Podcast Summary: Martin Lodge on the VW Emissions 'Scandal'

Podcast: LSE: Public Lectures and Events
Host: LSE Film and Audio Team
Guest: Professor Martin Lodge
Date: October 7, 2015

Overview

In this episode, Professor Martin Lodge discusses the 2015 Volkswagen (VW) emissions scandal with Martin Rogers, exploring how the deception was uncovered, regulatory issues in Europe and the US, and the broader implications for environmental regulation. The conversation critically examines the difference between gaming and outright cheating in emissions testing and questions the effectiveness of existing regulatory frameworks.

Key Discussion Points & Insights

Background of the Scandal [00:00–01:12]

• VW replaced its senior management following the scandal, but the extent of emissions issues and the number of affected cars remained unclear at the time.
• The scandal revealed longstanding problems with relying solely on official company-reported data versus independent testing and NGO findings.
• Quote:
  "It is not quite clear how many cars are being affected by this problem. More long standingly, it has shown us the problem of relying on official data, so to speak, on emissions versus what NGOs show us, what road tests show us." (Lodge, 00:11)

From Gaming to Cheating [00:43–01:12]

• Historically, companies have been known to "game the system" by modifying cars to pass emissions tests under controlled conditions.
• The VW case is different—there was "a specific case of cheating" using software deliberately designed to detect when a car was being tested and manipulate emissions results accordingly.
• Quote:
  "But here I think we have a specific case of cheating going on. A software which seems to have been updated over time to basically perform according to particular tests, only to switch off." (Lodge, 00:43)

Discovery: Role of NGOs & Real-World Testing [01:16–01:50]

• The malpractice was discovered not by regulators, but by an NGO conducting real-world emissions tests, uncovering that actual emissions were "much dirtier than promised."
• VW failed to provide satisfactory responses, initially claiming "technical issues."
• Quote:
  "It didn't come about by sort of public regulators finding things. It was an issue which emerged via NGO testing." (Lodge, 01:16)
• The NGO's testing found emissions to be about 40% higher than VW's own data.
• Quote:
  "They basically tested the emissions in sort of in the real world which were found to be about 40% higher than indicated by... the company's data." (Lodge, 01:50)

Testing Flaws & the “Golden Vehicle” [02:01–03:06]

• Emissions tests are conducted under artificial, laboratory conditions, not reflective of real driving, allowing for manipulation.
• The “golden vehicle” refers to cars specially prepared to perform ideally during tests, but not under everyday use.
• Regulatory testing requires certain software adjustments for safety, which was exploited by VW.
• Quote:
  "The problem... is that the tests are produced in... unreal circumstances... you Basically sort of establish or create cars which perform perfectly for the test, but you would never take on the road." (Lodge, 02:06)

Regulatory Weaknesses: US vs. EU [03:06–04:20]

• The US regulatory system is generally stricter and was quicker to investigate and uncover wrongdoing.
• European Union standards are “much lighter,” and car makers can “shop around” for the most favorable certifiers, creating a competition for laxer standards.
• This creates misaligned incentives and undermines effective regulation.
• Quote:
  "Companies can basically sort of choose where they want to be assessed or certified. The different certifiers are in a, you might say, commercial competition." (Lodge, 03:50)

Consequences and the Way Forward [04:20–05:39]

• The full scope of responsibility within VW was yet to be determined.
• VW faces operational challenges (fixing affected cars), legal consequences (likely heavy fines and compensation), and market impact.
• The intent (“willful wrongdoing”) makes severe penalties more likely compared to accidental disasters like BP’s Deepwater Horizon.
• There may be discussions on changing regulatory regimes, but Lodge is skeptical significant reform will happen, citing powerful industry lobbying.
• Quote:
  "Am I convinced... that European regulation will really shift towards a different regime? I would say no to that. The lobbying power is far too strong for that." (Lodge, 05:35)

Global Impact [05:39–06:17]

• Though the US initiated the investigation, the scandal has already impacted Europe—VW may not meet even lighter EU standards, affecting reputation and market presence in Europe and Germany.
• Quote:
  "I think this will also... have quite significant impact on the European market for Volkswagen and the reputation of Volkswagen in Germany itself." (Lodge, 06:08)

Notable Quotes & Memorable Moments

• Cheating Over Gaming:
  "A software which seems to have been updated over time to basically perform according to particular tests, only to switch off. So we have here a difference between gaming and cheating." (Lodge, 00:43)

• Regulatory Loopholes:
  "Companies can basically sort of choose where they want to be assessed or certified. The different certifiers are in a, you might say, commercial competition." (Lodge, 03:50)

• Regulatory Reform Prospects:
  “Am I convinced... that European regulation will really shift towards a different regime? I would say no to that. The lobbying power is far too strong for that.” (Lodge, 05:35)

Timeline of Key Segments

• 00:00 – 01:12: Introduction and overview of the VW scandal.
• 01:12 – 01:50: Uncovering how the cheating was discovered, NGO involvement.
• 01:50 – 03:06: Problems with current emissions testing and “golden vehicle” issue.
• 03:06 – 04:20: Role and shortcomings of regulatory authorities in the US and EU.
• 04:20 – 05:39: Possible consequences for VW and potential (but unlikely) regulatory reforms.
• 05:39 – 06:17: International implications, especially on the European market.

Conclusion

Professor Martin Lodge delivers a critical, nuanced assessment of the VW emissions scandal, capturing the core issues of regulatory failure, the difference between gaming and outright deceit, and the prospects for reform. The conversation underscores the necessity for more robust, real-world testing and regulatory mechanisms to ensure corporate accountability and environmental protection.