Tainted Fahrvergnügen: What the Volkswagen Scandal Tells Us About Achieving Climate and Clean Air Goals

A VW employee enters the Volkswagen factory site through Gate 17 in Wolfsburg, Germany, Oct. 6, 2015. For Volkswagen, the cos
A VW employee enters the Volkswagen factory site through Gate 17 in Wolfsburg, Germany, Oct. 6, 2015. For Volkswagen, the cost of its cheating on emissions tests in the U.S. is likely to run into the tens of billions of dollars and prematurely end its long-sought status as the world's biggest carmaker. (Julian Stratenschulte/dpa via AP)

The revelation that German automaker Volkswagen cheated on emissions tests by installing fraudulent software has caused a firestorm. The company's share price dropped dramatically, a criminal investigation was launched in the U.S., and CEO Martin Winterkorn resigned under pressure. Millions of cars worldwide are affected, and dozens of class-action lawsuits have been filed, claiming many billions of dollars in damages. Social media has been abuzz with #dieselgate.

Public brouhaha aside, from a climate change policy perspective, what is most troubling about this scandal is not what the company did, but the vulnerabilities it exposed in environmental policy.

Two months from now, world leaders will meet in Paris to negotiate a new climate agreement, and the commitments they will bring to the table reflect what each government believes it can achieve through national policies. In the U.S., for example, the Clean Power Plan is expected to play a key role in achieving climate targets, along with rising fuel efficiency standards and tougher air quality rules.

At the same time, pledges delivered until September 2015 will very likely not be enough to keep global warming below the internationallyagreed goal of 2°C. But climate action is not confined to Paris or to national governments, and a wide variety of actors, covering a range of issue areas, have entered the fold. For instance, the NAZCA (Non State Actor Zone for Climate Action) web portal, launched in 2014, now lists close to 4,000 commitments by cities, regions, investors and companies to tackle climatechange.

So how does Volkswagen fit in this picture? First of all, the NAZCA portal lists the German carmaker with four pledges, one promising to reduce carbon dioxide emissions from its European car fleet by 45% by 2020. Second, the software it installed directly undermined a policy measure - mandatory vehicle emissions testing - that had been adopted to reduce emissions of greenhouse gases and air pollutants. The Volkswagen scandal thus highlights the limitations of two key strategies that world leaders are counting on to achieve climate targets: voluntary pledges and regulatory action.

Voluntary commitments should be welcomed, especially from large branches of industries such as carmakers. Legislators may rely on such voluntary measures, trusting the goodwill of industry leaders. For example, in 1998, the European Commission signed an agreement with the European Automobile Manufacturers Association (ACEA) under which carmakers vowed to lower their fleets' carbon dioxide emissions to 140g per kilometre by 2008. The Japanese and Korean auto industries followed suit.

But without ways to ensure follow-through, those initiatives run the risk of remaining nothing more than lip service to climate protection. In the EU, it soonbecame clear that the car industry would miss their target.The EU reacted byimposing mandatory emissions standards for passenger cars. In the United States, President Obama seized the 2009 bailout of the auto industry in the wake of the financial crisis to impose stricter emissions standards.

But regulating industry is not easy. Governments may struggle to strike a balance between environmental policy goals, such as mitigating climate change, and economic goals, such as maintaining a healthy auto industry. Regulatory processes are often the target of fierce lobbying efforts, and if enforcement is inadequate or the fines are too low, companies may flaunt the rules. Volkswagen has done both: not only did it cheat with its software, but it and other German automakers have on multiple occasions lobbied against tougher emission standards, and they continue to do so. In fact, according to Transparency International, Volkswagen has become the ninth most influential lobbyist in Brussels, spending as much as €3.3 billion in the EU capital just one month before the scandal was revealed.

None of this should not let governments off the hook, however, as many have a track record of lobbying hard to protect their own industries from stringent standards and robust testing methods.

This is where a different set of non-state actors play a crucial role: as advocates for more robust policies and enforcement, and as watchdogs. It was the nonprofit International Council on Clean Transportation (ICCT) that funded the study that revealed Volkswagen's cheating software. Transparency International keeps an eye on lobbying efforts in Brussels, while others focus directly on how companies are trying to influence climate policies in particular. Yet others help companies disclose information on how they're tackling climate change.

So where to go from here? First, the Volkswagen case clearly calls for the tightening of existing regulations, such as improving emissions testing and moving the tests out of the laboratory onto the streets - as considered by the European Commission in May 2015. Second, it is important to strengthen the capacity of non-state actors such as the ICCT to allow them to independently monitor actions and commitments by other players in the field of climate policy. Along with providing financial support, governments can help by ensuring that these organizations can access the data they need to support their transparency efforts. For example, companies in the NAZCA database list general objectives, but they are not required to provide much information on how they will actually achieve them.

This leads to a third proposition, for businesses making climate commitments: Choose to be transparent, and regularly update policy-makers and the general public about the progress being made towards those commitments. More broadly, automakers should use this embarrassing experience to come clean in the best sense of the phrase. Roughly 22% of greenhouse gas emissions come from the transport sector, and small particles found in diesel engines have a significant negative impact on public health. Working towards more sustainable solutions for personal mobility is not only a useful way to polish the industry's tainted image, but can also be a more sustainable business model for the future. The opportunity is right there - now it's up to automakers to seize it and opt for a greener form of Fahrvergnügen.