In 2013 the International Council on Clean Transportation (ICCT), a non-profit public policy think tank, was about to unintentionally expose the biggest emission fraud case in the history of the world when they granted West Virginia University’s Centre for Alternative Fuels, Engines, and Emissions (CAFEE) $69,000 to study emissions from Volkswagen diesel cars sold in the U.S (Reitze 2016, 10564-5); (Vanderkolk 2017, 206-7).
The ICCT wanted to understand what enabled Volkswagen’s diesel cars to meet the Nitrogen Oxide (𝑁𝑂𝑥) emission cap of the U.S., which was lower than in the EU, to adopt the technology in European diesel cars as well. However, instead they found on March 31, 2014, that Volkswagen’s diesel cars were exceeding the 𝑁𝑂𝑥 limit regulated by the Clean Air Act (CAA) by a factor of 5 to 35 (Reitze 2016, 10564-5). 17 moths later on the 3rd of September, 2015, Volkswagen admitted to the U.S. Environmental Protection Agency (EPA) that it had deliberately outfitted 480,000 diesel cars with defeat devices (McGee, 2015). Defeat devices are components that are installed in vehicles to enable them to pass EPA testing even if their emissions would otherwise fail to meet standards (Vanderkolk 2017, 206). Eventually, Volkswagen admitted that 11 million diesel vehicles across the world had been fitted with the defeat devices (BBC News, 2015); (Reitze 2016, 10564).
The Impact of Non-compliant Diesel Vehicles on the Environment and Health
Non-compliant diesel vehicles in major markets emitted about 4.6 million tonnes of NOₓ in excess of limits in 2015, with Volkswagen’s actions contributing notably to this total (Anenberg et al. 2017, 469). According to the findings Tanaka et al. (2018) in the short-term these excessive NOₓ emissions lead to a significant increase in tropospheric ozone (O₃) concentrations, a potent greenhouse gas resulting in immediate global warming. For example, the global mean temperature increase attributable to a non-compliant VW Jetta 2012 diesel model under stop-and-go driving conditions is approximately 25 times greater than that of a compliant vehicle (Tanaka et al. 2018, 2-3). However, Tanaka also found that in the mid-term the elevated NOₓ levels accelerate the atmospheric breakdown of methane (CH₄), another greenhouse gas, leading to a cooling effect that partially offsets the initial warming (Tanaka et al. 2018, 4-5). Therefore, in the long-term, the impact of excessive emissions of NO_x on global warming is statistically insignificant (Tanaka et al. 2018, 6-7).
The impact of excessive NOₓ emissions on health is much more severe. According to Anenberg et al. (2017) the excess emission of NO-x by non-compliant diesel vehicles increased concentrations of fine particulate matter (PM_2.5) across regions like Europe, China, and India, resulting in an estimated 38,000 premature deaths and 625,000 years of life lost globally in 2015 (Anenberg et al. 2017, 468).
What enabled Volkswagen to cheat?
Volkswagen ability to cheat was largely caused by regulatory capture in both the EU and the US. Regulatory capture occurs when a regulatory agency, established to serve the public interest, instead advances the commercial or political concerns of the industry it oversees, often due to close relationships and revolving doors between regulators and industry players (Oxford University Press, n.d.).
In the EU, the diesel emissions regulatory framework was fragmented meaning that once a vehicle received approval from any national regulator, it could be sold across all member states (FT Reporters, 2015). This allowed car manufacturers to “shop around” for national regulators that offered the most lenient approval processed. Consequently, regulators had a strong incentive to protect their national industries and economic interests by turning a blind eye to test cheating. The influence of this incentive on the regulatory procedures applied is clearly evident in the regulatory practices uncovered. For example, major countries like Germany, Spain, Slovakia, and the Czech Republic admitted they had not inspected vehicles for defeat devices since the European Commission banned them in 2007, creating a loophole that companies like Volkswagen exploited (FT, Reporters 2015).
Regulatory capture was exacerbated further by the fact that car manufacturers funded the certification process themselves, and that some countries even had stakes in their national car manufacturing companies (FT Reporters, 2015). For instance, Germany, home to Volkswagen, had a substantial ownership stake in the company and shared leadership between government officials and company executives (Braun and Van Erp, 2022, 195). These created conflicts of interest incentivising regulators or private companies to approve vehicles without stringent testing.
Similar trends are evident in the US, although not as gross. It is not difficult to demonstrate that the EPA suffered from both industry-driven inertia and a culture that at least tacitly favoured industry interests. On one hand, the EPA failed to consistently adapt its emissions testing procedure, making the tests highly predictable despite technological advancements and evolving industry practices. This predictability allowed companies like Volkswagen to exploit regulatory loopholes by designing vehicles capable of detecting testing conditions and artificially lowering emissions output only during the tests (Vanderkolk 2017, 208-9). On the other hand, the EPA’s regulatory framework heavily relied on post-hoc enforcement (i.e., penalising violations after the fact) rather than preventing them through pre-emptive oversight, incentivising car manufacturers to weigh the financial benefits of non-compliance against the risk of detection and subsequent penalties. Unfortunately, even though the enforcement actions and fines for emission cheating were serious, the profit-driven car industry took advantage of the post-hoc enforcement and engaged in emission cheating because the risk of detection was relatively low given the predictability of the EPA’s emission tests. This clearly demonstrates that the EPA’s enforcement mechanisms were not only insufficient but also suggestively shaped in a way that allowed for continued industry transgressions. (Vanderkolk 2017, 209-11).
In conclusion, the Volkswagen emission scandal clearly demonstrates how regulatory capture can allow environmental oversight to be compromised along with public health. Interconnected interests between car manufacturers and agencies of regulation in both the EU and the U.S. have enabled Volkswagen to exploit existing systemic weaknesses. Fragmented regulatory frameworks have been defeated by national economic interests along with the capacity of the manufacturers to finance and influence their own certification procedures. This manipulation led to an excess amount of NOₓ emissions from millions of vehicles worldwide, with an estimated 38,000 premature deaths around the world in the year 2015. This scandal epitomizes the negative implications that are likely to confront a regulatory body if it advances the interests of an industry rather than carrying out its mandate of protection for the public, and one of the various ways capture leads to mass deception and harm.
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Bibliography
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