Volkswagen Scandal: Why Is It Falling to the U.S. to Regulate Europe?

When the news broke that Volkswagen, Europe's biggest car manufacturer, was deliberately rigging the emissions tests of some of its diesel models around the world, it was notable that they hadn't been caught out in Europe, where the company is based and sells most of its cars, but by the American regulator, the Environmental Protection Agency (EPA). As with the FIFA corruption scandal, which centered on the world football body's headquarters in Switzerland, it seems fair to ask why it has fallen to the U.S. to act on wrongdoing that's happening on Europe's doorstep. As Christofer Fjellner, a Swedish center-right MEP, said when the VW scandal broke: "Of course it's embarrassing that it's the Americans that show us we have a Europe, in member states, we are not up to the task of scrutinising our own heroes the way we should."

The scale and seriousness of the scandal is unquestionable. Volkswagen now admit that 11 million diesel cars are affected worldwide, and the company's shares have fallen by over a third as it faces billions of dollars in fines as well as numerous lawsuits. The EPA found that outside the laboratory, the cars emitted up to 40 times the amount of nitrogen oxides permitted by U.S. authorities. Surely someone in Europe, where VW has most of its factories and diesel cars make up 50 percent of the market compared to just three percent in the U.S., must have noticed what was going on.

Even worse have been the claims from some German politicians that the German transport ministry did know about the rigging, based on a written answer the ministry gave on July 28 to a question from the German Green Party about the so-called "defeat devices" used by Volkswagen. Alexander Dobrind, the transport minister, has denied the government failed to monitor the car industry. Yet the ministry wrote in its reply that it shared "the view of the European Commission that there is no extensively proven means of preventing defeat devices," according to the Daily Telegraph newspaper. A 2013 study by the European Commission's Joint Research Center included a review of defeat devices that suggested a shift towards on-road testing, instead of just in the laboratory, to make the analysis "more effective in limiting the application of defeat strategies."

Yet the warnings appear to have slipped between the cracks in European regulation, and since the scandal broke, the European Commission and the German government have blamed each other. The European Commission last week acknowledged that it was aware of defeat devices and had banned them, but insists that responsibility for enforcing the rules lies with each EU member state. Fjellner, the Swedish MEP, says it was unacceptable for Brussels to pass the blame. "The Commission is responsible for seeing we have a control framework that works. We know there are companies that don't give a damn about the rules," he says.

European carmakers, unlike their U.S. counterparts, are given too much sway over how air pollution standards are enforced, according to Transport and Environment, a group that campaigns for greener transport in Europe. While seemingly independent organisations certify the test results of cars in Europe, often these organisations are commercial enterprises competing for business, and optimise test results in order to win clients. These test results are not subject to any further checks and there is no system in place to enforce penalties should errors be discovered. Yet in the U.S., while carmakers are also responsible for their own tests, the EPA, an agency of the U.S. federal government, demands random checks, and imposes hefty fines if the numbers do not add up, according to The Economist newspaper.

Who should bear responsibility in Europe certainly appears to be one reason why the information was not acted on. "It's not necessarily something that falls under the authority of the European Commission, Raoul Ruparel, co-director of the not-for-profit think tank Open Europe, told Newsweek, "although you can ask why we didn't have proper oversight in terms of why they weren't running more effective tests around Europe, and why we kept very basic lab tests, instead of pushing for higher standards," he adds.

Instead, Ruparel says, it may be down to "significant amounts of lobbying" that the European Commission did not act. According to Greenpeace, diesel manufacturers spent 18.5 million euros ($20.6 million) lobbying Brussels in 2014, employing 184 lobbyists. Volkswagen alone employed 43 lobbyists and spent 3.3 million euros ($3.6 million) lobbying in Brussels, making it one of the biggest spenders on lobbying in the EU. It is also revealing that diesel models in the U.S. make up a tiny percentage of the U.S car market, just 3 percent. In Europe, diesel cars make up about 50 percent of the market, making it much more valuable to the car manufacturers. Part of the reason the U.S. market is so much smaller is due to stricter emissions standards concerning smog and conventional pollutants that were introduced in the 1970s.

Pascoe Sabido, from the Corporate Europe Observatory which campaigns for greater transparency within the EU, agrees that lobbying is to blame, and that most European governments simply looked the other way over emissions tests. "We call it the Brussels bubble, as there are more lobbyists here than permanent staff working for the European Commission, so it turns into a hermetically-sealed echo chamber. It takes a scandal like this to see what's going, but VW is really the tip of the iceberg." He adds: "The EPA has more independence that the European Commission for sure, as it seems the Commission has known about this for years but chose to sit on it."

For now, it remains to be seen whether the VW scandal will bring about any real change in the industry in Europe. "The big question is whether it remains a single firm scandal or a sector-wide scandal," says Ruparel. "If it is single firm scandal it will be easier to contain, and might not lead to significant institutional changes."

But for Volkswagen, and the German government, damage has already been done. Oliver Krischer, vice-chairman of the Green Party in the German parliament, is convinced that the German government knew that car companies were using techniques to rig emission tests and that cars were producing higher levels of nitrogen oxide than test results revealed. Simply put, Krischer believes that the car industry is too powerful, accounting for why the government did not act sooner. "We suppose the government didn't act because climate protection is not as important as the powerful German car industry," Krischer told Newsweek. "The German car industry has hundreds of thousands of employees and it exerts great influence."

"The German government has to act right away," Krischer continues. "The situation is not only a scandal for VW but also for the German government."