VW: a panto of Green politics

Paul Seaman and James Woudhuysen

Last week, everyone learned that Volkswagen (VW) fitted special, duplicitous software to its diesel-powered cars. In an outrageous play, VW’s software sensed when US regulators were lab-testing its cars for emissions, and defeated them by automatically adjusting its diesel engines to lower their emissions. Meanwhile, in normal use outside the lab, VW engines could run along, undetected, with much bigger emissions.

VW, the world’s leading manufacturer of cars, now faces billions of dollars in fines. It has lost both its CEO and its whole reputation as a Green car firm. Its shares have plummeted. Expensively, VW must also recall 11 million vehicles worldwide, and change them in ways that will lower fuel economy and the amount of luggage space they have at their backs.

Feeling vindicated, glib commentators now wheel out their familiar explanations of how all this came about.

For Oxford economist Will Hutton, a darling of the liberal left, VW shows what happens when a company’s executives make its share price their god. What we need instead is ‘mutual responsibility between firms and society – a moral ethic that must inform unions, regulators, shareholders and systems of corporate governance alike’.

For Greenpeace, however, a more corrupt kind of ‘mutual responsibility’ is already fact. With a 2014 expenditure of up to €18.5million on lobbying the EU, the European car industry, Greenpeace says, has reverted to type. Carmakers bribe regulators, end of story. VW alone spent €3.3million on Brussels, employing 43 lobbyists.

Actually the sums Greenpeace cites are peanuts. Much more interesting, though not all it seems, is VW’s R&D budget, which in 2013 ran to €11.743billion. In truth, it is VW’s poor R&D, combined with overzealous state regulation and the world’s obsession with green gestures, which produced the VW debacle.

VW R&D in perspective

For Hutton, VW’s R&D budget is ‘vast’ – it only fails because it’s ‘far from a leader in the electrical car [sic] or hybrid market’. Well: VW does spend more on R&D than any company in the world. But as a percentage of its revenues, VW’s R&D, when compared with that of other firms, is no big winner (1).

Contrast VW’s €11.743bn on R&D with what it does as a car-leasing bank. Its leasing arm has €164bn in assets, €67bn in debt, and 13.5m customers. Leasing, as a branch of sales and marketing, helps realise the value accumulated in VW factories. Finance, sales and marketing, not engineering and R&D, form the main event at VW (2).

VW favours financial gymnastics more than innovation. Had the company organised more and better R&D around exhaust emissions earlier than it did, it wouldn’t have needed to try to fool the regulators.

Overzealous and capricious regulation

Diesel cars emit less CO2 per kilometre than petrol vehicles; so New Labour’s vehicle taxes were designed to favour diesel cars. But while New Labour flaunted its virtue around climate change in the future, diesel emissions of nitrogen oxides (NOx, consisting of NO and NO2), particulates and black smoke presented problems in the here and now. Result? Not content with arrogantly trying to set the world an example through its regulations against cars emitting CO2, the EU stiffened regulation against NOx:

EU limits on diesel car emissions of nitrogen oxides (NOx), mg/km 

1992                       780
1997                       730
2000                       500
2006                       250
2009                       180
September 2015   80

All of this begs the question: what car manufacturer could truly keep up with such a fast-tightening vice? Yet instead of openly contesting matters, VW pretended to obey the limits on NOx, so as to uphold its Green virtue. That’s how far manufacturing is today in thrall to state-sponsored environmentalism.

US regulators were just as vain as those in the EU. To teach EU carmakers a Green lesson, the US Environmental Protection Agency introduced, in 2004, a NOx limit of just 30mg/km – 2.6 times as stringent as the EU regulation. This non-tariff barrier to trade was designed to keep European diesel carmakers such as VW out of the US market. Regulators in all nations apply such barriers in all sectors nowadays, so as to keep foreign imports down (3).

And yet… just how dangerous are NOx? In 2012 specialists in cancer at the World Health Organisation – a body that has an extensive history of alarmism – declared the dangers of inhaling diesel exhaust ‘on the same order of magnitude’ as those of passive smoking. However, while no dangers exist around passive smoking, some might well accompany continual walking during rush hours in London’s oxygen-lite Oxford Street. For smog-bound cities, professional drivers and car mechanics in particular, NOx can be bad news. For others, that’s not true.

While regulation against passive smoking makes no sense, there is case for regulating the fumes which come from diesel exhausts. Yet there’s been no sense in the international regulation of car emissions. In cars as, elsewhere, the regulation of the capitalist state remains lengthy, excessive, arbitrary, incoherent and entirely subject to new Green fads.

The world’s obsession with Green gestures

State regulation has led breast-beating car executives a merry dance. Both carmakers and regulators have long been engaged not so much in lobbying and being lobbied, as Greenpeace maintains, but in exactly the kind of environmentally obsessed mutuality Will Hutton upholds. They’ve coquetted with what he calls a moral ethic: of superhuman efforts to achieve impossible cuts in pollution levels. In this Green pantomime, gestures count much more than any substantive plot.

No wonder, after VW, it’s emerged that both carmakers and EU regulators have long been engaged in a knowing charade around diesel emissions. As early as 2011, indeed, the EU started ‘research’ into the discrepancies between emissions in the lab and those on the road (4).

Conclusion

The VW case, like that of transport generally, has been framed irrationally. Let’s start again. Are R&D and innovation in cars all they could be? No. Are automotive R&D, innovation and marketing, leave aside share prices, media coverage and all the rest, very heavily distorted by Green state regulation? Absolutely. Is ‘the motorist’ or the first-time car-buyer impoverished by self-serving manufacturers and regulators, always more interested in displaying Green credentials than seeing cars cheaper, better and genuinely less prone to fumes? Naturally.

We hear plenty of overblown claims about electric and driverless cars, the hacking of cars, car sharing and youth falling out of love with cars (5). Yet there’s something much more urgent than all this: extending the freedoms of motorisation more fully – especially to old people, young people and those in low-car countries such as India or China. Instead, however, our culture measures motoring not by what cars can do to expand human horizons, but in terms of humanity being evil to use them and so generating emissions.

VW and Brussels: you can go on pretending to save the world by legislating for ‘cleaner’ car exhausts. But we have a more honest, more humanistic agenda to offer.

Stop your slimy green exercises of perception management: money and public trust will be lost for years.

Instead, follow in the steps of Rudolf Diesel (1858-1913).

Make a better engine.

Paul Seaman is a Zurich-based communications professional who specialises in controversial issues.

ENDNOTES

1. At 6.0 per cent, VW’s research intensity is higher than that of Honda (5.4), Nissan (4.8), Daimler and General Motors (4.6 each), Ford (4.4), Fiat (3.9) and Toyota (3.5). But VW’s figure lies well below that of Volvo (6.9) and components supplier Robert Bosch (10.1) – leave aside companies in IT or in pharmaceuticals (10-20 per cent). Moreover the VW figure has only reached its current level through prodigious and rather recent increases: 32.1 per cent in 2012, and 23.4 per cent in 2013. This all looks too little, too late.
2. In a further financial flourish, VW is also the EU’s largest issuer of corporate bonds.
3. A fascinating if now outdated book on how countries invoke risks to health as a barrier to free trade is Catherine Button, The power to protect: trade, health and uncertainty in the WTO, 2004.
4. In April 2012 the International Council on Clean Transportation, an NGO, published a major report titled Discrepancies between type-approval and real-world fuel consumption and CO2 values in 2001-2011 European passenger cars. The ICCT then alerted the EPA and the California Air Resources Board to VW’s funny emissions software in May 2014. Why then did the EPA only move much later against VW, in late September 2015? Life isn’t a conspiracy; but it remains possible that Detroit’s Big Three car manufacturers tipped off the EPA that VW’s 2016 Passat, a do-or-die operation for the German firm in the US, was due for launch just a few days later.
5. We hear little, too, about the general level of vehicle recalls in modern capitalism. As early as October 2014, one in five of vehicles in the US was the subject of a recall. It is hard to tell whether the figure reflects more complex electronics in cars, poorer manufacturing and design in cars, or the car industry’s paranoid desire to pre-empt regulatory penalties.

• Another thing we do not hear much about in cars, given the Green cacophony that surrounds them today, is a rare example of goodish EU regulation. April 2018 will see all new passenger cars and vans in the EU equipped with the 112 eCall system, which will make an automatic call to the emergency services in case of an accident, even if the driver is unconscious.