VW's NOx-toberfest/Schadenfraud

I first posted on VW, on my tumblr blog, as soon as I'd read a report - and added to that post a couple of times. Eventually my interest became in how it came to be such a large company figured that programming to a test while allowing actual emissions far higher than advertised was a thing that could be done.

Climate Politics and the Volkswagen Scandal

"...clean diesel" was a government-led initiative, brought to you courtesy of Europe's taxpayers. And, by the way, the policy had proved a massively expensive failure on its own terms even before the VW scandal broke.
It's this scandal that teaches the most important lessons. Beginning in the mid-1990s, mindful of their commitments to cut carbon emissions, Europe's governments embarked on a prolonged drive to convert their car fleets from gasoline to diesel. With generous use of tax preferences, they succeeded.
... the switch to diesel probably didn't cut greenhouse gases. Making diesel cheaper by taxing it at a preferential rate encouraged people to drive more. And emissions of GHGs higher up the fuel-supply chain are worse for diesel than for gasoline. (Increasing demand for diesel drew in more supplies from Russia; producing and moving those supplies caused more emissions.) Treating diesel to lower its sulfur content adds yet another carbon penalty.
At best, the clean-diesel strategy lowered carbon emissions much less than hoped, and at ridiculous cost; at worst, as one study concludes, the policy added to global warming.

image from Seeking Alpha

So VW may have been used to operating with the tacit acknowledgment the game was to pretend to lower emissions.

We've known for years European, and particularly German, air quality wasn't improving - certainly not to the extent nuclear Ontario and it's gasoline propelled cars has experienced: Luftmess: checking up on air and carbon pollution
The section below is primarily from my Tumblr post.

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This is an incredible story, including (from the BBC's Volkswagen shares plunge 18% on exhaust scandal):

• The Environmental Protection Agency (EPA) found the "defeat device" in diesel cars including the Audi A3, VW Jetta, Beetle, Golf and Passat models. 

• "While Volkswagen tells consumers that its diesel cars meet California emissions standards, vehicle owners are duped into paying for vehicles that do not meet this standard and unknowingly pay more for quality they never receive," 

• The company's shares were down 19% in Frankfurt by lunchtime. 

• The German government said on Monday it would rely on the US authorities to assess whether VW had done anything wrong in Europe. 

My favourite is the comparison to Toyota’s image issues a couple of years ago:
"To some extent, the cheating by Volkswagen seems more blatant, but the numbers are lower and there are no fatalities involved. “
Unless you count the health impacts of greater emissions, particularly from diesel fueled vehicles known to be greater contributors to poor urban air quality.

Addendum: 

More at the terrific Energy Institute at HAAS blog: VW’s Deepwater Horizon?

and at NY Times:  Volkswagen Denied Deception to E.P.A. for Nearly a Year. Here’s the software’s trick:

...software measured factors such as the position of the steering wheel, the vehicle’s speed and even barometric pressure to sense when the car was being subjected to testing, the E.P.A. said. The car then configured itself to reduce emissions of nitrogen oxide, a gas that is a major contributor to smog and is linked to an array of respiratory ailments including asthma, emphysema and bronchitis, the E.P.A. said on Friday.

This may turn into a fascinating social science experiment, as affected cars will be recalled, but owners aren’t necessarily going to want the work done:

The E.P.A. said on Friday that Volkswagen would be required to recall the affected vehicles for repairs to make them compliant with smog regulations. Car owners would not have to pay for the repairs. Many owners may not bother, though, because the changes are likely to reduce fuel consumption and performance.

Nice to have such a large test group to see how people value emissions.
Kate Galbraith tweeted the previous two links, and this:

How are other automakers dealing w/ tradeoff between NOX emissions & performance in diesel cars? Is it even possible to do well on both?

Brad Plumer at VOX has written Volkswagen's appalling clean diesel scandal, explained. It’s very good - so read it. The concluding paragraph:

It also raises questions about the future of clean diesel. This is undoubtedly a promising technology — in theory, these vehicles could get both excellent mileage and low emissions. But this scandal raises serious questions about how well automakers can actually achieve both goals in practice. 

VW may reduce "clean diesel” to be only as meaningful as “clean coal.”
Nest issue: CAFE standards require the fleet of vehicles sold by a manufacturer hit fuel use targets: with VW/Audi pulling many of their smallest, lightest and previously thought most efficient models, how will they hit CAFE standards with other models?.

Addendummer

The Wall Street Journal has a column on the scandal I hope will become known as “NOxtoberfest”, and it implies a broad danger to Germany.
Volkswagen Emissions Investigations Should Widen to Entire Auto Industry, Officials Say (subscription):

BERLIN—Investigations into Volkswagen AG’s alleged manipulation of U.S. emissions tests should widen to include the entire auto industry, German and French officials said Tuesday, as regulators begin to ponder whether such trickery is more widespread.
Concerns that the scandal could lead to broader damage for the industry hit the shares of car companies across Europe on Tuesday, with Volkswagen’s stock down another 5% after dropping as much as 20% on Monday.
The state of Lower Saxony, a major Volkswagen shareholder with 20% of the car maker’s voting stock, said the emissions allegations raised doubts about tailpipe data published by all car makers.

Wishful thinking. The raise doubt primarily about emissions from diesel vehicles, and that means primarily European and especially German vehicles.

The U.S. scandal shocked Germany, where every seventh job is linked to the auto industry, and swept up rival car makers in its wake. Shares of Daimler AG, BMW AG, and French car makersRenault SA and PSA Peugeot Citroën all posted falls on Tuesday.
“We are worried that the justifiably excellent reputation of the German car industry and especially Volkswagen will suffer,” Sigmar Gabriel, Germany’s economy minister and vice chancellor, said Monday.

I became acquainted with Sigmar Gabriel through writing on Ontario’s German-inspired energy debacle. The Energiewende is broadly perceived, outside of Germany, to be about reducing emissions - which it isn’t. The Germans have played on manipulating the goals of others to spread their industrial message.

August 24: VW Scandal Threatens to Ensnare BMW as EU Urges Wider Probe

"... there are concerns for the long-term damage on the business with diesel cars for every manufacturer that builds cars with these engines.”

There’s also a perception amongst many that the Energiewende has been positive for employment. If NOxtoberfest delivers a hard hit to Germany’s automotive sector, there won’t be many wondering what’s good about the German economy.


September 24th Addendum

From the Economist, A mucky business: Systematic fraud by the world’s biggest carmaker threatens to engulf the entire industry and possibly reshape...:

In America NOx standards are more demanding than they are in Europe. Mazda and Honda, both accomplished producers of diesel engines, have had trouble complying with them. It now appears that VW, which has put a lot of effort into persuading Americans that diesels can be clean and green, would also have failed to comply if it had not cheated. The campaign to convince Americans of the merits of diesel may thus well be at an end. And if it turns out that under real-life conditions many diesels also break Europe’s less stringent NOx standards then the future of diesel cars worldwide will be bleak.

... Hidden within the German firm is a big finance operation that makes loans to car buyers and dealers and also takes deposits, acting as a bank. Its assets have more than doubled in the past decade and make up 44% of the firm’s total. And it may be vulnerable to a run. In previous crises “captive-finance” arms of industrial firms have proven fragile. After the Deepwater Horizon disaster BP’s oil-derivative trading arm was cut off from long-term contracts by some counterparties. General Motors’ former finance arm, GMAC, had to be bailed out in 2009.
With €164 billion of assets in June, VW’s finance operation is as big as GMAC was six years ago, and it appears to be more dependent on short-term debts and deposits to fund itself. Together, VW’s car and finance businesses had €67 billion of bonds, deposits and debt classified as “current” in June. This means—roughly speaking—that lenders can demand repayment of that sum over the next 12 months. The group also has a big book of derivatives which it uses to hedge currency and interest-rate risk and which represented over €200 billion of notional exposure at the end of 2014. It is impossible to know if these derivatives pose a further risk, but if counterparties begin to think VW could be done for they might try to wind down their exposure to the car firm or demand higher margin payments from it.

...though diesels account for only 1% of the American market for cars, last year VW had half of that slim slice.

...Apparently some people at VW thought they could get away with it. And this leads to the third bit of the explanation: a large part of their reason for believing this would have been that carmakers, particularly European ones, are used to getting away with a great deal in such matters.

...This all takes place against a background of increasingly strict controls on carbon emissions. Europe’s carbon-dioxide goal of an average of 95g/km across all a carmaker’s models by 2021 is already demanding. It will be even harder to achieve if it has to be reached honestly. The same goes for more stringent fuel-economy standards that are coming soon in other markets such as China, America and Japan.
The industry had built a continuing shift to diesel into its assumptions about how it would meet these requirements. But if diesels cannot deliver low NOx emissions while maintaining high fuel efficiency and staying affordable, that assumption will have to be jettisoned—quite possibly taking with it the whole idea of diesel engines for mass-market cars. They are difficult and expensive to develop, and there is already a backlash against them in Europe, where they are blamed for high particulates as well as NOx; both Paris and London have talked of banning them.
If diesels cannot deliver then carmakers will need to turn heavily towards hybrids and very efficient small petrol engines.

Read this entire article at the Economist!