Recycling: Breaking set notions over ship-breaking

There is a fine difference between a resource and waste. A waste becomes a resource when someone is willing to pay the owner to acquire it; it remains a waste if the owner has to pay someone to dispose of it. I look at the debate over ship-breaking in this article, "Breaking the set notion", published in the Hindustan Times, on 13 January 2006.

More than 150 years ago, the French economist and legislator Frederic Bastiat had written “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” The present debate over the decommissioned French aircraft carrier, Clemenceau, being sent to Alang in Gujarat for dismantling and recycling highlights the relevance of Bastiat’s idea of “what is seen and what is not seen”.

Clemenceau is a 265-m long ship, weighing about 26,000 tons. Recycling it could open new opportunity for Indian ship-breakers. And the environmental risks and labour safety can only be dealt with by becoming a more efficient recycler. A portion of the higher productivity and income can be used to take care of the environmental fallout, and protect the workforce.

There is a fine difference between a resource and waste. For instance, most readers of newspapers in India sell old newspapers to local vendors for reuse or recycling. But the same readers have to pay their garbage collectors to clear their kitchen wastes or scraps of paper and plastics. Therefore, a waste becomes a resource when someone is willing to pay the owner to acquire it; it remains a waste if the owner has to pay someone to dispose of it. Generally the volume and utility of the recyclable or reusable material determines the economics of whether it will remain a waste or graduate into a resource.

Ship recycling is a major component of international trade. In the Nineties, Lloyd’s of London estimated that over 7,200 ships, amounting to about 83 million gross registered tons (GRT) were recycled in the decade. Over the past two decades, India, along with Bangladesh, China, Pakistan and a few others, has emerged as one of the major players. But of late, there has been growing pressure on India to restrict this sector. Clemenceau is, of course, only the latest of the ships sent for scrapping that has to negotiate the turbulence created by western environmental groups. A year ago, there was the debate over a Danish ferry that was dismantled in Alang.

Shipyards and labour unions in rich Western countries are understandably concerned that the ship recycling sector has shifted to developing countries where labour costs are much lower. In the Nineties, the US stepped in with billions of dollars in subsidies to help its own shipyards dismantle their own navy ships. Yet by 2000, there were over 400 decommissioned US Navy ships whose fate was undecided. According to a Rand Corporation report a few years ago, the US would have needed $ 3.6 billion in 2000 to recycle these ships domestically. The cost of recycling per ton of light ship weight (LSW) could be as high as $ 680 in US. In contrast, the cost of recycling these ships in developing countries would at most be $ 170. Labour costs in rich and poor countries explain most of this cost differential. While typically, in US shipyards, labour costs range between $ 40-45 per hour, in India wages range between $ 0.25 to $ 1 per hour.

A French company was originally entrusted to clean up the asbestos from the aircraft carrier for a fee of 3 million euros. The company now says that the ship contains much more asbestos, and would have needed 6 million euros to completely remove all the asbestos. Environmental groups have seized on this claim to argue that the ship carries anything between 500 and 1,200 tons of asbestos.

There can’t be a clearer instance of the lure of subsidy uniting a company engaged in the clean-up of Clemenceau, with environmentalist groups. Both are using the loss of French jobs and Indian environmental pollution as fig leaves to cover their own financial and political interests.
Asbestos is a very useful material used for roofing as well as insulation. In its normal usage, asbestos is as safe as any other material. But it could pose a health hazard to workers engaged in removing asbestos from old equipment. But this is not rocket science, and protective gears for workers and containment strategies to hold the asbestos dust can easily be achieved.

Clemenceau could show how both the economic and environmental concerns could be taken care of. Recyclers in India have paid for the steel and other economically valuable material from the ship. And France could, at a fraction of the money it has paid to its own company, get the ship-breakers in India to adopt appropriate technologies to reduce exposure to workforce and lower environmental pollution. Both sides will benefit from such a deal.