volkswagen

When Volkswagen (VW) engineers were challenged to enable small diesel engines to meet stringent U.S. standards for nitrogen oxide pollution, they tried—tried—and failing—cheated.

Now VW has agreed to one of the largest pollution penalties in history—whose hidden underside is that the engineers are still failing. Of the $15 billion VW has so far committed, $5 billion is to balance the environmental harm done by the 500,000 cheat-cars—as you might expect. The other $10 billion, $20,000 per vehicle, designated to deal with the cars, not the air, will not, however, fix the vehicles. Even given an effectively unlimited budget, engineers have not yet figured out how to make these cars emit less NOx pollution without creating an equally disastrous increase in CO2 emissions. If such a solution ever emerges, owners of these cars can get their vehicles cleaned up—but that seems unlikely. Meanwhile, owners can drive the cars for another two years, then turn them in to be scrapped. They get paid the value of the car not on the day they turn it in, but on the day, perhaps years earlier, when the cheating as revealed. So their incentives are to drive the car until the final deadline and then sell it back for more than its value. During these two years the pollution continues.

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Given the complexities of the Clean Air Act and the threat of litigation by the purchasers of the cars (who are not the real victims, those who breathe the pollution are) this wasteful use of $10 billion may have been forced on regulators. What the settlements makes crystal clear, however, is that VW's engineers, with an unlimited budget, could not produce diesel engines that met U.S. NOx standards and retained the fuel efficiency that makes automakers (and customers) love diesels.

Auto and truck makers have made remarkable progress in cleaning up soot, hydrocarbons, sulfur and carbon monoxide from internal combustion engines (IC), while making those engines more efficient so that carbon pollution per passenger or ton mile could be lowered. Nitrogen oxide (NOx) pollutants from gas powered engines can also be cleaned up. Auto-makers like diesels because they squeeze more energy out of fuel—but they also make it much harder to control NOx emissions. VW didn't cheat to save a few dollars—it cheated because it couldn't make its small diesel cars meet U.S. standards. (Large diesels deal with NOx with a cumbersome, bulky urea injection system, which cannot be accommodated in smaller models).

This engineering limit on diesels is running into a global revolution of attitudes about air pollution. Deaths from air pollution are becoming a larger and larger catastrophe and a bigger and bigger political issue. New studies from the International Energy Agency calculated that 6.5 million people each year die from air pollution; similar studies emerge regularly from the World Health Organization. Governments and business can no longer conceal the death toll and publics are unwilling to tolerate it. Governments are acting. The VW settlement is not the only regulatory crackdown on internal combustion engines.

The Chinese government has drastically modified its entire development strategy to respond to citizen pressure about lethal pollution. The Indian government is scrambling to deal with growing public anger. In Europe, where auto manufacturers have been massively manipulating emission testing results and urban air quality degrading as a result, public outcry has led cities to begin banning significant segments of the European auto fleet. New EU pollution testing systems will make it much more difficult and expensive for auto manufacturers to game emission tests, leaving diesel vehicles in particular at risk.

Climate concerns and fuel efficiency standards are also making internal combustion an outmoded technology. The U.S. is moving forward with new heavy duty fuel efficiency and pollution standards for diesels. Countries like India and China are passing more stringent pollution rules and eliminating fuel subsidies. US auto companies are complaining—falsely—that they cannot meet the current round of fuel economy standards; they are rightly concerned that the next round of post 2021 standards, is likely to exceed the capacity of internal combustion engines to meet. This will force a rapid increase in market share for electric cars.

As shared fleet transportation companies like Uber and Lyft seize more and more market share, electric vehicles become more and more and more competitive. Vehicles which drive 100,000 miles a year recover the purchase price of an EV from savings on fuel and maintenance six times faster than a car driven only 15,000 miles.

Oil powered transportation is becoming the most important climate threat. For both the U.S. and Europe, 2015 was the year in which climate pollution from transportation exceeded emissions from electricity. Oil, not coal, is now the biggest danger. That means that advocacy, philanthropic and political energy that has focused on emissions from coal is going to take a closer look at oil. This closer look will increase the pressure on the internal combustion engine, which stands out as the main technology sustaining demand for oil.

Governments all over the world—California, the Netherlands, Britain, Germany among them—are considering outright bans on the sale of internal combustion engines. (A month ago Norway almost implemented its proposed 2025 ban). More immediately, Germany, South Korea, Sweden and China are aggressively increasing incentives for EV's. India's car manufacturers have joined with the government to phase out IC passenger vehicles by 2030.

Elon Musk has dubbed the internal combustion engine, powered as it is by thousands of small explosions inside its cylinders, a "remarkable kludge." Automotive engineers have indeed made modern gasoline and diesel engines perform remarkably—but now the limits are being reached.

In 1969 the California State Senate rejected—by one vote a bill by then State Senator, later Congressman, Anthony Beilenson, to ban the sale of cars powered by internal combustion engines. Beilenson's bill, motivated by a conviction that California's critical air pollution crisis could not be solved by gasoline powered autos, has stood for almost half a century as an example of environmental over-reach.

Now technology trends, public insistence, industry investment and government policy are all signaling that Beilenson's dream—an end to the burden of a transportation system powered by exploding gasoline or diesel combustion engines—is coming within grasp.