Emis­sions scan­dal drags on over loop­holes

IN­DUS­TRY NEWS/ While au­to­mo­tive in­dus­try deals with new WLTP reg­u­la­tions, it con­tin­ues to dis­cover gaps, writes Pa­trick McGee

Business Day - Motor News - - MOTOR NEWS -

After Volk­swa­gen was caught cheat­ing diesel emis­sions tests in 2015, one of the first ac­tions its en­gi­neers took was to launch a se­cret project: to ob­tain cars from ri­val man­u­fac­tur­ers and con­duct tests on their emis­sions. Its aim was to find ev­i­dence of wide­spread cheat­ing across the in­dus­try, so guilt could be spread around and penal­ties di­luted, say two peo­ple in­side the com­pany.

The Volk­swa­gen Scan­dal, in other words, might help­fully be­come the Car Scan­dal.

Ve­hi­cles from Fiat, Hyundai and oth­ers were tested for harm­ful ni­tro­gen ox­ide emis­sions by VW en­gi­neers from late 2015 to early 2016. The en­gi­neers had a sim­ple co­nun­drum: VW had just ad­mit­ted to equip­ping 11 mil­lion cars with soft­ware to de­tect lab­o­ra­tory tests and en­able them to en­ter a lowe­mis­sions mode. If VW’s best en­gi­neers found reg­u­la­tions so oner­ous that they re­sorted to de­lib­er­ate fraud, what had its ri­vals done?

A third per­son in the com­pany in­sists there was a more in­no­cent ex­pla­na­tion for the tests. En­gi­neers un­in­volved in the orig­i­nal cheat­ing had to use ri­val cars as con­trol vari­ables to bet­ter un­der­stand their own so­phis­ti­cated soft­ware — some of it sup­plied by third par­ties and used by ri­val brands.

“We were not dirty­ing oth­ers’ hands to make our own look clean,” says this em­ployee.

Volk­swa­gen de­clined to com­ment on this pre­vi­ously un­re­ported episode.

What the en­gi­neers found shocked them. Ri­val brands’ NOx emis­sions were “a com­plete dis­as­ter”. Per­for­mance on the road was “com­pletely dif­fer­ent to the tech­ni­cal data”, says a VW worker. The sum­mary of whether ri­vals were skew­ing emis­sions re­sults was clear: “It’s not only VW who is cheat­ing.”

What is un­clear is whether ri­vals were de­ploy­ing the same strat­egy as VW — us­ing a “de­feat de­vice” to il­le­gally trick reg­u­la­tors into be­liev­ing its cars were green — or if they had be­come bet­ter at bend­ing the rules on tests, a prob­lem that still ex­ists with petrol cars, as the Euro­pean Com­mis­sion re­vealed in July when it dis­closed the lat­est “tricks” car mak­ers were us­ing to ex­ploit loop­holes for in­com­ing 2020 emis­sions pro­ce­dures.

The dis­tinc­tion is blurred but im­por­tant. VW paid the con­se­quences of cross­ing the line and cheat­ing NOx emis­sions tests in the US. But the ef­forts of other car mak­ers to legally un­der­mine test­ing for both NOx and CO² in Europe have never re­sulted in real penal­ties.

“Le­gal op­ti­mi­sa­tion was done on an in­dus­trial scale,” says Nick Molden, CEO of Emis­sions An­a­lyt­ics, which con­ducts re­al­world driv­ing emis­sions tests.

“It be­came so in­grained in how cars were cer­ti­fied that the car mak­ers didn’t un­der­stand they had done some­thing wrong. That’s the scan­dal in Europe: that these ac­tions were not il­le­gal.”

Nearly three years after Diesel­gate was ex­posed, Volk­swa­gen is still the only car maker to have pleaded guilty in the US court for cheat­ing NOx emis­sions tests and ly­ing to reg­u­la­tors. Dam­ages have been in ex­cess of $25bn.

In Europe, how­ever, there has been no com­pa­ra­ble clam­p­down on what might be called “the other emis­sions scan­dal” — or what one com­pli­ance ex­pert dubbed “the law­ful but aw­ful ways” in which car mak­ers legally ex­ploit EU loop­holes to achieve the best pos­si­ble scores for CO² emis­sions.

It had been known in the in­dus­try for years that car mak­ers were gam­ing the EU lab tests in myr­iad ways: over­in­flat­ing tyres, tap­ing doors, re­mov­ing the sound sys­tem and turn­ing off the air-con­di­tion­ing were just a few of the meth­ods that helped cut emis­sions in the lab but that were im­pos­si­ble to repli­cate on the road.

In 2014, a year be­fore the VW diesel scan­dal was ex­posed by the US En­vi­ron­men­tal Pro­tec­tion Agency, one study showed that car mak­ers had be­come in­creas­ingly brazen in “op­ti­mis­ing” EU tests to lower their stated car­bon diox­ide emis­sions. From 2001 to 2013, the gap in CO² emis­sions in the lab ver­sus on the road nearly quadru­pled from 8% to 31%, ac­cord­ing to the In­ter­na­tional Coun­cil on Clean Trans­porta­tion (ICCT). In 2016, the gap was 42%.

Even with car mak­ers un­der scru­tiny, and Euro­pean reg­u­la­tors un­der pres­sure to en­force rules, the gap has since widened — reach­ing 42% in 2016.

Given the com­mis­sion’s re­cent ac­cu­sa­tions it would, how­ever, be wrong to con­clude that car mak­ers “are at it again”. Rather, they never stopped in the first place.

Once the VW en­gi­neers com­pleted their al­legedly damn­ing re­port in early 2016, the com­pany de­cided not to pub­lish it. VW had just adopted a le­gal strat­egy of full co-op­er­a­tion with US au­thor­i­ties, in part to ac­cel­er­ate a set­tle­ment; it wor­ried about ap­pear­ing like it was shirk­ing re­spon­si­bil­ity. The re­sults were given to in­de­pen­dent in­sti­tutes, in case they wanted to ver­ify them. And VW moved on.

Within months, how­ever, al­le­ga­tions im­pli­cat­ing Mer­cedes, Fiat-Chrysler and Opel be­gan to emerge as the in­sti­tutes and EU reg­u­la­tors per­formed their own com­pre­hen­sive NOx emis­sions tests.

Re­calls to “fix” or “mod­ify” emis­sions soft­ware have since be­come a reg­u­lar oc­cur­rence. But Europe has not taken strong ac­tion to pe­nalise them for us­ing le­gal tricks to un­der­mine CO² tests, which is why prob­lems per­sist, says Wil­liam Todts, ex­ec­u­tive di­rec­tor at the Euro­pean Fed­er­a­tion for Trans­port and En­vi­ron­ment (T&E), a clean en­ergy group.

By con­trast, the US, which op­er­ates “the most strin­gent pol­icy en­force­ment prac­tices” ac­cord­ing to the ICCT, has taken strong ac­tion. The lab-road dis­crep­ancy in emis­sions is present in the US, too, but the EPA cor­rects for it so there is vir­tu­ally no gap and fuel econ­omy in­for­ma­tion is cred­i­ble.

That car mak­ers are still bend­ing EU rules, there­fore, is as much a story of in­ef­fec­tual reg­u­la­tion. En­gi­neers, after all, are tasked with build­ing en­gines to meet test re­quire­ments, just like stu­dents fo­cus their read­ing on what is likely to be in ex­ams.

“Man­u­fac­tur­ers will al­ways re­spond to lit­eral re­quire­ments from the reg­u­la­tors,” says John Ger­man, se­nior fel­low at the ICCT. “If some­thing isn’t spec­i­fied in the reg­u­la­tions, it’s not re­ally eth­i­cal to take ad­van­tage of that — but nei­ther is it il­le­gal.”

In the US, the EPA sets and en­forces the rules; in Europe, Brus­sels sets the rules but en­force­ment is left to na­tional au­thor­i­ties. “No­body has the man­date or le­gal author­ity that the EPA has,” Ger­man says.

Crit­ics of the EU sys­tem say the na­tional au­thor­i­ties’ in­de­pen­dence and in­cen­tives are ques­tion­able. Ger­many’s trans­port author­ity, the KBA, is in a dif­fi­cult po­si­tion to im­pose bil­lions of eu­ros in fines on a car in­dus­try that em­ploys 800,000 peo­ple in the coun­try.

When, in April 2016, the KBA found that Mer­cedes, Opel and VW cars were un­der­stat­ing pol­lu­tion by turn­ing off emis­sions con­trols in tem­per­a­tures not found in test pro­ce­dures, it re­called 630,000 cars. It sim­ply told car mak­ers to stop ex­ploit­ing the loop­hole.

“It’s very tough to fight with the guys that cre­ate the jobs,” says Ós­car Ro­driguez Rouco, a car an­a­lyst at Banco Sabadell in Madrid. “I don’t think that any car­maker will have any big trou­ble with Euro­pean fines.”

Emis­sions test­ing in the EU is be­ing over­hauled, al­beit grad­u­ally. Sim­ple lab tests un­der the New Euro­pean Driv­ing Cy­cle (NEDC) de­scribed by T&E as “ut­terly dis­cred­ited” are be­ing re­placed by tests de­signed to bet­ter repli­cate on-the-road con­di­tions. The new sys­tem also gives the com­mis­sion pow­ers to check cars al­ready on the road, and it can pe­nalise car mak­ers up to €30,000 a car in case of non­com­pli­ance.

Yet crit­ics say Brus­sels is not go­ing far enough. “They’ve taken away some … loop­holes; they’ve made the cy­cle more ag­gres­sive, but it’s still more gen­tle than re­al­ity,” Molden says. “Car buy­ers will still find their cars emit­ting more CO² by about 20%.”

The com­mis­sion’s re­search arm said in July car mak­ers were al­ready un­der­min­ing these new CO2 emis­sions tests — be­fore they even be­come manda­tory in Septem­ber.

The com­mis­sion’s Joint Re­search Cen­tre found that cars were still be­ing con­fig­ured to pro­duce low re­sults on NEDC tests, but fea­tured a dif­fer­ent con­fig­u­ra­tion to emit higher emis­sions on the in­com­ing regime, the World­wide Har­monised Light Ve­hi­cle Test Pro­ce­dure, or WLTP.

The logic is to in­flate the base­line for 2020 emis­sions — the year NEDC stan­dards are phased out in favour of WLTP — be­cause tar­gets in 2025 and 2030 are based on a per­cent­age re­duc­tion from the start point.

To ob­tain lower emis­sions on the NEDC test, car mak­ers can test the cars on full bat­ter­ies, en­able start/stop en­gine tech­nol­ogy and man­u­ally shift gears quickly. To raise emis­sions for WLTP, they per­form a sep­a­rate test us­ing a de­pleted bat­tery, dis­able start/stop func­tions and shift gears more slowly.

Brus­sels ac­knowl­edges that it in­ad­ver­tently cre­ated this loop­hole when it wrote the WLTP reg­u­la­tions.

The com­mis­sion found that some car mak­ers were in­flat­ing emis­sions for WLTP stan­dards by up to 13% and on av­er­age by 4.5%. They con­tin­ued to “sys­tem­at­i­cally” un­der­state NEDC emis­sions by 4%.

Brus­sels says it is work­ing to close the loop­hole and pos­si­bly amend the law.

A big­ger chal­lenge, the ICCT’s Peter Mock says, is for the car mak­ers to shift gears on com­pli­ance. “Car mak­ers have a so­cial re­spon­si­bil­ity to be more hon­est and to not ex­ploit ev­ery sin­gle loop­hole they come across,” Mock says.


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