While Pope Francis was shuttled around during his historic visit to the U.S. in a Fiat, he shared the news cycle with Volkswagen.
The pope made headlines with his calls for action on climate change. USA Today touted: “Obama, Pope Francis praise each other on climate change.” In his September 23 speech from the White House lawn, the Pope addressed President Obama saying: “I find it encouraging that you are introducing an initiative for reducing air pollution.” Addressing that comment, Business Insider added: “He praised President Barack Obama for his proposals, which aim for the US to cut emissions by up to 28% over the next decade.”
The core of the entire climate change agenda is the reduction of carbon dioxide emissions that proponents like to call “air pollution.” It comes from sources we can’t control: volcanoes; sources we can kind-of control: forest fires (better forest management would result in fewer fires) and human beings exhaling (reduce the population, reduce CO2 emissions); and sources we can control: the use of fossil fuels (we can virtually outlaw them as several countries, including the U.S., are trying to do).
The drive to cut CO2 emissions is at the root of Volkswagen’s unprecedented scandal that broke last week, resulting in the CEO’s abrupt ouster on September 23—the day that Pope Francis’ U.S. visit went into full swing.
With nonstop coverage of the papal activities—including his Fiat Popemobile—the Volkswagen story was likely lost on most Americans. But it is not going away.
On September 18, the U.S. Environmental Protection Agency disclosed the scandal: Europe’s biggest auto maker, with 600,000 employees world-wide and 300,000 in Germany, utilized software on some VW and Audi diesel-powered cars to manipulate the results of routine emissions tests—allowing them pass strict emissions standards in Europe and the U.S. The “defeat devices” have reportedly been fitted to more than 11 million vehicles since 2008 and may cost Volkswagen up to $18 billion in fines in the U.S. alone. Owners of the impacted vehicles will need to have a heretofore unavailable “fix” installed and may have to provide a “proof of correction certificate” in order to renew their registration and will suffer “loss due to the diminished value of the cars.” As a result of the scandal, Volkswagen’s stock price and reputation have both fallen precipitously, and class-action lawsuits are already taking shape. Fund managers have been banned from buying VW’s stocks and bonds. Tens of thousands of new cars may remain unsold. USNews stated: “Whoever is responsible could face criminal charges in Germany.”
The question no one seems to be asking is: what would drive Europe’s biggest auto maker to make such a costly decision, to take a risk, from which it may be impossible to recover, and tarnish the “made-in-Germany brand”?
While the question isn’t asked, Reuters coverage of the story offers the answer: “Diesel engines use less fuel and emit less carbon—blamed for global warming—than standard gasoline engines. But they emit higher levels of toxic gases known as nitrogen oxides.”
In short, the answer is the drive to lower CO2 emissions and the policies that encourage reduction.
In BloombergView, Clive Crook offers this excellent explanation:
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. In the European Union as a whole, diesel vehicles now account for more than half of the market. In France, the first country to cross that threshold, diesel now accounts for roughly 80 percent of motor-fuel consumption.
What was the reasoning? Diesel contains more carbon than gasoline, but diesel engines burn less fuel: Net, switching to diesel ought to give you lower emissions of greenhouse gases. However, there’s a penalty in higher emissions of other pollutants, including particulates and nitrogen oxides, or NOx. Curbing those emissions requires expensive modifications to cars’ exhaust systems. To facilitate the switch, Europe made its emission standards for these other pollutants less stringent for diesel engines than for gasoline engines. The priority, after all, was to cut greenhouse gases.
If anyone could solve the dilemma, one would expect it to be the Germans, who excel in engineering feats. It is Germany that is touted as the world leader in all things green. The reality of achieving the goals, however, is far more difficult than passing the legislation calling for the energy transformation.
Addressing German Chancellor Angela Merkel’s push for de-carbonization, BloombergBusiness points out: “Merkel has built a reputation as a climate crusader during a decade as Chancellor.” She “has straddled between pushing to reduce global warming while protecting her country’s auto industry.”
Merkel is, apparently, bumping up against reality. After shutting down its nuclear power plants, Germany has had to rely more on coal. BloombergBusiness continues: “She successfully helped block tighter EU carbon emissions standards two years ago.” Those tighter emissions standards would have hurt Germany’s auto industry, which accounts for 1 in 7 jobs in the country and 20 percent of its exports. At last week’s Frankfurt Auto Show Merkel said: “We have to ensure politically that what’s doable can indeed be translated into law, but what’s not doable mustn’t become European law.”
Evidence suggests the issue “could be industry-wide.” CNBC reports: “several major companies having exposure to the same diesel technology.” BMW’s stock price plunged, according to BloombergBusiness, “after a report that a diesel version of the X3 sport utility vehicle emitted more than 11 times the European limit for air pollution in a road test.” The Financial Times quotes Stuart Pearson, an analyst at Exane BNP Paribas, as saying: VW was “unlikely to have been the only company to game the system globally.” And an October 2014 study, cited in BloombergBusiness, claims that “road tests of 15 new diesel cars were an average of seven times higher than European limits.”
The VW emissions scandal is more than just a “‘bad episode’ for the car industry,” as Germany’s vice-chancellor, Sigmar Gabriel, called it. It provides a lesson in the collision of economic and environmental policies that strive to reach goals, which are presently technologically unachievable—a lesson that regulators and policy makers have yet to learn.
The Los Angeles Times (LAT) reports: “Regulators have ordered Volkswagen to come up with a fix that allows vehicles to meet environmental regulations.” If it were that easy, even economically possible, the much-vaunted German engineering could have solved the problem instead of developing technology that found a way around the rules. LAT concludes: “automotive experts believe any repair will diminish the driving dynamics of the vehicles and slash fuel economy—the two major characteristics that attracted buyers.”
The fact that, while waving the flag of environmental virtue advocated by Pope Francis, those, with the world’s best engineering at their fingertips, had to use the expertise to develop a work-around should serve as a lesson to policymakers who pass legislation and regulation on ideology rather than reality.
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