Dieselgate – why did the EC allow this to happen?

I’ve been reading the recent report by Transport and Environment “Mind the Gap 2016” about car fuel efficiency and it makes shocking reading for a number of different reasons. The report focuses on the difference between official tests which produce the emissions data on which we base decisions to buy cars in Europe and the actual emissions when the car is driven on the road. In summary the report states:

“The difference between official laboratory test results and real world car performance is growing uncontrollably jumping from 9% in 2001 to 28% in 2012 and 42% in 2015. It is expected to reach 50% before 2020. New cars have not become more efficient, as carmakers claim; on the road, progress in reducing emissions having stalled for four years”.

The report examines the reasons that the lab results understate real world emissions which are complex :

“In 2002, exploiting test flexibilities accounted for just five-percentage points difference between test results and real world performance. This grew to 15 points in 2010; and 24 points in 2014. Technology that reduces emissions more in the test than on the road contributes an additional three percentage points to the gap; the failure to switch on auxiliary equipment during tests adds around eight points. Exploiting test flexibilities is therefore the dominant cause of the growing gap. In addition, new evidence emerging from the Dieselgate scandal shows some cars detect laboratory fuel economy and CO2 tests and illegally put the car into a low emission mode.”

Now if this is correct, it poses some interesting questions about EC regulation, the approach of the motor industry to regulation and the impact of all this on air quality in cities and the operation of the car market in Europe.

Why has the EC allowed this to happen?

DG Environment is the competent body for these regulations, but Climate, Competition, Energy, Internal Market and Taxud all have an interest in this issue. So how come the regulations which have been introduced are so disconnected with real world emissions with a knock on to other policy issues? It appears that the EC has been hoodwinked by the motor industry to use regulations which bear little relation to the real world – I’m not going to speculate on why but whatever the cause it doesn’t reflect on the Commission very well, particularly as this issue has been growing for 15 years – regulation can sometimes miss its target initially, it doesn’t usually get worse as it develops which is the case here.

Was this not considered an important issue because the figures were in the ballpark for measuring efficiency? That may have been the case initially, but that isn’t the case now as the gap has widened to over 50% higher for some cars. What surprises me is that the various DGs all have policies which are impacted by this inaccurate information – so this spills over into other policy areas.

Environment itself, obviously, is the guardian of EU carbon policy based on reducing emissions, but these misleading fuel statistics are probably leading to higher emissions as car purchasers ignorant of the true real world emissions, buy cars which they believe emit less than they do.

Mind the Gap states

“CO₂ emissions are significantly raised compared to what was planned. The Car CO₂ Regulation is a major plank of the EU’s climate policy, and has been rendered much less effective by the manipulation of the test procedure. As a result, by 2030 the widening gap will cause 1.5bn additional tonnes of CO₂11 compared to the level of emissions if the gap had remained at 15% as in 2008.”

If this is correct, this poses major questions as to why DG Environment has allowed this to happen and other sectors may question why they have had to deal with lower emission targets when the car industry has been actually increasing them.

DG Competition and DG Markt should surely be worried by miss selling implied by these misleading emission figures and that certain manufacturers have benefited more than most from this.

DG Energy seeks to reduce energy consumption in Europe, surely it should have been concerned by this as it leads to greater energy consumption. Mind the gap states:

“Fuel is the biggest cost of running a car and drivers are not getting the benefit of the fuel economy that they have been promised. Projecting forward to 2030 the cumulative additional fuel consumption arising from the widening gap will be nearly 600 billion litres, costing motorists around €1 trillion. More oil is imported into Europe – by 2030, because of the widening gap, 6 billion additional  barrels of oil must be imported into Europe costing €360 billion at current prices, with a third of the money going to Russia;”

So why haven’t DG Energy focussed on this?

Finally, Taxud. In the tax field Taxud has sought to align car registration tax and annual tax to emissions and many countries have done this. As these taxes have been based on these inaccurate fuel figures this suggests a significant understatement of car taxes which has fiscal impacts and competition consequences. I have no calculation of the amounts involved but they are likely to be significant. In a period of fiscal deficits, this understatement of a tax source makes no sense.

My experience in chairing the Green Tax group for Business Europe and discussing the Energy Tax Directive revisions showed me how powerful the motor industry was in discussions with the EC. A good example was their opposition to the harmonisation of taxes on energy in motor fuels based on energy content and arguing instead that diesel should be taxed at a lower rate.

As Mind the Gap concludes :

“ If car buyers cannot get reliable information about fuel economy, they cannot make informed choices about the cars they buy. Drivers and the media are increasingly aware of the growing discrepancy between labelled fuel economy and what happens on the road, leading to a loss of credibility for the whole of the EU’s car labelling and regulatory system. This is not in the interests of consumers, policymakers or the environment – and ultimately not of the car industry either.”

Car buyers can feel aggrieved as the support for diesel cars and in pricing it as a fuel originate with the EC. To quote a recent Guardian article:

“The subsequent EC 1998 Acea agreement with all European car makers was backed by then EU transport commissioner Neil Kinnock and UK environment secretary John Prescott. It committed passenger car-makers to reduce CO2 emissions by 25% over 10 years.

“It was practically an order to switch to diesel. The European car fleet was transformed from being almost entirely petrol to predominantly diesel. Britain, along with Germany, France and Italy, offered subsidies and sweeteners to persuade car makers and the public to buy diesel,” said Simon Birkett, director of the Clean Air London group.

The European auto industry ramped up diesel engine production. Under EU pressure, governments kept the diesel price below that of petrol. In the UK, the amount motorists paid in vehicle excise duty was linked to cars’ CO2 emissions, effectively incentivising people to buy diesels.

“Diesel cars should attract less vehicle tax than their petrol equivalents because of their better CO2 performance,” said then chancellor Gordon Brown in 1998.

The results were dramatic, says the Society of motor manufacturers and traders(SMMT). From being a quirky choice, diesel went mainstream in Europe. Its market share in the UK rose from under 10% in 1995 to over 50% in 2012. Britain now has 11.8m diesel cars in use, making up one of the greatest diesel car fleets in the world.”

When owners of diesel cars are told they should now switch to petrol or hybrid they retort that they bought diesel on the basis of the EC and their governments telling them to do this through price signals and that this was the best choice. This issue is compounded by the fact that the fuel efficiency of these vehicles was overstated significantly by the lab figures.

So why did the EC and the various DGs referred to above allow this to develop? This is difficult to explain or understand. Surely each of them should have seen the consequences of the policy not to release real world fuel efficiency figures? That the policy of using understated figures  based on laboratory tests would lead to policy outcomes which contradicted their policies and surely this issue demonstrates a lack of being joined up within the Commission which is very worrying.

The consequence of this is that the EC’s own climate and energy goals have been undermined by one of its own policies. Public health has worsened due to additional particulate pollution that the switch to diesel has caused particularly in European cities. Government fiscal revenues have been reduced by basing car registration taxes on fuel efficiency figures which don’t relate to the real world.

And consumers have been misled about a crucial factor in deciding on which car to drive and purchase – given that this is one of the biggest purchase decisions after buying a home – this is serious. This has all the ingredients of mis-selling facilitated by a regulatory framework that should have been corrected.

Surely, fuel efficiency figures for cars should be based on the real world and using the equipment which the car has (not turning it off for the test) – why can’t we move to this as soon as possible? If the EC don’t change policy and propose this one will have to ask the question why and whose interests are they protecting – consumers and citizens or the diesel motor industry?

 

 

 

© Chris Lenon and www.green-tax.co.uk  2014-2016. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.green-tax.co.uk with appropriate and specific direction to the original content.

No comments yet.

Leave a Reply