Vermont Law Top 10 Environmental Watch List 2016

Fasten Your Seatbelts: Volkswagen’s Bumpy Ride

Summary:
Volkswagen violated the Clean Air Act with its "defeat device" to cheat emissions testing. How will this environmental fraud play out in 2016?

Despite the fact that diesel fuel has a high sulfur content, which emits noxious chemicals when burned, it powers roughly one-third of America’s transportation fleet. The Environmental Protection Agency (EPA) wanted to curb emissions, so they issued new standards in 2006 that mandated auto manufacturers phase in Ultra-Low Sulfur Diesel (ULSD) by 2010. These regulations inspired a new type of commuter car, the “clean diesel” car.

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Shortly after the EPA issued the new emission standards, Mercedes developed the BlueTec engine. While this engine complied with EPA standards, it sacrificed fuel efficiency. Volkswagen decided to develop its own clean diesel engine with the goal of meeting EPA standards without sacrificing fuel efficiency. Unlike Mercedes, Volkswagen’s product met fuel-efficiency goals, but sacrificed Volkswagen’s reputation.

In 2008, Volkswagen introduced diesel-powered cars into the American market. The cars passed EPA inspection in off-road laboratories. Things ran smoothly for Volkswagen until 2011 when the European Commission Joint Research Centre conducted on-road testing. The results showed that Volkswagen vehicles typically had 14 times higher emission rates on-road than in laboratory inspection. The scandal did not break at this time, as scientists were not willing to rely on data from one experiment. However, this began the downhill ride for Volkswagen.

In 2013, the International Council on Clean Transportation, in conjunction with California regulators, funded a research project on clean diesel cars. When the Volkswagen automobiles were tested on-road, emissions fluctuated from nine to 38 times higher than when the EPA tested the cars off-road. The European Commission Joint Research Centre also repeated its experiment and confirmed the initial data; Volkswagen cars did not comply with regulations.

With incriminating data in hand, regulators questioned Volkswagen representatives. Volkswagen denied any large-scale problems for more than a year. However, in September 2015, Volkswagen confessed. Volkswagen had indeed installed a “defeat device” in its clean diesel cars in the form of software that detected when the car was undergoing laboratory testing. When the car was under testing, the software reduced the amount of emissions released. When the tests were complete, the software turned off and the engines resumed emitting an amount of pollutants that was above regulatory limits. Volkswagen issued statements declaring that company officials did not condone the defeat device nor were they aware of it. The company blames “rogue software engineers” for conceiving, creating and installing the software.

Volkswagen recalled about 11 million cars worldwide. While it is currently undetermined how much Volkswagen will pay in penalties and damages, companies who settled with the Department of Justice (DOJ) in 1993 for selling equipment with defeat devices paid more than $83 million.

Volkswagen clearly has violated the Clean Air Act. The company should pay civil and criminal penalties. However, the government may need to craft another strategy due to automotive-friendly drafters of the 1970 Clean Air Act. While the Clean Air Act provides criminal sanction for stationary sources, mobile source provisions include only civil sanctions.

The Volkswagen scandal will be a noteworthy event in 2016. Whatever resolution the company comes to will set precedent for this type of environmental fraud. Additionally, the EPA may develop a more rigorous testing regime to prevent a similar scandal.