Four years ago, President Barack Obama was joined by the CEOs of 13 major automakers to announce new tailpipe emissions standards for cars and trucks sold in the United States. One notable absence from this gathering was Jonathan Browning, the then president and CEO of Volkswagen, or VW, Group of America. Browning released a statement refusing to endorse the tough new standards because of the company’s commitment to diesel engines. We now know that VW’s commitment to diesel engines may have led them to violate the law.
Earlier this month, Michael Horn, the current president and CEO of VW Group of America, testified before a congressional committee about the company’s alleged use of “defeat devices” in certain make and model year diesel vehicles. The Environmental Protection Agency, or EPA, alleges that VW installed software in order to ensure that vehicles would pass emissions tests even though they emitted higher than allowed levels of pollution during normal use. The use of such software is a clear violation of the Clean Air Act.
The EPA has opened an investigation in conjunction with the U.S. Department of Justice and the Federal Trade Commission to determine the scope and scale of the company’s wrongdoing. As part of the investigation, the federal agencies will determine the proper penalties VW will have to pay, as well as other remedies the company will incur as a result of its actions. If the EPA assesses the maximum fine per affected vehicle, VW could be on the hook for $18 billion in penalties.
It is important to recognize the primary victims of this corporate malfeasance beyond the company’s shareholders—consumers who purchased these vehicles, as well as all U.S. residents who have had to breathe dirtier air. But because of deficiencies in the Clean Air Act, any criminal prosecution under that act is likely to be for filing false certifications—not for polluting the environment and harming public health. Fortunately, through the civil penalties assessed for this scandal, it is possible for both public health and the environment to come out ahead.
The EPA alleges that VW installed these defeat devices in certain model year 2009 to 2015 VW and Audi light-duty vehicles equipped with two-liter diesel engines, which amounts to approximately 480,000 vehicles in the United States alone. VW had marketed these cars as using clean diesel technology that allowed owners to meet strict pollution limits while also achieving a higher fuel economy. Understandably, many consumers feel cheated and duped.
While VW has announced that it will recall 8.5 million cars in Europe, it has not yet announced a plan in the United States to either buy back the defective cars or fix them so that they meet emissions standards on the road. However, it is clear that—as a matter of justice—consumers in the United States must be made whole when penalties and other remedies are determined.
Moreover, VW and Audi vehicles equipped with defeat devices emitted nitrogen oxides, or NOx, 10 times to 40 times higher than the EPA-compliant levels. This is bad news for anyone who cares about clean air and human health. NOx reacts with other pollutants in the presence of sunlight to produce ozone, more commonly referred to as smog. Exposure to high ozone levels can trigger asthma attacks, impair lung function, and cause other adverse health effects, including premature death. NOx also combines with other compounds to form small soot particles that can penetrate deeply into the lungs and can exacerbate respiratory and heart disease, leading to premature death.
One reporter estimated that the defective VW cars have released more than 46,000 additional tons of NOx in the United States. According to an Associated Press analysis, these vehicles released enough pollution over the past seven years to cause “between 16 to 94 deaths,” affecting the lives of people wherever the cars traveled.
What can be done to mitigate the human health and environmental effect of these dirty cars?
In 2005, Congress passed the Diesel Emissions Reduction Act, or DERA, instructing the EPA to provide funding for projects that reduce emissions from diesel sources. Since then, hundreds of millions of dollars have been allocated for projects that tackle this pollution source, cleaning up tens of thousands of dirty diesel engines, cutting pollution by hundreds of thousands of tons, and generating health benefits of up to $8.2 billion in just two years. DERA grant recipients have used this money for a variety of projects, ranging from retrofitting school bus engines to installing technologies at truck stops to reduce idling. The funds have even been used to help electrify the transportation sector by, for instance, incentivizing the replacement of diesel delivery vans with battery electric delivery vans. There is an incredible appetite for support for these projects throughout the country. Even when funding levels amounted to more than $500 million in 2009 and 2010, funding requests exceeded available funding by a ratio of 7-to-1.
As VW is facing up to $18 billion in penalties, significant effort should be put into a plan to use these funds wisely and offset the damage done by the deceptive software. The EPA has the authority to direct penalty payments to the diesel emissions reduction program—a step the agency should take. By directing billions of dollars in penalties into the DERA program, this federal enforcement action can result in pollution cuts that greatly exceed the extra pollution that the noncomplying vehicles released. At the same time, it can help to modernize vehicle fleets and infrastructure throughout the country and boost local economies. According to a coalition of trade associations, companies, and public health advocacy groups, DERA cleans the air and underpins employment in innovative industries by encouraging outdated equipment in each of the 50 states—as well as the District of Columbia, the U.S. territories, and tribal lands—to be turned over and retrofitted with modern pollution controls.
There is a strong precedent for using penalty funds to offset pollution caused by the offending party. In 2003, Toyota paid $20 million to retrofit thousands of public diesel-fleet vehicles with pollution controls because of the carmaker’s violation of Clean Air Act emissions standards. When the company then known as DaimlerChrysler was found to have installed defective catalytic converters in Jeep and Dodge vehicles, the auto manufacturer was required by a 2005 consent decree to use $3 million to retrofit heavy-duty diesel engines with pollution controls. In 1997, Ford paid $7.8 million in a Clean Air Act settlement after installing devices to cheat emissions control tests in 60,000 vans, as well as an additional $2.5 million in emissions offsets and $1 million to study new emissions control technology.
The Obama administration has a rare opportunity to use its existing authority to hold VW accountable, as well as to cut pollution and boost local economies throughout the nation by directing billions of dollars in penalties to productive use.
Greg Dotson is the Vice President for Energy Policy at the Center for American Progress. Alison Cassady is the Center’s Director of Domestic Energy Policy. Myriam Alexander-Kearns, a Research Associate for the Energy Policy team at the Center, also contributed to this column.