fatalities and
incident amongst these

Accidents (number of persons) || 2015 || 2020 || 2025 || 2030

Adults fatal accidents || 4 || 2 || 2 || 3

Adults - non-fatal accidents || 1345 || 1106 || 1004 || 1227

Children - fatal accidents || 1 || 0 || 0 || 0

Children - non-fatal accidents || 148 || 0 || 0 || 0

Economic impacts:

EU ship
recycling facilities

The competitive
disadvantages of EU recycling facilities in relation to facilities in Asia will
most likely remain also in the longer term, due to the much higher labour costs
in Europe and in spite of the fact that EU facilities would not need
significant investments in order to comply with the requirements of the
Convention. The national ship recycling policies of the UK and France might
secure a niche for EU or environmentally sound OECD facilities in relation to
the government vessels of these two Member States. Apart from this, employment
and business opportunities in the EU recycling sector would not rise from the
current low level. Administration costs to Member States in relation to
Convention requirements for EU recycling facilities are very limited and are
left out of the analyses.

Administrative
burden for EU Member States

The competent
authorities of the flag states will need to conduct surveys on board ships and
to issue certificates. All these administrative costs are reflected in the
table below.

EU
shipowners

Shipowners
would be required to develop, maintain and renew Inventories of Hazardous
Materials during the life span of their ships as well as prior to dismantling.
They will also have to undertake surveys in order to receive the necessary
certifications from their flag states. Detailed information about these costs
is provided in the table below.

In order to
meet the Hong Kong Convention, sub-standard ship dismantling facilities will
have to invest in infrastructures, protective equipments, trainings. This
translates into a loss for the ship owner, which is realised when he sells the
ship for dismantling, as the price obtained will be correspondingly lower to cover
up for the increased costs. In general only costs for upgrade of existing
South-Asian facilities from a non-compliant to a compliant Convention facility
level are included in the analyses (including increased waste management
costs).

Considering a life
span of 30 years, a visible impact on transport and consumer prices is
unlikely.

The total costs
related to the establishment and the update of the inventory of hazardous
materials (including the update prior to dismantling) as well as the costs for
obtaining the necessary certificates from the flag state administration would
indeed be of 14 200 € for new ships and of 18 000 € for existing ships.

Considering a
ship of 9 220 LDT (the average LDT of large EU flagged dismantled in 2009),
this would represent respectively 1,54 and 1,96 € per LDT. Considering also
that the costs for improving recycling facilities in order to comply with the
Hong Kong Convention will be passed over the ship owners, the total costs for
shipowners would respectively be of 11,54 and 11,96 € per LDT. In June 2011,
the average dismantling prices offered by ship recycling facilities was
comprised between 450(China) and 525 (Bangladesh) €/LDT.

Costs || Who is affected || Unit cost1

Preparing and renewing the Inventory of hazardous materials || Shipowner || · For merchant ships: 1.830 euro for new ships, 9.505 euro for existing ships and 318 euro each five years for renewal · For navy ships 21.133 euro per ship

Obtaining the International Certificate on the Inventory of Hazardous Materials || Shipowner || · 2.956 € for new-ship and 2.519 € for existing ship · Recertification each five years: 1.680 €/ship

Administrative costs in relation to the checking of the existence and the correctness of the certificates as part of flag state control. || Shipowner || · Cost for having the certificates checked. · First five years 271.024 €/year and later 542.073 €/year (total for Europe)[153]

Administrative costs in relation to the checking of the existence and the correctness of the certificates as part of flag state control. || EU Member States || · Cost for checking the certificates. 271.024€/year (total for Europe)

Update of the inventory of hazardous materials just before dismantling (ship owners) || Shipowner || 769 € per ship

Ready to recycle certificate (ship owners) || Shipowner || · First five years 3.360 €/ship153 · Later 6.719 €/ship

Dismantling in more environmentally sound and safe recycling facilities || Shipowner || Income from selling to an: · existing beaching facility in India, Bangladesh or Pakistan: 218 €/LDT · upgraded beaching facility in India: 212 €/LDT · upgraded beaching facility in Bangladesh or Pakistan: 211 €/LDT · landing facility in Turkey: 184 €/LDT · berthing facility in China: 170 €/LDT · EU slipway/dock facility: 82 €/LDT

Administrative costs related to the checking of the existence and the correctness of the inventories. || EU Member States || · 32,5 €/ship calling European ports in administration

Taking into
account the costs indicated in the table below, the costs related to the
implementation of the Hong Kong Convention requirements for the period
2020-2030 have been estimated. The costs that fall on the ships owners and
those which fall on the public authorities have been distinguished.

Table 29
presents the total cost for the ships owners in the base line scenario with
entry into force by 2020. As it can be seen, the ships owners would begin
experiencing increasing costs as from 2020 where the requirements become
binding. Also, the revenues are affected as they decline as a result of lower
prices paid for ships to be dismantled.

Table 29: Cost and revenues for
the ship owners in €

Costs and revenues for ship owners (€) || 2015 || 2020 || 2025 || 2030

Costs || || || ||

Inventories new ships || 0 || 465 195 || 513 636 || 763 902

Inventories existing ships || 0 || 0 || 106 690 059 || 2 220 031

Certificates || 0 || 751 430 || 52 095 411 || 11 728 464

Ready for recycling certificate || 0 || 1 009 243 || 2 020 865 || 3 005 517

Costs for checking certificates || 0 || 417 229 || 1 015 293 || 1 235 259

Revenues || || || ||

Selling ships for recycling || 376 906 056 || 510 178 469 || 563 303 925 || 837 769 918

Total (+/-) || 376 906 056 || 507 535 372 || 400 968 662 || 818 816 746

In Table 30 the
administrative costs for the public authorities are shown. The table clearly
illustrates that these administrative costs increase substantially once the
requirements also come to cover existing ships.

Table 30: Administrative cost
for Member states authorities in €

Administrative costs - Member States ( ) || 2015 || 2020 || 2025 || 2030

Additional controls in the Ports || 0 || 19 112 || 906 816 || 1 300 974

Certificates || 0 || 417 229 || 507 623 || 617 601

Total || 0 || 436 341 || 1 414 439 || 1 918 575

Non-action by
the EU is, in addition, expected create additional administrative and legal
costs for industry due to the diverging national legislation and implementation
by Member States. Especially delays and different timelines in the introduction
of the Inventories of Hazardous Materials might lead to incoherent control
standards and an uneven playing field for shipping companies and facilitiesin
different parts of the EU. This could results in unsound competition amongst
Member States in favour of the flags of Member States which would not have
ratified the Hong Kong Convention.

Third countries:

As explained above, significant investments
will be necessary in Pakistan and Bangladesh in order to meet the Hong Kong
Convention's requirements.

Less accidents (both fatal and non fatal)
are expected in the dismantling facilities due to the improvement of the
working practices. This will result in decreasing social costs.

Table 31 : Social costs in € -
accidents and deaths

Social costs (€) || 2015 || 2020 || 2025 || 2030

Total || 6 101 348 || 3 788 139 || 4 182 602 || 6 220 546

Other impacts

The Hong Kong
Convention potentially raises problems of capacity. If 54,000 larger ships
worldwide have to be surveyed and certified within a few years, a shortage of
qualified staff in classification societies is probable.

Annex XII: Option B.

General considerations (and
assumptions)

The assessment is based on the volumes of
EU flagged ships subject to the Hong Kong Convention (above 500 GT).

Under this scenario, some requirements of
the Hong Kong Convention would be transposed in 2013 in the current Waste
Shipment Regulation as well an invitation for the EU Member States to ratify
the Hong Kong Convention by 2020.

All recycling countries where there are
currently substandard facilities are expected to have upgraded them so as to be
able to reach the minimum quality criteria (A level) of the Convention by 2020.

Since the Waste
Shipment Regulation will continue to constitute the core of the control
mechanism covering end-of-life ships, the prohibition to dismantle EU flagged
ships outside the OECD would be maintained.

As explained in
the Impact Assessment, the dismantling capacity within this geographic zone
would not be sufficient to treat all EU-flagged ships. In this therefore
foreseeable that even responsible shipowners would continue to send their ships
for dismantling outside the OECD.

The assessment
of the quantitative impacts of this scenario is based on the assumption that
the Waste Shipment Regulation complemented by key requirements of the Hong Kong
Convention would continue to be largely circumvented. The dismantling locations
would therefore be the following.

Dismantling locations and volumes (million LDT) || 2015 || 2020 || 2025 || 2030 ||

EU facilities || || || || ||

AAA || 0,000869 || 0,000988 || 0,000896 || 0,001096 ||

AA || 0,012933 || 0,014704 || 0,013344 || 0,016312 ||

A || 0 || 0 || 0 || 0 ||

Substandard facilities not meeting Convention's criteria || 0 || 0 || 0 || 0 ||

Non EU OECD facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0 || 0 || 0 || 0 ||

A || 0,07367 || 0,083762 || 0,076015 || 0,092921 ||

Substandard facilities not meeting Convention's criteria || 0 || 1 || 2 || 3 ||

Other facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0,324361 || 0,368794 || 0,334686 || 0,409122 ||

Upgraded India || 0 || 0,500535 || 0,454243 || 0,55527 ||

Upgraded Pakistan + Bangladesh || 0 || 0,691215 || 0,627288 || 0,766801 ||

Substandard India || 0,44023 || 0 || 0 || 0 ||

Substandard Pakistan + Bangladesh || 0,607936 || 0 || 0 || 0 ||

|| || || || ||

Impacts

Taking into
account the continued circumvention of the legislation driven by the lack of
legally available dismantling capacity, the environmental and social impacts of
this option will be similar to the baseline scenario (option A) as well as the
social costs.

An early
implementation of the key elements of the Hong Kong Convention at EU level
would create additional costs for ship owners as it obliges them to pay for
surveys and certificates some years in advance. Early movers might, however,
benefit from avoiding bottlenecks of survey and certification capacity and
being able to use certificates as a marketing argument.

Costs and revenues - ship owner (€) || 2015 || 2020 || 2025 || 2030

Costs (€) || || || ||

Inventories new ships || 336289,4814 || 465 195 || 513 636 || 763 902

Inventories existing ships || 0 || 74 951 663 || 1 547 425 || 2 220 031

Certificates || 543208,583 || 36 597 952 || 8 175 073 || 11 728 464

Ready for recycling certificate || 729581,3727 || 1 830 276 || 2 020 865 || 3 005 517

Costs for checking certificates || 342 932 || 834 496 || 1 015 293 || 1 235 259

Revenues || || || ||

Selling ships for recycling || 376 906 056 || 510 178 469 || 563 303 925 || 837 769 918

Total (+/-) || 374 954 045 || 395 498 886 || 550 031 634 || 818 816 746

Similarly to
shipowners, EU Member States would have to face additional administrative costs
in advance.

Administrative costs - Member States ( ) || 2015 || 2020 || 2025 || 2030

Additional controls in the Ports || 13 498 || 637 054 || 906 816 || 1 300 974

Certificates || 342 932 || 417 229 || 507 623 || 617 601

Total || 356 430 || 1 054 283 || 1 414 439 || 1 918 575

Additional risk of non-compliance and reflagging.

The Hong Kong
Convention introduces an obligation for shipowners to inform their flag states in
writing of their intention to discard their ships. With this written proof of
the intention to discard ships, EU Member States will have, according to the
Waste Shipment Regulation, to ensure that these ships have to be dismantled
within the OECD. Otherwise, there might be a clear risk to be faced by numerous
infringement procedures to be launched by the Commission.

Shipowners as
well as EU Member States (as flagged states) considered that the proposal from
the Commission to include elements of two different control systems for ships
(one coming from the Hong Kong Convention and one from the Basel Convention)
would be very confusing and administratively burdensome. It would not send a
strong political message toward EU's commitment to support the entry into force
of the Hong Kong Convention. The ability of the EU to convince other countries
to ratify the Hong Kong Convention would be strongly reduced.

The most
probable scenario is therefore that EU shipowners would change flag in order to
be allowed to dismantle their ships outside the EU. This would in turn have an
impact of the EU Member States' importance for the fulfilment of the entry into
force requirements of the Hong Kong Convention and might therefore postpone or
deter its entry into force.

Should EU shipowners decide to massively
change their flags to non-EU flags, it is expected that the amount hazardous
waste not treated in an environmentally sound manner (ESM) will increase. As shown in Figure 4,
the proportion of non-EU flagged ships going to substandard facilities located
in Pakistan and Bangladesh is indeed higher than the proportion of EU flagged
ships.

Annex XIII: Option C

General considerations and
assumptions:

The assessment is based on the volumes of
EU flagged ships subject to the Hong Kong Convention (above 500 GT).

Under this scenario, ships which are
covered by the Hong Kong Convention would be excluded from the scope of the
Waste Shipment Regulation. The transposition of the Hong Kong Convention will
be left entirely to European Member States.

Since they will not be subject to the
requirements of the Waste Shipment Regulation, ships will be able to be legally
dismantled worldwide prior to the entry into force of the Hong Kong Convention.
For this reason, it is assumed that 50 % of the volume of ships currently
dismantled in the EU, in Turkey and in China will be dismantled in India, China
and Bangladesh prior to the entry into force of the Convention.

Since substandard facilities will receive
legally more EU flagged ships, they are expected to delay their investments in
order to upgrade their facilities. All recycling
countries where there are currently substandard facilities are expected to have
upgraded them so as to be able to reach the minimum quality criteria (A level)
of the Convention by 2025 only.

In order to remain competitive and avoid
reflagging to other flags (both EU and non EU ones), it is expected that the
rate of ratification will be notably different amongst EU Member States.

The Hong Kong Convention would in this
scenario not enter into force before 2025.

The dismantling locations and volumes of EU
flagged ships are therefore expected to be the following.

Dismantling locations and volumes (million LDT) || 2015 || 2020 || 2025 || 2030 ||

EU facilities || || || || ||

AAA || 0,00043435 || 0,00049385 || 0,000896353 || 0,001095707 ||

AA || 0,00646634 || 0,00735214 || 0,013344359 || 0,016312218 ||

A || 0 || 0 || 0 || 0 ||

Substandard facilities not meeting Convention's criteria || 0 || 0 || 0 || 0 ||

Non EU OECD facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0 || 0 || 0 || 0 ||

A || 0,03683507 || 0,04188097 || 0,076015242 || 0,092921448 ||

Substandard facilities not meeting Convention's criteria || 0 || 1 || 2 || 3 ||

Other facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0,16218045 || 0,18439695 || 0,334686106 || 0,40912213 ||

Upgraded India || 0 || 0 || 0,454243368 || 0,555269582 ||

Upgraded Pakistan + Bangladesh || 0 || 0 || 0,627288461 || 0,766800852 ||

Substandard India || 0,526714732 || 0,598867435 || 0 || 0 ||

Substandard Pakistan + Bangladesh || 0,727367963 || 0,82700741 || 0 || 0 ||

|| || || || ||

Environmental impacts:

Generation of waste and waste
management:

The generation
of non hazardous will be the same as for option A and can be found in Table 22.

The amount of
hazardous waste generated are similar than in option A but less hazardous waste
will be managed in an environmentally sound manner. The situation will be
particularly problematic before 2025 since nothing would prevent the ships of
EU Member States which would not have ratified nor implemented the Hong Kong
Convention to dismantle their ships in substandard facilities.

Hazardous waste || Units || 2015 || 2020 || 2025 || 2030

Asbestos || t not according to ESM || 209,52 || 238,22 || 73,81 || 60,15

|| t according to ESM || 63,02 || 71,65 || 137,09 || 111,72

|| || || || ||

PCB || kg not according to ESM || 0,33 || 0,29 || 0,10 || 0,08

|| kg according to ESM || 0,05 || 0,05 || 0,12 || 0,09

|| || || || ||

Heavy metals || t not according to ESM || 2,18 || 2,48 || 1,88 || 2,30

|| t according to ESM || 7,96 || 9,05 || 8,58 || 10,49

|| || || || ||

Oil || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

|| t according to ESM || 12 277,62 || 13 959,48 || 12 668,44 || 15 485,97

|| || || || ||

Oil sludges || t not according to ESM || 25 867,55 || 29 411,05 || 12 046,53 || 14 725,75

|| t according to ESM || 34 362,28 || 39 069,44 || 50 100,54 || 61 243,17

|| || || || ||

Tri butyl tin || t not according to ESM || 22,07 || 18,25 || 8,65 || 4,23

|| t according to ESM || 3,62 || 3,00 || 3,40 || 1,66

|| || || || ||

Mercury || kg not according to ESM || 0,50 || 0,57 || 0,21 || 0,26

|| kg according to ESM || 0,08 || 0,09 || 0,39 || 0,48

|| || || || ||

Ozone Depleting Substances || t not according to ESM || 27,09 || 20,53 || 5,30 || 0,00

|| t according to ESM || 4,45 || 3,37 || 5,54 || 0,00

|| || || || ||

Total || not according to ESM || 26 128,40 || 29 690,52 || 12 136,18 || 14 792,43

according to ESM || 46 718,94 || 53 115,99 || 62 923,59 || 76 853,02

Atmospheric emissions

The atmospheric emissions will be the same
as the ones in option A and can be found in Table 23.

Social impacts:

This option will have negative impacts on
the number of employment opportunities in the EU in the period 2012-2025. The
number of jobs will increase globally as ship dismantling is expected to take
place in labour intensive countries.

Labour (Man years) || 2015 || 2020 || 2025 || 2030

Workers load required || 5986 || 6806 || 5498 || 6721

|| || || ||

Work load EU || 5 || 6 || 10 || 13

Work load outside EU || 5981 || 6800 || 5488 || 6708

|| || || ||

of which protected workers || 3133 || 3562 || 5498 || 6721

of which not protected workers || 2853 || 3244 || 0 || 0

of which children || 970 || 1103 || 0 || 0

However the working conditions in these
countries will also lead to an increased number of both fatal and non-fatal
accidents will be particularly negative prior to the entry into force of the
Hong Kong Convention.

Accidents (number of persons) || 2015 || 2020 || 2025 || 2030

Adults fatal accidents || 5 || 5 || 2 || 3

Adults - non-fatal accidents || 1530 || 1739 || 1004 || 1227

Children - fatal accidents || 1 || 1 || 0 || 0

Children - non-fatal accidents || 177 || 201 || 0 || 0

Economic impacts:

This option would be particularly
beneficial for EU shipowners prior to 2025 since they would be able to sell
their ships to the substandard facilities which offer the best prices as they
do not protect the environment and the human health.

Shipowners and Member States will be faced
with increasing costs when the Hong Kong Convention will enter into force in
2025.

Costs and revenues - ship owner (€) || 2015 || 2020 || 2025 || 2030

Costs (€) || || || ||

Inventories new ships || 0 || 0 || 513 636 || 763 902

Inventories existing ships || 0 || 0 || 0 || 153 064 130

Certificates || 0 || 0 || 829 677 || 74 739 286

Ready for recycling certificate || 0 || 0 || 1 114 336 || 3 005 517

Costs for checking certificates || 0 || 0 || 507 623 || 1 235 259

Revenues || || || ||

Selling ships for recycling || 389 446 323 || 538 727 985 || 563 303 925 || 837 769 918

Total (+/-) || 389 446 323 || 538 727 985 || 560 338 652 || 604 961 824

Administrative costs - Member States (€ ) || 2015 || 2020 || 2025 || 2030

Additional controls in the Ports || 0 || 0 || 27 204 || 1 300 974

Certificates || 0 || 0 || 507 623 || 617 601

Total || 0 || 0 || 534 827 || 1 918 575

Since fatal and non-fatal accidents will be
important prior to 2015, this option will have particularly high social costs.

Social costs (€) || 2015 || 2020 || 2025 || 2030

Total || 7 071 139 || 9 781 632 || 4 182 602 || 6 220 546

Annex XIV: Option D

Assumptions:

The assessment is based on the volumes of
EU flagged ships subject to the Hong Kong Convention (above 500 GT).

Under this scenario, ships which are
covered by the Hong Kong Convention would be excluded from the scope of the
Waste Shipment Regulation. These ships will be covered by a specific Regulation
(Ship Recycling Regulation) transposing the Hong Kong Convention.

The Hong Kong
Convention is expected to enter into force in 2020. Indian facilities are
expected to be able to be upgraded so as to meet the Convention's standards by
2015 while installations in Pakistan and Bangladesh would not be able to do so
before 2020. The maximum volume of EU flagged ships to be dismantled in the
period 2012-2030 will be of 1,88 million LDT. The Chinese facilities alone
treated 2,83 millions LDT in 2009. The recycling capacity available in the EU,
Turkey, China and upgrade Indian facilities will be largely sufficient to treat
all EU flagged ships.

The Hong Kong Convention requires that
waste resulting from the recycling of a ship be transferred only to waste
facilities authorised to deal with its treatment and disposal in a safe and
environmentally sound manner and requires that waste management and disposal
sites are identified for this purpose. Like the Basel Convention, the Hong Kong
Convention does not establish any system of control for such waste in the
recycling state once it leaves the Ship Recycling Facility.

Similarly to what has been done with the
Waste Shipment Regulation, the Ship Recycling Regulation will complement the
requirements of the Hong Kong Convention so as to ensure that all the waste
produced in the ship recycling facilities are treated in an environmentally
sound manner not only in the dismantling facility but also in other facilities
which can be used for further processing or disposing the waste. Specific
criteria have been developed in this respect in on study undertaken by the
Commission125.

The dismantling volumes and locations are
the following ones:

Dismantling locations and volumes (million LDT) || 2015 || 2020 || 2025 || 2030 ||

EU facilities || || || || ||

AAA || 0,0009 || 0,0010 || 0,0009 || 0,0011 ||

AA || 0,0129 || 0,0147 || 0,0133 || 0,0163 ||

A || 0 || 0 || 0 || 0 ||

Substandard facilities not meeting Convention's criteria || 0 || 0 || 0 || 0 ||

Non EU OECD facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0 || 0 || 0 || 0 ||

A || 0,0737 || 0,0838 || 0,0760 || 0,0929 ||

Substandard facilities not meeting Convention's criteria || 0 || 1 || 2 || 3 ||

Other facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0,3244 || 0,3688 || 0,3347 || 0,4091 ||

Upgraded India || 1,0482 || 0,5005 || 0,4542 || 0,5553 ||

Upgraded Pakistan + Bangladesh || 0,0000 || 0,6912 || 0,6273 || 0,7668 ||

Substandard India || 0 || 0 || 0 || 0 ||

Substandard Pakistan + Bangladesh || 0 || 0 || 0 || 0 ||

|| || || || ||

Overall, it is expected that there would be
positive environmental, social and economic impacts of implementing the Hong
Kong Convention into EU legislation. In particular with respect to the baseline
option, the following positive impacts are to be expected:

· A coherent approach, for example ensuring uniform controls across
the EU in ports and facilities,

· Faster potential for legislation to take effect and speeding up
information processes such as on recycling facilities in Member States,

· Greater certainty and level playing field for operators in the EU,

· Reduction of administrative burden for both Member States and EU
operators

Each of these in turn would benefit workers
safety and the state of the environment. Specific aspects of implementing the
Hong Kong Convention into EU law are dealt below.

An EU Ship Recycling Regulation that
transposes the Hong Kong Convention would be able to harmonise implementation
EU-wide. Differences between Member States concerning the point in time when
the Convention requirements take legal effect would be annulled.

Transposition of Convention elements into
the Ship Recycling legislative instrument would not be necessary where existing
EU legislation already covers the issue and provides for a higher standard of
safety or environmental protection. This is the case particularly for the ban
on hazardous materials on board ships or the environmental and workers' health
and safety requirements in recycling facilities. Here a reference to the relevant
provisions of EU law (for the latter e.g. Directive 2008/98/EC on waste,
Directive 89/391/EEC on measures to encourage improvements in the safety and
health of workers at work, and Directive 83/477/EEC on the protection of
workers from the risks related to the exposure to asbestos at work, as amended)
would be sufficient.

The most important elements of a Ship
Recycling Regulation to implement the Hong Kong Convention would be the
following:

·
Introduction of a mandatory Inventory of Hazardous
Materials (IHM) on board ships, of the "Ready for Recycling"
certificate, and the surveys necessary for them;

·
Specification of the key requirements for ship
recycling facilities, including an obligation to prepare a Recycling Facility
Management Plan;

·
Obligations on Member States to communicate
relevant information (especially on ship recycling facilities, competent
authorities, recycled ships, violations and actions taken) to the IMO, as well
as directly to other Member States and the Commission;

·
Reporting requirements for shipowners and
recycling facilities which would replace the existing requirements of the EC
Waste Shipment Regulation for notification and prior informed consent.

As requested by the Impact Assessment Board
when assessing the Impact Assessment supporting the EU strategy on better ship
dismantling, a detailed comparison of the legal provisions of the Hong Kong
Convention and of the existing EU legislation has been undertaken in one
specific study[154]. This study identified the gaps on inconsistencies between the
existing EU legislation and the Convention and proposed draft legal provisions
to address them. Regarding ships, the Ship Recycling Convention would, in
particular, need to:

- adjust some definitions and introduce new
definitions,

- introduce into EU legislation
requirements linked with the establishment, maintenance and survey of the
inventory of hazardous materials as well as with the obligation to obtain
certificates,

Inventory of Hazardous Materials, surveys and certificates

The environmental, social and economic
impacts of the new survey and certificate system have been described already in
the context of the Hong Kong Convention (see above in Annex XI).

Harmonization of standards and procedures for
surveys and certificates by an EU legislative instrument would establish a
level playing field for operators in the EU and reduce administrative and legal
costs as well as the drivers for reflagging between Member States. It would
also increase the effectiveness of EU controls in ports and facilities which in
turn benefits health and safety of seafarers and workers. This effect could be
strengthened by incorporating references to the guidelines supporting the Hong
Kong Convention into the set of binding rules.

Requirements for ship recycling facilities

The Convention requirements for ship
recycling facilities have been outlined (see above in Annex XI). Current EU
legislation does not regulate such facilities explicitly, but as performing an
operation for the recycling of metals they fall under the permit requirement of
Directive 2008/98/EC on waste. A recycling facility management plan does not
exist as a legal obligation under EU law. Other substantial requirements for
the protection of workers' health and safety, however, are essentially
contained in relevant EU directives.

Transposing the relevant provisions of the
Convention into an Ship Recycling Regulation would therefore not introduce new
elements - apart from the management plan - but rather clarify the legal
situation, further specify the requirements applicable to ship dismantling
facilities (a Regulation contains more precise requirements that a Directive).

EU rules on the Recycling Facility
Management Plan would cause no additional administrative costs in relation to
the baseline scenario but could reduce such costs by preventing different
standards in Member States.

Information duties of recycling states

The Hong Kong Convention requires flag
states to report annually the list of ships which have received an
International Ready for Recycling Certificate and the location of the Ship
Recycling Facility.

It requires recycling states to report to
the IMO various relevant data, e.g. a list of authorized ship recycling
facilities and an annual list of ships recycled within the jurisdiction of that
state.

Such obligations are useful tools to ensure
transparency and contribute to an effective implementation of the Convention,
provided the lists contain sufficient information and are regularly updated and
disseminated to all interested parties and the public.

EU legislation would have the positive
effect of harmonising implementation and ensuring a minimum standard of
communication. The additional obligation on Member States to communicate the
information directly to other Member States and the Commission (instead of
waiting for the IMO to disseminate it) would simplify and speed up the process
and enhance its effectiveness in the EU. The information on recycling facilities,
recycled ships, violations of the Convention and action taken would be
important for the implementation the EU legislation on ship dismantling.

The administrative burden for Member
States' authorities and the recycling facilities would not be substantially
increased in relation to what is required by the Convention (baseline
scenario). However in the short term, since the recycling facilities would not
yet be legally required to report about their authorized facilities, EU Member
States would have to verify that the expected dismantling facility will be able
to reach the levels of protection provided for by the Hong Kong Convention when
conducting the final survey prior to dismantling.

In addition, recycling facilities will be
required under the Convention to report on incidents, accidents, occupational
diseases and chronic effects. The EU legislation would not go beyond these
reporting requirements of the baseline scenario and thus not create additional
administrative burden.

Environmental impacts:

Generation of waste and waste
management:

The generation of non hazardous waste for
option D is similar to the generation for option A and can be found in Table 22.

The same amount of hazardous waste is generated
than in the baseline scenario (Option A) but more hazardous waste will be
managed in an environmentally sound manner.

Hazardous waste || Units || 2015 || 2020 || 2025 || 2030

Asbestos || t not according to ESM || 24,46 || 108,45 || 73,81 || 60,15

t according to ESM || 248,08 || 201,42 || 137,09 || 111,72

|| || || || ||

PCB || kg not according to ESM || 0,14 || 0,16 || 0,10 || 0,08

kg according to ESM || 0,24 || 0,18 || 0,12 || 0,09

|| || || || ||

Heavy metals || t not according to ESM || 1,82 || 2,07 || 1,88 || 2,30

t according to ESM || 8,32 || 9,46 || 8,58 || 10,49

|| || || || ||

Oil || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 12 277,61 || 13 959,48 || 12 668,44 || 15 485,97

|| || || || ||

Oil sludges || t not according to ESM || 5 405,04 || 13 274,19 || 12 046,53 || 14 725,75

t according to ESM || 54 824,76 || 55 206,27 || 50 100,54 || 61 243,17

|| || || || ||

Tri butyl tin || t not according to ESM || 18,45 || 15,25 || 8,65 || 4,23

t according to ESM || 7,25 || 5,99 || 3,40 || 1,66

|| || || || ||

Mercury || kg not according to ESM || 0,05 || 0,23 || 0,21 || 0,26

kg according to ESM || 0,53 || 0,43 || 0,39 || 0,48

|| || || || ||

Ozone Depleting Substances || t not according to ESM || 11,32 || 11,69 || 5,30 || 0,00

t according to ESM || 20,22 || 12,21 || 5,54 || 0,00

|| || || || ||

Total || not according to ESM || 5 461,09 || 13 411,66 || 12 136,18 || 14 792,43

|| according to ESM || 67 386,24 || 69 394,83 || 62 923,59 || 76 853,02

Atmospheric emissions

The atmospheric emissions will be the same
as the ones in option A and can be found in Table 23.

Social impacts:

The social impacts on the EU will be
similar to the ones in the baseline scenario.

The social impacts in third countries will
be lower than in the baseline scenario in the short term since ships would only
be dismantled in facilities which are not employing children or unprotected
workers. There would be a clear incentive for the substandard facilities located
in Pakistan and in Bangladesh India to invest in order to meet the Convention's
requirements as soon as possible.

Labour (Man years) || 2015 || 2020 || 2025 || 2030

Workers load required || 5329 || 6058 || 5498 || 6721

|| || || ||

Work load EU || 10 || 11 || 10 || 13

Work load outside EU || 5318 || 6047 || 5488 || 6708

|| || || ||

of which protected workers || 5329 || 6058 || 5498 || 6721

of which not protected workers || 0 || 0 || 0 || 0

of which children || 0 || 0 || 0 || 0

The number of accidents (both fatal and non
fatal) of children workers would decrease by 2013 onwards. The number of
accidents of adult workers will decrease in the short term but is expected to
increase in the medium and long term. Upgraded facilities in Pakistan and
Bangladesh are indeed expected to continue to be more dangerous than facilities
located in China and in the OECD.

Accidents (number of persons) || 2015 || 2020 || 2025 || 2030

Adults fatal accidents || 2 || 2 || 2 || 3

Adults - non-fatal accidents || 973 || 1106 || 1004 || 1227

Children - fatal accidents || 0 || 0 || 0 || 0

Children - non-fatal accidents || 0 || 0 || 0 || 0

Economic impacts:

As for option B, ship owners and Member
States would be faced with additional costs linked with the implementation of
the requirements of the Hong Kong Convention more rapidly than in the baseline
scenario.

Costs and revenues - ship owner (€) || 2015 || 2020 || 2025 || 2030

Costs (€) || || || ||

Inventories new ships || 336 289 || 465 195 || 513 636 || 763 902

Inventories existing ships || 0 || 74 951 663 || 1 547 425 || 2 220 031

Certificates || 543 209 || 36 597 952 || 8 175 073 || 11 728 464

Ready for recycling certificate || 729 581 || 1 830 276 || 2 020 865 || 3 005 517

Costs for checking certificates || 342 932 || 834 496 || 1 015 293 || 1 235 259

Revenues || || || ||

Selling ships for recycling || 369 346 348 || 510 178 469 || 563 303 925 || 837 769 918

Total (+/-) || 367 394 337 || 395 498 886 || 550 031 634 || 818 816 746

Administrative costs - Member States ( ) || 2015 || 2020 || 2025 || 2030

Additional controls in the Ports || 13 498 || 637 054 || 906 816 || 1 300 974

Certificates || 342 932 || 417 229 || 507 623 || 617 601

Total || 356 430 || 1 054 283 || 1 414 439 || 1 918 575

Since there would be less fatal and
non-fatal accidents from 2013 onwards, the social costs are expected to
decrease.

Social costs (€) || 2015 || 2020 || 2025 || 2030

Total || 2 799 730 || 3 788 139 || 4 182 602 || 6 220 546

Annex XV: Option E1

This option would consist in completing the
option D by covering also the EU governmental vessels including navy vessels in
the specific Regulation transposing the Hong Kong
Convention.

The expected volume of government vessels
including navy ships until 2030 has been estimated at 0,4 million tons per year.

Maintaining the "business as
usual" situation for these ships until 2030 would mean that all the ships
are dismantled within the EU (0,2 million tons per year will be treated in AA
facilities and the rest in AAA facilities) while the current prohibition to
export these ships outside the OECD will be maintained. This option can
therefore not be compared directly to the baseline scenario (option A) since
this scenario excludes EU governmental vessels from its scope.

Including these ships under the scope of
the specific Regulation transposing the Hong Kong Convention will imply that
these ships would be allowed to be dismantled in facilities compliant with the
Hong Kong Convention worldwide. The volume of these ships dismantled in the EU
and in the OECD is expected to decrease significantly. It is however not
expected to see all these ships being dismantled outside the OECD notably to
protect certain technologies.

The stakeholders expressed differing views
as regards the extension of the Convention requirements to warships and other
government vessels on non-commercial service. Including such vessels in the
scope of an EU regulation, provided that they are allowed to use certified
facilities in third countries, would increase the demand for clean recycling
and contribute to the improvement of recycling conditions in these countries.
Others argued that all military and government vessels should be dismantled
within the EU as it could make the existence of EU dismantling facilities more
economically sustainable. It was also pointed out that these vessels would
automatically follow the requirements for clean dismantling without necessarily
being specifically covered by the requirements. However, many stakeholders
believed that specific inclusion of these vessels would serve as a means of
demonstrating the commitment of EU Member States in fully implementing the
Convention requirements and ensuring that they build a level of expertise on
the issue from a shipping and recycling perspective. Inclusion would avoid
possible discrimination between private and State-owned vessels and
consequently contribute to a better image of public authorities that should
play an exemplary role by ensuring clean dismantling of their vessels.

Like for option D, the Hong Kong Convention
is expected to enter into force in 2020. Indian facilities are expected to be
able to be upgraded so as to meet the Convention's standards by 2015 while
installations in Pakistan and Bangladesh would not be able to do so before
2020.

Dismantling locations and volumes of governmental vessels (million LDT) || 2015 || 2020 || 2025 || 2030 ||

EU facilities || || || || ||

AAA || 0,0000 || 0,0000 || 0,0000 || 0,0000 ||

AA || 0,0004 || 0,0004 || 0,0004 || 0,0004 ||

A || 0 || 0 || 0 || 0 ||

Substandard facilities not meeting Convention's criteria || 0 || 0 || 0 || 0 ||

Non EU OECD facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0 || 0 || 0 || 0 ||

A || 0,0020 || 0,0020 || 0,0020 || 0,0020 ||

Substandard facilities not meeting Convention's criteria || 0 || 1 || 2 || 3 ||

Other facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0,0089 || 0,0089 || 0,0089 || 0,0089 ||

Upgraded India || 0,0287 || 0,0121 || 0,0121 || 0,0121 ||

Upgraded Pakistan + Bangladesh || 0,0000 || 0,0167 || 0,0167 || 0,0167 ||

Substandard India || 0 || 0 || 0 || 0 ||

Substandard Pakistan + Bangladesh || 0 || 0 || 0 || 0 ||

|| || || || ||

Environmental impacts:

The dismantling of EU governmental vessels
including navy vessels will produce an average of almost 33 000 tons of
non-hazardous waste during the period 2010-2030.

Non-hazardous waste (tons) || Yearly average (2010-2030)

Steel || 29 600

Copper || 4

Non-ferrous metals || 3 200

Total || 32 804

Generation of waste and waste
management:

The global volume of navy and governmental
vessels is limited but these ships usually contain larger quantities of
hazardous waste than commercial vessels.

Hazardous waste || Units || 2015 || 2020 || 2025 || 2030

Asbestos || t not according to ESM || 0,67 || 2,61 || 1,96 || 1,31

t according to ESM || 6,80 || 4,85 || 3,64 || 2,43

|| || || || ||

PCB || kg not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

kg according to ESM || 0,01 || 0,00 || 0,00 || 0,00

|| || || || ||

Heavy metals || t not according to ESM || 0,05 || 0,05 || 0,05 || 0,05

t according to ESM || 0,23 || 0,23 || 0,23 || 0,23

|| || || || ||

Oil || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 336,37 || 336,37 || 336,37 || 336,37

|| || || || ||

Oil sludges || t not according to ESM || 148,08 || 319,86 || 319,86 || 319,86

t according to ESM || 1 502,05 || 1 330,27 || 1 330,27 || 1 330,27

|| || || || ||

Tri butyl tin || t not according to ESM || 0,51 || 0,37 || 0,23 || 0,09

t according to ESM || 0,20 || 0,14 || 0,09 || 0,04

|| || || || ||

Mercury || kg not according to ESM || 0,00 || 0,01 || 0,01 || 0,01

kg according to ESM || 0,01 || 0,01 || 0,01 || 0,01

|| || || || ||

Ozone Depleting Substances || t not according to ESM || 0,31 || 0,28 || 0,14 || 0,00

t according to ESM || 0,55 || 0,29 || 0,15 || 0,00

|| || || || ||

Total || not according to ESM || 149,62 || 323,17 || 322,24 || 321,31

|| according to ESM || 1 846,20 || 1 672,16 || 1 670,75 || 1 669,34

Atmospheric emissions

The redirection of EU Member States navy
and government owned vessels from EU recycling facilities to upgraded Asian
facilities would further result in an extra CO2-emission from the
extra transport of these ships the long way from EU waters to the Asian ship
recycling facility and transportation of the steel the opposite direction.

The extra CO2-emissions from
sailing the EU Member State navy and government vessels to Asia for recycling
and afterwards sailing the resulting steel the opposite way is estimated at 26,9
tons CO2/year, based on the following estimates:

·
Average of 25 ships transported per year,

·
Emission from navy vessels and government owned
ships: 124,3 g CO2 ship/nautical mile (assuming these ships are
equal to smaller complex ships like refrigerated cargo; average size of 9.850
GT, [155]

·
Steel returned to Europe in three shipments in
bulk carriers with an emission of 7,6 g CO2 ship/nautical mile
(assuming bulk dry carriers; average size of 81.519 GT,[156]

·
The sailing distance, e.g. London - Alang, is
8.540 nautical miles (average distance of route via the Suez Channel and around
the Cape)[157].

Social impacts:

Labour (Man years) || 2015 || 2020 || 2025 || 2030

Workers load required || 146 || 146 || 146 || 146

|| || || ||

Work load EU || 0 || 0 || 0 || 0

Work load outside EU || 146 || 146 || 146 || 146

|| || || ||

of which protected workers || 146 || 146 || 146 || 146

of which not protected workers || 0 || 0 || 0 || 0

of which children || 0 || 0 || 0 || 0

Accidents (number of persons) || 2015 || 2020 || 2025 || 2030

Adults fatal accidents || 0 || 0 || 0 || 0

Adults - non-fatal accidents || 27 || 27 || 27 || 27

Children - fatal accidents || 0 || 0 || 0 || 0

Children - non-fatal accidents || 0 || 0 || 0 || 0

Economic impacts:

Member States would be affected as ship
owners as well as flag states.

Member States acting as ship owners would
be subject to the obligation to establish and maintain inventories of hazardous
materials and to obtain the necessary certification. As shown in Annex XII, the
cost of establishing an Inventory of Hazardous Material would be significantly
higher than in the case of commercial vessels as navy vessels usually contains
more hazardous waste. On the other hand, Member States would also be allowed to
send their ships for dismantling outside the OECD thus benefiting from lower
labour costs and best prices for getting their ships dismantled.

The administrative burden would be less important
for Member States as flag states. Navy vessels have indeed specific immunities
which imply that they are not subject to the Port State Control requirements.

Costs and revenues - ship owner (€) || 2015 || 2020 || 2025 || 2030

Costs (€) || || || ||

Inventories for ships || 58 143 || 70 740 || 86 065 || 104 712

Certificates || 28 175 || 29 212 || 23 703 || 28 839

Ready for recycling certificate || 509 362 || 619 717 || 801 373 || 974 992

Revenues || || || ||

Selling ships for recycling || 10 119 078 || 12 293 457 || 14 956 870 || 18 197 320

Total (+/-) || 9 523 398 || 11 573 789 || 14 045 729 || 17 088 777

Social costs (€) || 2015 || 2020 || 2025 || 2030

Total || 76 705 || 91 280 || 111 057 || 135 117

Annex XVI: Option E2

The assessment is based on the volumes of
EU flagged ships subject to the Hong Kong Convention (above 500 GT).

This option would consist in strengthening
the option D by requiring that all ship dismantling facilities should have
impacts on human health and on the environment comparable to the European ones.
This implies that ships would be allowed to be dismantled in the EU, in China
and in Turkey (investments would be needed for the facilities of this country
so as to reach EU standards by 2015).

Dismantling locations and volumes (million LDT) || 2015 || 2020 || 2025 || 2030 ||

EU facilities || || || || ||

AAA || 0,0009 || 0,0010 || 0,0009 || 0,0011 ||

AA || 0,0129 || 0,0147 || 0,0133 || 0,0163 ||

A || 0 || 0 || 0 || 0 ||

Substandard facilities not meeting Convention's criteria || 0 || 0 || 0 || 0 ||

Non EU OECD facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 0,08376194 || 0,07601524 || 0,09292145 || 0 ||

A || 0,0000 || 0,0000 || 0,0000 || 0,0000 ||

Substandard facilities not meeting Convention's criteria || 0 || 1 || 2 || 3 ||

Other facilities || || || || ||

AAA || 0 || 0 || 0 || 0 ||

AA || 1,3725 || 1,5605 || 1,4162 || 1,7312 ||

Upgraded India || 0,0000 || 0,0000 || 0,0000 || 0,0000 ||

Upgraded Pakistan + Bangladesh || 0,0000 || 0,0000 || 0,0000 || 0,0000 ||

Substandard India || 0 || 0 || 0 || 0 ||

Substandard Pakistan + Bangladesh || 0 || 0 || 0 || 0 ||

|| || || || ||

Environmental impacts:

Generation of waste and waste
management:

The generation of non hazardous will be the
same as for option A and can be found in Table 22.

The amount of hazardous waste generated are
similar than in option A but less hazardous waste will be managed in an
environmentally sound manner.

Hazardous waste || Units || 2015 || 2020 || 2025 || 2030

Asbestos || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 272,53 || 309,87 || 210,91 || 171,88

|| || || || ||

PCB || kg not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

kg according to ESM || 0,38 || 0,34 || 0,22 || 0,17

|| || || || ||

Heavy metals || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 10,14 || 11,53 || 10,46 || 12,79

|| || || || ||

Oil || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 12 277,61 || 13 959,48 || 12 668,44 || 15 485,97

|| || || || ||

Oil sludges || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 60 229,81 || 68 480,46 || 62 147,07 || 75 968,92

|| || || || ||

Tri butyl tin || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 25,70 || 21,25 || 12,05 || 5,89

|| || || || ||

Mercury || kg not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

kg according to ESM || 0,58 || 0,66 || 0,60 || 0,74

|| || || || ||

Ozone Depleting Substances || t not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

t according to ESM || 31,54 || 23,90 || 10,85 || 0,00

|| || || || ||

Total || not according to ESM || 0,00 || 0,00 || 0,00 || 0,00

|| according to ESM || 72 847,33 || 82 806,49 || 75 059,78 || 91 645,45

Atmospheric emissions

The atmospheric emissions will be the same
as the ones in option A and can be found in Table 23.

Other environmental impacts

Social impacts:

Labour (Man years) || 2015 || 2020 || 2025 || 2030

Workers load required || 2006 || 2281 || 2070 || 2530

|| || || ||

Work load EU || 10 || 11 || 10 || 13

Work load outside EU || 1996 || 2269 || 2059 || 2517

|| || || ||

of which protected workers || 2006 || 2281 || 2070 || 2530

of which not protected workers || 0 || 0 || 0 || 0

of which children || 0 || 0 || 0 || 0

Accidents (number of persons) || 2015 || 2020 || 2025 || 2030

Adults fatal accidents || 1 || 1 || 1 || 1

Adults - non-fatal accidents || 240 || 273 || 248 || 303

Children - fatal accidents || 0 || 0 || 0 || 0

Children - non-fatal accidents || 0 || 0 || 0 || 0

Economic impacts:

As for option
D, option E2 would imply an early implementation of the Convention rules at EU
level for ships flying EU flags. It would create additional costs for ship owners
and administration in the short and medium term.

Option E2 would
have a significant impact on the revenues of the shipowners since their ships
would only be allowed to be dismantling in facilities equivalent to the EU
ones.

Costs and revenues - ship owner (€) || 2015 || 2020 || 2025 || 2030

Costs (€) || || || ||

Inventories new ships || 336 289 || 465 195 || 513 636 || 763 902

Inventories existing ships || 0 || 74 951 663 || 1 547 425 || 2 220 031

Certificates || 543 209 || 36 597 952 || 8 175 073 || 11 728 464

Ready for recycling certificate || 729 581 || 1 830 276 || 2 020 865 || 3 005 517

Costs for checking certificates || 342 932 || 834 496 || 1 015 293 || 1 235 259

Revenues || || || ||

Selling ships for recycling || 312 508 124 || 432 298 014 || 477 313 691 || 709 881 530

Total (+/-) || 310 556 113 || 317 618 431 || 464 041 400 || 690 928 357

Administrative costs - Member States (€) || 2015 || 2020 || 2025 || 2030

Additional controls in the Ports || 13 498 || 637 054 || 906 816 || 1 300 974

Certificates || 342 932 || 417 229 || 507 623 || 617 601

Total || 356 430 || 1 054 283 || 1 414 439 || 1 918 575

Since the number of accidents will be
significantly reduced, thereby limiting strongly the social costs.

Social costs (€) || 2015 || 2020 || 2025 || 2030

Total || 699 557 || 967 709 || 1 068 478 || 1 589 086

Annex XVII: Option E3 list of certified facilities

General considerations:

The Communication proposing an EU Strategy on ship dismantling identified
that the (at the time draft) Hong Kong Convention will rely in particular on a
system of surveys and certificates for ships and on authorisations for ship
recycling facilities granted by the competent authorities of recycling states. It
highlighted a potential weakness of the control system linked with existing
governance problems in some developing countries and the limited non-compliance
mechanism in the Hong Kong Convention.

Depending on the final provisions on auditing and certification
included in the Hong Kong Convention, the Commission announced that it would further
assess the feasibility of developing a certification and audit scheme for ship recycling
facilities worldwide and would evaluate how it can be ensured that a maximum
number of ships, including ships flying the flags of Member States go for
dismantling to facilities certified and audited

The Communication also proposed to provide guidance to shipowners
with the publication of a list of "green" ship dismantling facilities
worldwide could fill remaining knowledge gaps and provide benchmarks.

The Hong Kong Convention, as adopted, contains a voluntary
audit mechanism but no compliance mechanism per se. According to Regulation
15(3), Parties have to establish a mechanism for ensuring that Ship Recycling
Facilities comply with the requirements of the Convention including the
establishment and effective use of inspection, monitoring and enforcement
provisions, including powers of entry and sampling. A Party can voluntarily
decide to have its mechanism audited either by its authorities (self-audit) or
by an organization recognized by itself, taking into account guidelines
developed by the Organization. The results of these audits should be
communicated to the IMO. The existence of an audit is positive but does not
resolve all the potential concerned related to governance concerns since the
audit will be voluntary and mainly under the control of the recycling
countries.

Public consultation and expert
workshops:

Stakeholders were consulted on the possible positive and negative
impacts of the introducing an EU audit and certification scheme as well as on
the organisations and actors which could be playing a key role in such scheme.

In the Communication, the Commission referred to a study undertaken
on behalf of EMSA which proposed an EU business-to-business voluntary
certification and audit scheme. Several stakeholders questioned the effect of a
voluntary scheme and argued that the scheme should be made mandatory.

There were diverging views on the criteria which should be used to
certify and audit facilities. Some considered that this scheme should rely on
the requirements of the Hong Kong Convention only. Others proposed to introduce
additional criteria related to transparency, human health and the environment. The
same responses were received regarding the establishment of a list of green and
safe facilities.

Almost all stakeholders agreed that the national authorities and/or
the classification societies/accreditation organisations would have a key role to
play in such an audit and certification scheme. It was suggested that this
should be done by an independent supervision and control organisation, while
the State’s role would be to control implementation. Such an organisation must
be independent from the construction and demolition sector. Two of the
stakeholders specifically mention the European Maritime Safety Organisation
(EMSA) as having a key role to play within such system. One stakeholder
proposes that local trade unions should play a key role in auditing and
improving standards and ‘giving voice to workers’.

At the same time, some stakeholders argued that an EU specific third
party certification and audit scheme could have a counterproductive effect given
some recycling States' insistence on sovereignty rights during the negotiations
of the Hong Kong Convention. Finally, a few stakeholders argue that such EU
rules could result in the reflagging of EU ships as a result of lack of
compliant recycling capacity.

Ensuring that ships are going to
authorized and upgraded facilities only in the short and medium term.

As explained in Annex XIII, opening the
possibility for ships to be dismantled worldwide prior to the entry into force
of the Hong Kong Convention without controlling where they are going would
imply significant negative environmental and health impacts. This option
therefore aims at ensuring that EU ships are directed to facilities which are
authorized by their authorities and able to respect the requirements of the
Hong Kong Convention in terms of protection of the human health and the
environment.

In 2010, all dismantling facilities were
closed in Bangladesh because none of them had received the necessary authorization
("environmental clearance") from the Ministry of Environment.
Nowadays, all recycling countries request their facilities to be authorized in
order to operate.

However, as explained before, investments
will be needed in facilities located in India, Pakistan and Bangladesh in order
for their facilities to be upgraded so as to be compliant with the Hong Kong
Convention.

Improving transparency in the short,
medium and long term

As explained in Annex XIV ship recycling
countries which will be Party to the Hong Kong Convention will have to provide
each year to the Secretariat of the IMO:

- a list of the ship recycling facilities
authorized in accordance with the Convention and operating under heir
jurisdiction,

- an annual list of the ships recycled
within the jurisdiction of that Party,

- actions taken towards ship recycling
facilities under the jurisdiction of that Party.

This obligation would however only be
applicable after the entry into force of the Hong Kong Convention.

Moreover the above mentioned information is
limited and does not provide for a certain number of data which are important
for shipowners when selecting their dismantling facilities as well as for flag
state during the final survey before allowing the ship to go for dismantling:

(a)
the capability of the ship recycling facility in
terms of size of ship (length, breadth, lightweight),

(b)
the maximum authorized dismantling capacity,

(c)
the ability of the facility to deal with
hazardous materials present on bard ships: authorization to manage these waste,
process used in the facility or in downstream facilities.

These elements would be necessary in order
to allow the shipowners to make an informed decision and to avoid problems at
the time of delivery. For example, if a facility is not authorized to deal with
some type of hazardous waste contained in the ship (as reflected in the
Inventory of Hazardous Materials), the ship will need to be pre-cleaned before
being delivered to the yard.

There will not be any additional costs for
the recycling facilities to compile this information compared with the baseline
scenario since they have to be provided to their competent authorities in the
document of authorization to conduct ship recycling (see Appendix 5 of the Hong
Kong Convention).

They would also be needed by flag states
when conducting their final survey prior to dismantling. During this survey,
the flag state will have to verify:

(1)
that the IHM is in accordance with the
requirement of the Convention taking into account the guidelines,

(2)
whether the Ship Recycling Plan developed by the
Ship Recycling Facility corresponds to the IHM and contains information about
safe for entry and safe for hot work conditions

(3)
whether the facility is authorized in accordance
with the Convention.

Taking into account these comments and the relevant studies, the
audit and certification scheme should:

·
Be mandatory otherwise there would be little
incentive to use certified and audited facilities,

·
Involve third party auditing[158] while respecting sovereignty rights as much as possible,

·
Might include additional requirements compared
to the Hong Kong Convention while ensuring the availability of sufficient
recycling capacity,

·
Be performance based[159] and
not procedure based only so as to secure an effective improvement of the human
health and environmental impacts of ship dismantling,

·
Improve transparency with the publication of a
list of certified ship dismantling facilities operating worldwide,

·
Be undertaken by people with a strong expertise
on health and the environment and about ship recycling practices.

Introducing an obligation for EU flagged
ships to be dismantled in a list of audited and certified facilities worldwide
only.

EU flagged ships would be allowed to be
dismantled only in a list of audited and certified ship dismantling facilities.
This list would be compiled by the European Commission and would contain the
data and information indicated above regarding ship dismantling facilities.

In order to be added on this list, ship dismantling facilities would
have to:

- be audited by EU's recognized organisations and receive a
"document of compliance" ensuring the facility's compliance with the
requirements concerning ship recycling facilities contained in the Ship
Recycling Regulation,

- transmit the information requested by the Hong Kong Convention to
the Commission as well as relevant information regarding any limitation
regarding the type of ships and/or hazardous materials that they can accept
(see above).

In order to ensure the expertise of the EU recognized organisation
about ship recycling, the Ship Recycling Regulation would contain a provision
amending the Annex to the council directive 94/57/EC containing the minimum
criteria for recognized organizations in order to add references to expertise
on ship dismantling and its human health and environmental impacts.

Environmental and social impacts

The quantitative environmental and social impacts will be similar to
the ones of option D. By applying this scheme the EU would increase
transparency and compliance by providing a tool to monitor that the facilities
to which EU-flagged vessels are sent for dismantling comply with the applicable
standards and rules on safe and environmentally sound recycling of ships. The
participating facilities themselves would have a better control of operations
and of their compliance with international standards, the rules of the Hong
Kong Convention and also national legislation. Moreover there would be an
economical incentive for these facilities to be in the scheme so as to be
legally authorized to receive EU flagged ships.

The certificate would give them an incentive to improve
environmental and safety performance. Certified facilities would serve as a
benchmark for the industry and for national competent authorities.

Significant impacts on the environment and social conditions in the
EU are not likely.

Economic impacts

All economic impacts but the ones of
shipowners will be similar to the ones of option D.

The additional auditing of performance indicators and the
classification would produce costs for recycling facilities in the range of
20,000-40,000 € plus internal personnel costs of 1-2 man years (2160-4320 €).

A study undertaken on behalf of the Commission125
developed a list of criteria based on the Hong Kong Convention as well as a
first list of 25 facilities with a total dismantling capacity of 2,4 million
LDT. This capacity will be largely sufficient to treat all EU flagged ships (the
maximum volume of EU flagged ships to be dismantled in the period 2012-2030 is
of 1,88 million LDT).

Considering that during the 5 years during
which they will be certified, these facilities will treat a yearly average of
1,6 million LDT of EU-flagged ships. The auditing cost would represent 0.139
€/LDT so negligible compared to the current dismantling prices. It is therefore
not expected to have a noticeable impact on transport costs or on consumers

Costs and revenues - ship owner (€) || 2015 || 2020 || 2025 || 2030

Costs (€) || || || ||

Inventories new ships || 336 289 || 465 195 || 513 636 || 763 902

Inventories existing ships || 0 || 74 951 663 || 1 547 425 || 2 220 031

Certificates || 543 209 || 36 597 952 || 8 175 073 || 11 728 464

Ready for recycling certificate || 729 581 || 1 830 276 || 2 020 865 || 3 005 517

Costs for checking certificates || 342 932 || 834 496 || 1 015 293 || 1 235 259

Audit and certification || 202 210 || 229 910 || 208 647 || 255 051

Revenues || || || ||

Selling ships for recycling || 356 838 522 || 510 178 469 || 563 303 925 || 837 769 918

Total (+/-) || 354 684 301 || 395 268 977 || 549 822 987 || 549 776 583

[1]               Regulation (EC) No 1013/2006 of the European
Parliament and of the Council of 14 June 2006 on shipments of waste. More
information about the Basel Convention and the Waste Shipment Regulation are
provided for in Annex III

[2]               In 2009, more than 90 % of EU flagged ships have been
dismantled outside the OECD mostly in South Asia.

[3]               Communication COM (2008) 767 final of 19 November
2008 presenting an "EU strategy for better ship dismantling, and its
impact assessment in Commission Staff Working Document SEC(2008) 2846

[4]               The Hong Kong International Convention for the safe
and environmentally sound recycling of ships was adopted in May 2009 by the
International Maritime Organization.

[5]               The NGO Platform on Ship Breaking is a global
coalition of 15 environmental, human and labour rights' organisations.

[6]               Lloyd's register

[7]               ECSA represents all the European shipowners as it is
composed of the national shipowners associations from European Member States.
It represents 40 % of the shipowners worlwide.

[8]               The International Chamber of Shipping (ICS) is the
principal international trade association for the shipping industry,
representing all sectors and trades. ICS membership comprises national shipowners’
associations whose member shipping companies operate two thirds of the world’s
merchant tonnage.

[9]               http://ec.europa.eu/environment/waste/ships/pdf/summary%20of%20contributions.pdf

[10]             http://ec.europa.eu/environment/waste/ships/index.htm

[11]             DIVEST (Dismantling of Vessels with Enhanced Safety and
Technology) is a Research and Technology Development collaborative project
funded by the European Union as part of the 7th Framework Programme for
Research, Technological Development and Demonstration
(http://www.divest-project.eu/).

[12]             COWI study for DG Environment: "Support to the
impact assessment of a new legislative proposal on ship dismantling" Final
report of December 2009

[13]             For more information about these provisions, see Annex
IV.

[14]             http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2009-0195+0+DOC+XML+V0//EN&language=EN

[15]             http://eescopinions.eesc.europa.eu/EESCopinionDocument.aspx?identifier=ces\nat\nat425\ces877-2009\_ac.doc&language=EN

[16]             http://www.consilium.europa.eu/uedocs/cms\_data/docs/pressdata/en/envir/110626.pdf

[17]             See
the Annex 10 of the Rapport de la Mission Interministérielle portant sur le
Démantèlement des Navires civils et militaires en fin de vie

[18]             COWI/DHI for the European Commission, DG Environment,
Study on "Ship dismantling and pre-cleaning of ships", Final report
of June 2007, published on the Commission website at: http://ec.europa.eu/environment/waste/ships//index.htm

[19]             Further explanations are provided for in Annex VII.

[20]             For several years, the number of ships going for
dismantling was limited to 200 to 600 per year. According to data provided by
HIS Fairplay, 744 and 1299 ships have respectively been dismantled in 2008 and
2009. According to the broker N. Cotzias, 1256 ships have been sent for
dismantling in 2010: http://www.cotzias.gr/reports/overcapacity/NCSCOCREP2010\_%28JAN-DEC2010COMP%29.pdf.

[21]             "beaching” means that the vessels are driven —
usually under their own steam — onto sandy beaches and broken up without heavy
machinery and without other containment than the hull of the ship itself

[22]             COWI study for DG Environment: " Support to the
impact assessment of a new legislative proposal on ship dismantling" Final
report of December 2009

[23]             Calculation made by DG ENV based on data provided by
IHS Fairplay.

[24]             See Table 4.

[25]             The existing information has been compiled and is
summarized in page 43 of the study supporting the impact assessment (see
footnote 12)

[26]             On 7 March 2011, the High Court authorized the yards to
be temporarily reopened provided that a certain number of conditions are met.
Requirements apparently include pre-cleaning of tanks and holds before being
entered for cutting to ensure they are gas-free, a prohibition to employ
children workers and the obligation for all workers to be trained at an
institute that is to be set up under supervision from the Bangladesh Marine
Academy. A team of engineers will be required to be onsite during the
dismantling process to monitor safety and environmental conditions. No
dismantling would be able to take place after dusk and yards must provide a
separate rest and eating area for workers. At this stage, the judgment is not
available is writing.

[27]             Report from International Federation of Human Rights
"Childbreaking Yards – Child Labour in the Ship Recycling Industry in
Bangladesh", 2008 at http://www.fidh.org/IMG/pdf/bgukreport.pdf

[28]             Lloyd's List of 8 September 2006.

[29]             Soil samplings in dismantling yards in Bangladesh and
Pakistan showed large contamination notably by heavy metals. See the study from
the World Bank "The Ship Breaking and Recycling Industry

in Bangladesh
and Pakistan", December 2010.

[30]             Study from the World Bank "The Ship Breaking and
Recycling Industry in Bangladesh and Pakistan", December 2010.

[31]             See 18.

[32]             Results of investigations on site by IMO and EU experts
in January 2008; cf. also Third Progress Report Identification Mission for EC
support in the area of Environment and Disaster Management Bangladesh, J.
Caldecott / A. Karim, 25 February 2008.

[33]             For example, emission of dioxins produced by the open
burning of cables or by the processing of painted metal in the re-rolling
mills.

[34]             Presentation to IMO National Workshop in Mumbai, 8-10
January 2008; data also published at: http://www.gmbports.org/env\_issues.htm ,
Environment / Alang Sosia Shipbreaking Yard.

[35]             The costs associated with the remediation of closed
yards were estimated at 10 millions dollars for Bangladesh. See on page 83 of
the Study from the World Bank "The Ship Breaking and Recycling Industry in
Bangladesh and Pakistan", December 2010.

[36]             Thoroughly cleaned ships of all hazardous materials
could be legally exported to non-OECD. But this is in practice rarely happens
because of the costs of pre-cleaning and towing operations (see footnote 31).

[37]             The weight of a scrap ship is often expressed in light
displacement tonnes (LDT) which is calculated without cargo, fuel, ballast
water etc and roughly equals the steel weight of a vessel.

[38]             See the list on page 175 of the BIO intelligence
service study for DG Environment:" Feasibility of a list of “green and
Safe” ship dismantling facilities and of a list of ships likely to go for
dismantling". The facility located in Italy does not have a waste management
license and has therefore not been retained in the calculation of the EU
recycling capacity.

[39]             See page 68 of the study referred to in footnote 31.

[40]             See: http://www.sgmer.gouv.fr/IMG/pdf/Annex\_3\_Dismantling\_site\_in\_Europe\_and\_OECD.pdf

[41]             See footnote 31. The indicated volume is an average.
Larger volumes are expected to be sent for dismantling in particular in 2015
due to the phase-out of single hull tankers.

[42]             For more detailed information see Annex V and Annex VII.

[43]             As explained in the IA supporting the EU Strategy on
ship dismantling, government vessels are composed of navy ships and of
state-owned ships for civilian purposes with a respective tonnage of 300 000
and 100 000 LDT over the next decade. There exist also a high number of small
ships used by navies or other government services which, however, are normally
scrapped near their berth.

[44]             See footnote 42.

[45]             See COWI study for DG Environment: " Support to
the impact assessment of a new legislative proposal on ship dismantling" http://ec.europa.eu/environment/waste/ships/pdf/final\_report080310.pdf

[46]             Communication COM (2008) 767 final of 19 November 2008
presenting an "EU strategy for better ship dismantling, and its impact
assessment in Commission Staff Working Document SEC(2008) 2846

[47]             According to the study from the World Bank "The
Ship Breaking and Recycling Industry in Bangladesh and Pakistan", December
2010, the daily wage in Bangladesh is of TK 225 (2,25 €) and Rs 350 (2,78 €) in
Pakistan.

[48]             GT stands for gross tons which is the measure of the
overall size (internal capacity) of a ship.

[49]             For information about EU flagged and EU owned ships, please
consult Table 11 in Annex VII.

[50]             For detailed information about the waste management
practices in the dismantling countries and their compliance with EU waste
management requirements and with the obligation of the Hong Kong Convention see
pages 47 to 61 of the COWI study for DG Environment: " Support to the
impact assessment of a new legislative proposal on ship dismantling" Final
report of December 2009 and pages 31 to 33 of the World Bank study "the
Ship Breaking and Recycling Industry in Bangladesh and Pakistan" of
December 2010.

[51]             See the Annex II of the report of the French
Inter-departmental Committee on the Dismantling of Civilian and Military
End-of-Life Ships and BIO intelligence service study for DG Environment:"
Feasibility of a list of “green and Safe” ship dismantling facilities and of a
list of ships likely to go for dismantling" Final report of January 2010.

[52]             Detailed information about the dismantling prices in
2009 is provided in Annex VII.

[53]             For detailed information about the waste management
practices in the dismantling countries and their compliance with EU waste
management requirements and with the obligation of the Hong Kong Convention see
pages 47 to 61 of the COWI study for DG Environment: " Support to the
impact assessment of a new legislative proposal on ship dismantling" Final
report of December 2009 and pages 31 to 33 of the World Bank study "the
Ship Breaking and Recycling Industry in Bangladesh and Pakistan" of
December 2010.

[54]             http://bargad.files.wordpress.com/2011/06/site-visit-report-of-smc-to-alang-on-24-1-2011.docx

[55]             For more information see Annex XI.

[56]             As noted by one stakeholder " Ships change hands
many times in their life, moving down the ‘food chain’ up to a dozen times in a
life that often exceeds thirty years. Ships are mobile and can re-flag easily,
i.e. change nationality".

[57]             See Table 18 and Table 19 in Annex VIII.

[58]             See Table 15 in Annex VII.

[59]             According to Cotzias, the prices ranges of Turkey,
India, Bangladesh and Pakistan were respectively in 2009 : [140-265],
[106,720], [220,393], [90,340].

[60]             According to data published by Cotzias, ships sold to
cash buyers represented 1,3 % of all large commercial ships in 2009 and 3,5% of
EU flagged ships.

[61]             See article 3 of the Hong Kong Convention.

[62]             The number and tonnage of ships that went for recycling
in the years 2004-2007 has stayed well below the forecasts that were made in
preceding years. Whereas the recycled tonnage was 10 million gross tons (GT)
and more in any year between 1993 and 2003, the figures have not exceeded 5 million
GT in the years since 2005. Parallel to this, the average age of a dismantled
ship has risen from less than 27 years in the 1990s to more than 32 in 2006.

[63]             The ratification of new IMO Conventions take time as
can be seen from the table showing the state of ratification
(http://www.imo.org/About/Conventions/StatusOfConventions/Documents/status-x.xls
).

[64]             Workshop organized in EMSA in June 2011.

[65]             Council conclusions on an EU Strategy for better ship
dismantling of 21 October 2009,

[66]             See decision IX/30 on dismantling of ships adopted
during the 9th Conference of the Parties in June 2008: http://www.basel.int/meetings/cop/cop9/docs/39e-rep.pdf#ix30

[67]             " As a preliminary assessment and taking a life
cycle perspective, it can therefore be concluded that the Hong Kong Convention
appears to provide a level of control and enforcement at least equivalent to
that one provided by the Basel Convention for ships which are waste under the
Basel Convention and for ships to which the Hong Kong Convention applies and to
ships treated similarly pursuant to article 3(4) of this latter
Convention".

[68]             For more information about reflagging (including the
costs), see Annex VI.

[69]             See
http://bargad.files.wordpress.com/2011/06/site-visit-report-of-smc-to-alang-on-24-1-2011.docx

[70]             Guidelines supporting the Hong Kong Convention.

[71]             The Guidelines for the development of the Inventory of
Hazardous Materials and the Guidelines for the development of the Ship
Recycling Plan are available on this website: http://ec.europa.eu/environment/waste/ships/index.htm

[72]             Guidelines focusing in particular on the facilities'
authorization and procedures to ensure their safe and sound operations.

[73]             The project is presented on this website http://www.divest-project.eu/Home.aspx. In
addition, an exchange platform has been created and is accessible to the
persons involved in the project as well as to the general public.

[74]             Information is provided on this website: http://www.recyship.com/ .

[75]             For more information, see http://www.basel.int/ships/gpssr/index.html

[76]             See point 9 of the Council Conclusions on an EU
Strategy for better ship dismantling adopted on 21 October 2009 available at: http://www.consilium.europa.eu/uedocs/cms\_data/docs/pressdata/en/envir/110626.pdf

[77]             As highlighted by several stakeholders (shipowners'
associations, Member States) it would be impossible to impose the whole set of
reporting requirements to ship recycling facilities located in countries which
are not yet Contracting Parties to the Hong Kong Convention.

[78]             As explained in section 3.6, shipowners themselves are
already using such contracts.

[79]             These facilities employing on the following methods:
afloat, landing, slipway of docking, and corresponding to the medium level (AA)
of the theoretical and safety benchmark for accidents and facilities. These
facilities would not employ children workers and would ensure that all the
hazardous waste would be treated in the facility and in downstream facilities
according to EU standards.

[80]             Percentage of waste generated by ship recycling treated
in an environmentally sound manner (ESM) for each option compared to the
baseline option. In the short term, this baseline option considers that the
legislation would continue to be circumvented and that ships would end up in
substandard facilities located in Bangladesh and Pakistan which can not ensure
the ESM of waste. In the medium and long term, facilities located in these
countries are expected to have been upgraded and meet the Hong Kong
Convention's requirement. A better ESM of the waste generated in these
countries is therefore expected.

[81]             Expressed in man years

[82]             Number of persons.

[83]             Expressed in €.

[84]             Mainly Malta, Cyprus, Greece, Spain and Bulgaria see

Table 12 in Annex VII.

[85]             Malta, Cyprus, Greece, Bulgaria and the UK see

Table 12 in Annex VII.

[86]             These countries are identified in

Table 12 in Annex VII.

[87]             Detailed explanations can be found in Annex X.

[88]             For more information about the methodology see Annex V

[89]             Based on the hypothesis that all ships dismantled in
the EU and in Turkey follow the requirements of the Waste Shipment Regulation
while the ships dismantled elsewhere do not. Detailed estimates about the
administrative costs linked with the Waste Shipment Regulation have been
provided in the context of an EU Project on baseline measurement and reduction
of administrative costs (http://ec.europa.eu/enterprise/policies/better-regulation/documents/files/abs\_development\_reduction\_recommendations\_en.pdf).
The administrative burden associated with a total of 507 000 shipments of waste
was estimated at 124 914 800 euros.

[90]             It is not unusual to have one-ship companies involved
in shipping but these are usually in fact composed of a large group of
shareholders with different names, legal addresses and sometimes in different
countries.

[91]             This was also recognized by Parties to the Basel
Convention when they noted that " duplication of regulatory instruments
that have the same objective should be avoided" (see decision IX/30).

[92]             For more details about the calculations, see Annex XV.

[93]             Recycling capacity in terms of ship's size (length,
breadth, lightweight), maximum authorized recycling capacity, information about
the management of hazardous waste in and outside of the recycling facility.

[94]             The international Convention on Standards of Training,
Certification and Watchkeeping for Seafarers (STCW) has been adopted
in 1978 by the IMO and sets the standards of competence for seafarers
internationally. .

[95]             See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:131:0047:0056:EN:PDF

[96]             Costs have been estimated based on the labour costs in
China see Table 14 in Annex VII

[97]             A list of the guidelines supporting the Hong Kong
Convention is provided for in Annex IV.

[98]             Regulation (EC) no 1013/2006 of the European Parliament
and of the Council of 14 June 2006 on shipments of waste.

[99]             COP 10 will take place from 17 to 21 October 2011 in
Colombia.

[100]            See decision VII/26 : http://www.basel.int/meetings/cop/cop8/docs/16e.pdf#viii11

[101]            See decision IX/30: http://www.basel.int/meetings/cop/cop9/docs/39e-rep.pdf#ix30

[102]            See http://www.basel.int/ships/ix30-comments/comments/eu-2009-01-30.doc.

[103]            See decision OEWG VII/12: http://www.basel.int/meetings/oewg/oewg7/docs/21e.pdf#vii12

[104]            IMO Hong Kong International Convention for the safe and
environmentally sound recycling of ships, 2009, (SR/CONF/45) adopted 19 May
2009.

[105]            The text of the Hong Kong Convention is available here: http://ec.europa.eu/environment/waste/ships/pdf/Convention.pdf

[106]            Data provided by the International Maritime Organisation
based on data from ISH Fairplay.

[107]            http://ec.europa.eu/environment/waste/ships/index.htm

[108]            Study on the "Recovery of small vessels not used in
the fishing trade" undertaken by COWI for DG Environment.

[109]            For more explanations about the signification of the
word "as if", see the part of this report dealing with change of
flag.

[110]            571 ships out of 1299 dismantled in 2009

[111]            763 ships out of 1299 dismantled in 2009

[112]            See Annex VIII.

[113]            In the projections of the future dismantling volumes,
the calculated average lifetimes for 2008 and 2009 have been applied (See Table
7 in Annex VII). The calculated average lifetimes of the various vessels types
are assumed constant during the forecast period.

[114]            Study by COWI/Litehauz for EMSA on the Certification of
Ship Recycling Facilities. September 2008.
https://extranet.emsa.europa.eu/index.php?option=com\_docman&task=doc\_download&gid=620&Itemid=193

[115]            Available at: http://ec.europa.eu/environment/waste/ships/pdf/Appendix\_A.xls.

[116]            Norwegian Ministry of the Environment, 1999.
Decommissioning of Ships. Environmental Protection and Ship Demolition
Practices. Norwegian Ministry of the Environment and Norwegian Shipowners
Association. Technical Report. Report No 99-3065 Revision No. 03.

[117]            Notification received by the DG Environment for the
transboundary movement of the Clemenceau.

[118]            For accidents the number of days where the worker is not
able to work will be calculated as lost earning those days, which is a cost to
the society. The calculations do not include medical cost related to the
accidents etc., as these are not available. The effects of leaving out these
costs are however estimated insignificant.

[119]            It is expected that the extra requirements for the
dismantling facilities will lead to a reduction in the relative number of fatal
accidents at the recycling facilities. These deaths will be valued by using the
unit cost from the Impact Assessment. There are two main approaches to value
life. The Value of Statistical Life (VSL) method estimates what the willingness
to pay for a life is, whereas the Value of Life Year (VOLY) method estimates
the value of living one year longer. When using VSL the value of a life is the
same in the entire world whereas using VOLY combined with local information of
life expectancies, one will achieve variation over the world. Here the VSL
method is applied. However as the majority of accidents occur in the lower
income regions in Asia, the VSL value of 980 000 EUR is applied in the
analyses. This corresponds to the median VSL value indicated in the European
Commission Impact Assessment Guidelines 15 January 2009, SEC(2009) 92.

[120]            See Table 16 in Annex VII

[121]            In Lloyd's List dated 8 December 2009 "Last rites
of passage" and "Short-term registration looks set for bumper
year"

[122]            Mikelis, Nikos, 2009, “Entry into force conditions of
the Hong Kong Convention”, Workshop on Ship recycling and the Hong Kong
Convention, 23-24 October 2009 [Available online: www.denizcilik.gov.tr/dm/dosyalar/IMO%20Mr%20Mikelis.pdf]

[123]            See Table 13 in Annex VII.

[124]            Calculated as the difference between the percentages of
EU owned and EU flagged ships at the time of dismantling in the dismantling
country compared to the difference between the percentages of EU owned and EU
flagged ships of the active fleet.

[125]            BIO intelligence service study for DG Environment:"
Feasibility of a list of “green and Safe” ship dismantling facilities and of a
list of ships likely to go for dismantling" Final report of January 2010

[126]            United Nation Conference on Trade and Development,
Review of Maritime Transport 2010 available at http://www.unctad.org/en/docs/rmt2010\_en.pdf

[127]            COWI for the European Commission, DG Transport and
Energy, Study on "Oil Tanker Phase Out and the Ship Dismantling
Industry", 2004, published at: http://europa.eu.int/comm/transport/maritime/safety/doc/prestige/2004\_06\_dismantling\_study\_en.pdf

[128]            Calculations from DG ENV based on data provided by IHS
Fairplay LTD, January 2011.

[129]            Robin de Bois, January 18, 2011, Information and
analysis bulletin on ship demolition #22 From October 16th to December 31th
[Available online:  http://www.robindesbois.org/english/shipbreaking22.pdf
]

[130]            The Shipbuilders' Association of Japan, Shipbuilding
Statistics, March 2011

[131]            GT stands for gross tons which is the measure of the
overall size (internal capacity) of a ship.

[132]            UNCTAD, review of Review of Maritime Transport 2009.
Situation as of the 1 January 2009

[133]            Source: Eurostat, ILO

[134]            Source: Study "Ship dismantling: a status report on
South Asia" published in the context of the EU-India Action Plan Support
Facility (environment), 2001 available at: http://www.apsfenvironment.in/images/stories/APSF\_ship\_dismantling\_report.pdf

[135]            Source see footnote 30

[136]            Note: it has been considered than there are 24 working
days per month

[137]            Source: N. Cotzias Shipping Group, S&P monthly
report December 2009 except for "Others" for which, conservatively,
the dismantling price proposed for EU in the COWI study for DG Environment:
" Support to the impact assessment of a new legislative proposal on ship
dismantling" Final report of December 2009

[138]            Volume calculated by DG Environment following
methodology explained in Annex V

[139]            Sources: The Shipbuilders' Association of Japan,
Shipbuilding Statistics, March 2011 and IHS Fairplay.

[140]            Regulation (EC) No 850/2004 of the European Parliament
and of the Council of 29 April 2004 on persistent organic pollutants and
amending Directive 79/117/EEC, OJ L 229, 29.6.2004, p. 5.

[141]            Regulation (EC) No 782/2003 of the European Parliament
and of the Council of 14 April 2003 on the prohibition of organotin compounds
on ships, OJ L 115, 9.5.2003, p. 1.

[142]            Regulation (EC) No 2037/2000 of the European Parliament
and of the Council of 29 June 2000 on substances that deplete the ozone layer,
OJ L 244, 29.9.2000, p. 1.

[143]            Directive 2006/122/EC of the European Parliament and of
the Council of 12 December 2006 amending for the 30th time Council Directive
76/769/EEC on the approximation of the laws, regulations and administrative
provisions of the Member States relating to restrictions on the marketing and
use of certain dangerous substances and preparations (perfluorooctane
sulfonates), OJ L 372, 27.12.2006, p. 32.

[144]            Data from the Danish Building Research Institute' PC
tool (BEAT) for performing environmental assessment of products, building
elements and buildings

[145]            On account of various EU directives, most recently
Commission Directive 1999/77/EC of 26 July 1999 adapting to technical progress
for the sixth time Annex I to Council Directive 76/769/EEC on the approximation
of the laws, regulations and administrative provisions of the Member States
relating to restrictions on the marketing and use of certain dangerous
substances and preparations (asbestos), OJ L 207, 6.8.1999, p. 18.

[146]            See the article "Netherlands warns IMO of asbestos
in newbuildings" in Lloyd's List of 20/07/2010.

[147]            Assuming similar incident rates for children and adults

[148]            A detailed presentation of the structure of the Hong
Kong Convention is provided for in Annex IV.

[149]            The complete list of the guidelines can be found in Annex
IV.

[150]            Gujarat Maritime Board, presentation to IMO National
Workshop on the IMO Ship Recycling Convention, Mumbai, 8-10 January 2008.

[151]

[152]            Assuming similar incident rates for children and adults

[153]            Costs increase after five years as existing ships must
then also certify for the materials in Table B/Appendix II

[154]            Milieu/COWI for DG Environment " Study in relation
to options for new initiatives regarding dismantling of ships " Final
report of October 2009: published on the Commission website at http://ec.europa.eu/environment/waste/ships/index.htm

[155]            Greenhouse Gas Emissions for Shipping and Implementation
Guidance for the Marine Fuel Sulphur Directive. CE Delft, Germanischer Lloyd,
Marintek and Det Norske Veritas. December 2006. Publication No. 06.4103.6)

[156]            Greenhouse Gas Emissions for Shipping and Implementation
Guidance for the Marine Fuel Sulphur Directive. CE Delft, Germanischer Lloyd,
Marintek and Det Norske Veritas. December 2006. Publication No. 06.4103.6).

[157]            COWI/DHI DG ENV 2007 study. Ship Dismantling and
Pre-cleaning of Ships, June 2007

[158]            Self-auditing by the facilities themselves is not
considered as feasible at this stage since ship dismantling is a highly
competitive market where substandard facilities have a competitive advantage as
explained in the Impact Assessment.

[159]            Contrary to existing ISO and OHSAS standards. For
further explanations, see the COWI/Litehauz study for EMSA, ‘Certification of
Ship Recycling Facilities’, 2008.

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