Loading summary
Transcript18 lines
- [00:00]
A
Hello, welcome to toxic. I'm Martin Rogers here with Professor Martin Lodge to discuss the recent Volkswagen emissions scandal. Welcome, Martin. So first of all, can you give us an overview of the situation?
- [00:11]
B
Well, at present Volkswagen has replaced its senior management. We don't quite know what actually the emissions will be once we assess what these cars are. It is not quite clear how many cars are being affected by this problem. More long standingly, it has shown us the problem of, of relying on official data, so to speak, on emissions versus what NGOs show us, what road tests show us.
- [00:40]
A
So what specifically does this scandal refer to?
- [00:43]
B
I mean, I suspect there's a. I think what has made this a scandal is the difference between what I think everyone assumes, namely that companies game the system, produce certain kind of specific cars to look good. 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. So we have here a difference between gaming and cheating.
- [01:13]
A
And how did the issue come to light, this cheating?
- [01:17]
B
Well, sort of more or less coincidentally that an NGO which wanted to find out how clean these cars were suddenly realized it was much dirtier than promised and basically Volkswagen couldn't answer it and didn't come up with problems. Proper responses claims these were technical issues that never got resolved and then finally sort of it revealed itself. So that is basically how it came about. It didn't come about by sort of public regulators finding things. It was an issue which emerged via NGO testing.
- [01:48]
A
And what was the process of that NGO testing?
- [01:50]
B
Well, I mean they basically tested the emissions in sort of in the real world which were found to be about 40% higher than indicated by these kind of the company's data.
- [02:01]
A
And so what was the problem with the testing and this issue of the golden vehicle?
- [02:07]
B
Well, the problem, I mean, there are two problems. I mean that's a kind of problem relating to Volkswagen and this particular episode is that the tests are produced in, you might say, sort of unreal circumstances. So under laboratory conditions and so on, software has to be put into these motors because otherwise the car would sort of spin out of control. So it needs to adjust to the testing conditions. Nevertheless, this software was used to then manipulate as a test result. So one of the big problem is that the way in which emissions are being sort of assessed and so on does not reflect real driving. This is something which has been around the car process for a long time. There's nothing new about this. The golden vehicle refers to the idea that you Basically sort of establish or create cars which perform perfectly for the test, but you would never take on the road.
- [03:06]
A
So what is the role for regulatory authorities in this area?
- [03:10]
B
Well, there are two debates here. One is basically why is it that it seems that sort of scandals are revealed in the US rather than in, let's say, the motherland of the company, Germany, for example. So that is sort of one problem here. Why is it that the US finds wrongdoing rather than European regulators? But the broader question for the European regulatory context is that the European provisions are much lighter than the US standards, which to some extent might explain why Volkswagen went down this road. They had backed technologically the wrong horse and therefore couldn't hit a US standard. But they might not even hit the EU standard. So we have got softer standards in the European Union. However, they're also. 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. So what we are having here is a setup where different jurisdictions compete for the lightest bureau. And you might say that is not the appropriate way to go about it when we come to environmental regulation because incentives are misaligned here.
- [04:21]
A
So where do we go from here? And what are the likely punishments that Volkswagen is facing?
- [04:26]
B
I mean, Volkswagen I think still needs to find out what has happened. It seems as so in terms of responsibility at present, I think nobody really knows who, who did what and who knew what. Technically, Volkswagen needs to sort out its cars, the consequences of being able to sell certain products on a continuing basis or not. So that is the operational side, there will be the fine and compensation payment side and what the courts will say. And here I think because of this willingness and the wrongdoing, the likelihood of higher pay fines is much higher than for example, when we look at BP and Deepwater Horizon where you might say this was an accident, this was intentional. And then thirdly, at a certain level, I think there will be more consideration about how basically cars are being assessed in terms of emission standards. There will be debates about regulation and testing regimes. Am I convinced on the last part 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.
- [05:39]
A
So currently this is a US centric issue. Is this likely to spread to Europe and further afield?
- [05:46]
B
I mean, I think it has already spread to the European context because it's not clear whether the this Volkswagen cars hit even the European standards. So in that sense, while the US is basically maybe at the moment, sort of market wise and penalty wise, sort of the center of attention. I think this will also quite have quite significant impact on the European market for Volkswagen and the reputation of Volkswagen in Germany itself. Great.
- [06:18]
A
Thank you very much. Martin, you're off the hot seat.
- [06:20]
B
Thank you.