The revelation of Volkswagen’s deception has left consumers, politicians, national authorities, and environmental organisations reeling. Trust in big business and industry has taken a nosedive, but it is not the first time a big company has deceived consumers and authorities, and it is unlikely to be the last scandal. Given the lobbying power of car manufacturers in both the EU and USA one should not be surprised that companies cheat to avoid complying with legislation, what might be surprising is that Volkswagen spends money on developing a software system aimed at deceiving instead of actually developing technologies to reduce emissions. The reactions have been one of condemnation and discussions about how to prevent this in the future is slowing emerging.
The scandal has also led to loss of confidence in test reports from consumer organisations and national regulators. Consequently, national agencies and regulators in the USA and in several European countries have said they will retest the cars under real life conditions instead of laboratories. Moreover, MEPs have called for stricter emissions control and the Commission has said it is monitoring the case. The Commission has already proposed a law which aims to narrow the gap between laboratory tests and real life tests.
Traditionally, car manufacturers have close ties to governments, they represent big economic interests and work places, as such governments have taken an active interest in where new car plants will be located and they have been known to bail out ailing car companies. The economic powers of car manufactures are still evident today, especially in terms of lobbying power. Indeed the close relationship between the German car industry and governments is well known in Brussels, where German government have been known to lobby on behalf of the German car manufacturers, similar many German MEPs have opposed stronger environmental standards for the car industry. According to Politico this close relationship between the automotive industry and policy-makers extends to the European Commission. The 2014 EU regulation on CO2 emissions for passenger cars is a good example of intense German lobbying. The regulation requires new cars on average to emit 95 g CO2 /km by 2020. However, the German car manufactures, especially Mercedes and Daimler, which represent premium cars, were opposed to the targets and dates, instead they tried to lobby for loopholes such as super credits. Crucially, Chancellor Merkel and the German federal government supported their industry.Nevertheless, the Commission’s initial standards were adopted by the European Parliament, in February 2014, with an overwhelming majority of 499 votes in favour, 107 against and 9 abstentions against, and the regulation was adopted by the Council the following month.
According to the European Commission; “Cars are responsible for around 12% of total EU emissions of carbon dioxide (CO2), the main greenhouse gas.”
The report, which reveals the Volkswagen deception show that the affected diesel cars pollute up to 35% more than US standards on nitrogen oxide allow. Given the limited share of diesel cars compared to total number of cars, the environmental impact is manageable and although the US report did not reveal any problems with BMW, there have been speculations that this deception could be a much wider industry problem, in which case the negative environmental impact will be much higher. Whilst there are various regulators and research organisations that measures actual pollution and emissions, it is problematic if industries, in general, are providing inaccurate figures because this could ultimately affect climate change targets, as it might be necessary to impose stricter standards to ensure environmental damage do not exceed the targets recommended by climate scientists and those agreed by governments, the UN and the EU. This clearly links into the up and coming COP21 in Paris, where governments have to decide on new measures to combat climate change.
The question is to what extent the car industry will be able to continue to do dominate environmental policy-making, or has the car lobby lost some of its power as a consequence of this scandal or will the car companies eventually regain their power vis-à-vis political policy-makers? This will depend on how consumer groups and environmental groups are able to utilise the window of opportunities to lobby for stricter legislation and how inclined policy-makers are to listen to these groups instead of Volkswagen and the rest of the industry, which still represent strong economic interests and jobs. Environmental groups have generally been very critical of the car industry and its lobbying power, which have left environmental groups marginalised as economic interests, i.e. competitiveness and jobs, always weigh more than environmental protection.
Based on previous corporate scandals in the long term this scandal will not change the power of car companies, and their interests will soon be heard instead of environmental or consumer interests. The close relationship between Brussels and automotive industry, between the German federal government and Volkswagen has been shaken but when the dust settles it will be back to normal again. Indeed Volkswagen spent Euro 3.3 million on lobbying in the EU in 2014, and is likely to increase this amount in 2015 as part of its damage control, where it needs to work closely with politicians, regulators and consumer groups to demonstrate that it can change and can be trusted again.