Volkswagen’s darkest days could benefit the environment


The road transport lobby is all-powerful in Europe and they are one of the main reasons that the sector is not currently accountable for its greenhouse gas emissions under Europe’s cap and trade system. We think they’ve got this wrong, especially when Michael Horn, President and CEO of Volkswagen Group of America is quoted in the press saying in relation to vehicle emissions, “Our company was dishonest…we have totally screwed up.”

Since the boss of Volkswagen’s US business publicly admitted the firm was dishonest in using software to rig emissions tests, their shares have plunged nearly 38% and wiped over €27 billion off their value. The affected vehicles were programmed with ‘defeat devices’, software that allowed the cars to emit lower emissions in lab tests than they actually did in day to day use. Unfortunately, one by-product of this tampering can be higher emissions of gases like nitrogen oxides and CO2 than was expected.

This software allowed VW cars to release up to 40 times the tested amount of nitrogen dioxide, a toxic gas that absorbs light and leads to the yellow-brown haze that blankets cities. Nitrogen dioxide combined with minute particulate matter causes breathing issues and is linked with millions of early deaths.

Individual vehicles don’t necessarily create a health threat but collectively they harm public health. Cars emit up to 30 percent of the NOx and volatile organic compounds in areas that fail ambient air quality standards, releasing smog and soot skyward. Furthermore NOx, as well as the more obvious CO2, has climate change impacts. When taken collectively the 11 million affected cars (as currently identified, the number seems to climb daily) make a significant contribution to the global greenhouse gas loading.

Road transport carbon emissions are already included in carbon cap and trade systems in the US and Korea which means that there is a limit on how much pollution can be emitted by the sector before having to source pollution cuts elsewhere, for example from industry. However Europe’s transport sector has successfully hidden behind promised emissions and efficiency standards. But the standard that Volkswagen are holding themselves to turns out to be different and much more generous than the one the regulator and consumer thinks they are getting, at least in the case of huge numbers of diesel powered cars they have sold in the US and Europe. The global car industry is in crisis as they come under the kind of scrutiny more recently reserved for the financial services industry. There is one sure fire way to restore this trust, include the transport sector in Europe’s greenhouse gas cap and trade system.

There is a glaring omission in the EU’s flagship greenhouse gas reduction policy, it only covers half of Europe’s carbon emissions and even less of its total greenhouse gas emissions. Road transport inclusion would cause the majority of emissions to be captured, which is good for overall market efficiency, and inclusion would ensure that we meet reductions. In other words transport can’t cheat as the emissions would be calculated from the fuel used not based on what the car company tells us they should be. It would also remove the direct subsidy to the transport sector that we are all paying for by virtue of the fact that they don’t have to account for their emissions when the rest of European industry does.

And finally, here is why the transport sector needs to be included in the EU ETS, the rest of European industry should want it there. Consider the existing installations in the EU ETS sharing an ever-dwindling supply of carbon credits between themselves. As the transport sector moves towards greater acceptance of electrically powered vehicles it will be the power sector that provides the additional electricity required. The problem is that there is absolutely no allowance for this in the future caps proposed for the sector. This means that existing transport emissions will shift into the EU ETS over time anyway but there is no new carbon to make up for the increase. This will lead to dramatic carbon price inflation, higher than would ordinarily be caused by the carbon reductions required from the EU ETS. Include transport now and the price rises as we cut emissions will be more manageable because there will be a bigger pot to split between all emitters. It is then down to the customer to decide how carbon emissions will be cut by choosing their products based, in part, on carbon cost.

Volkswagen presumably won’t object to this idea because according to the Climate Disclosure Project’s 2015 report, Volkswagen says that ‘In connection with (short and long term) product decisions including investment decisions a group internal CO2 price… is used to evaluate the efficiency / effectiveness of alternative measures for reduction of vehicle CO2-emissions.’

Volkswagen’s deception may turn out to be, financially, the biggest fraud in automotive history. But the story has only just begun, there are plenty of test-rigging rumours so who knows which manufacturer will be forced to confess next. The deception and ensuing scandal is an opportunity to bring about positive change. Properly implemented efficiency standards are still important but by also making the transport sector accountable for its greenhouse gas emissions we can force honesty on the manufacturers and bring efficiency and fairness to carbon markets. In the run-up to the COP 21 climate conference in Paris this year the transport industry will be well served by throwing its weight behind efforts to implement market based solutions to slow and reverse climate change.