As VW scandal lingers, EU confronts Copenhagen legacy

5th September 2016. By Laurel Henning

Volkswagen came clean about its dirty diesel emissions this time last year, admitting it had rigged cars to cheat on pollution tests.

The fallout in the US was swift and costly, yielding a $15.3 billion settlement with VW to shove half a million affected vehicles off America’s roads.

In Europe, the German automaker has flatly refused to compensate car owners caught in the “diesel dupe.” And the EU has no legal leverage for forcing it to do so — leaving drivers of 8.5 million affected VWs without compensation.

This diverging response is no fluke. It arises from a fundamentally different approach to air-quality standards and global warming in the US and Europe.

The US has a long history of enforcing — and tightening — air-quality rules to protect human health. The Environmental Protection Agency sets strict standards for six major pollutants, including carbon monoxide, nitrogen dioxide and particle pollution.

Europe has its own air-quality standards, but they count among the least respected rules in the EU. This partly reflects Europe’s preoccupation with reducing emissions of carbon dioxide to curb global warming — an issue that has struggled to gain traction in the US.

Copenhagen calculation

To understand how this happened, flip the calendar back to early last decade, when EU policymakers were trying to claim a frontrunner position in the run-up to the Copenhagen summit on climate change in 2009.

The upshot: EU policymakers gave more importance to cutting CO2 than to curbing other pollutants, former EU industry chief Günter Verheugen said last week.

“The EU wanted to be the leader of climate change policy,” he told a European Parliament panel investigating whether EU officials did enough to head off the VW scandal.

Verheugen said this didn’t involve a conscious tradeoff — swapping respiratory health for low-carbon industry leadership. But “CO2 reduction was given priority,” he said.

By the time the Copenhagen summit opened, the EU had declared war on carbon dioxide, proposing goals to cut output from vans and cars, though not trucks. To support those reductions, the use of diesel cars was promoted.

Favoring diesel

Gasoline-driven engines burn fuel less efficiently than diesel ones and have higher emissions of CO2 and other greenhouse gases. This prompted many EU countries to introduce tax breaks and other incentives to favor diesel over gasoline vehicles — even though diesel engines produce more nitrogen oxides and other nasty stuff, including sulfur dioxide, black smoke and particles.

The strategy worked. Between 1990 and 2010 the share of diesel vehicles in the EU’s car fleet grew from 10 percent to 35 percent, as governments ratcheted up taxes on gasoline and kept them low on diesel.

Since monitoring started under current legislation in 2010, carbon emissions from new cars have decreased by 17 grams of CO2 per kilometer — a drop of 12 percent, based on company lab testing. For vans, carbon-output goals for 2017 have already been met, with emissions from vehicles made in 2013 already 3 percent lower than those produced the previous year.

But emissions of nitrogen oxide, or NOx, have meanwhile risen above legal limits across the EU — according to data from the European Environment Agency. Those emissions may have been higher than thought, because VW was using “defeat devices” to cheat on the lab tests. Road transport accounts for approximately 40 percent of the bloc’s NOx output.

High cost

Those emissions carry a hefty price tag for the EU, where 17 countries were facing legal action last year over breaches of air-quality rules.

Premature deaths and disease linked to air pollution in Europe cost its economy $1.6 trillion in 2010, the World Health Organization reported in 2015. That amounted to almost one-10th of the region’s gross domestic product.

More than 90 percent of citizens in the WHO’s European region — covering the EU 28 plus 25 other countries — are exposed to annual outdoor levels of fine particulate matter above the organization’s guidelines, the study said.

With the economic burden from death and disease rising, one might have expected EU governments — and their nationalized healthcare systems — to take action. Yet most European states have failed to meet the bloc’s air-quality standards, blaming their low compliance on factors beyond their control such as airborne pollution from other parts of Europe or sand blowing in from storms in the Sahara.

US exposure

In retrospect, it’s hardly surprising that Dieselgate was exposed in the US.

It’s not just that the air-quality standards are tighter in the US. The reality is also that a paltry 3 percent of cars driven in the States are powered by diesel engines. In Western Europe, by contrast, almost 50 percent of all new cars registered in the first quarter of 2016 ran on diesel.

What’s more, the legal definition of “defeat device technology” is unclear in Europe. The use of defeat devices has been forbidden under EU law dating back to early last decade. But the lack of clarity has allowed carmakers to avoid the ban by saying they had to remove the pollution controls in some circumstance to protect car engines — a loophole permitted under the rules.

The differences between engine designs on the two sides of the Atlantic — along with tougher industry standards in America — made it harder for VW to fix the defeat devices in its US models. It was quicker to pay a legal settlement than to come up with a technological response. In Europe, less stringent industry standards have made it easier for VW to recall cars and simply remove the devices from affected vehicles.

'Collective action' in EU?

That could change, judging by remarks today from Věra Jourová, the EU’s commissioner for consumer affairs.

Speaking to reporters at the European Commission in Brussels, Jourová said the VW had broken commercial-practice rules in a majority of EU states. If consumer authorities file “collective action” before national courts, then damages could be sought against VW, she said.

Jourová was quick to note that handling damage claims in the EU “is more complicated than in US.” And the role of the commission in the matter was limited to drafting legislation and supporting national authorities, she said.

If national authorities fail to get compensation from VW, EU consumers may well feel they have been taken for a ride by a company that has now surpassed Toyota as the world’s biggest automaker by global deliveries.

Like Wall Street bankers in the wake of the financial crisis, VW executives appear to have gotten off lightly, leaving taxpayers to foot the bill for potentially massive costs related to air pollution. Meanwhile, Volkswagen is leading calls for government aid to boost the sale of electric cars across Europe.

Perhaps national consumer authorities in Europe will manage to win damages from VW. But it won’t be on environmental grounds that the company is held accountable in the EU.

Almost one year after the US blew the whistle on VW’s dirty secret, EU policymakers must ask themselves whether the bloc’s pursuit of world-class CO2 standards has been worth it.