The Volkswagen (VW) scandal reveals enforcement from a wide array of international players is crucial to cases involving multi-national corporations. The regulators at a problem’s place of origin induce limited consequences while outside entities may have a greater incentive and opportunity to halt unhealthy endeavors. As Steffen discussed, in the context of political campaigns, there can be massive consequences to bringing down a financial powerhouse. On the other hand, outside entities can act without the same risk. Particularly since the issue is cheating on tests, the United States needed to emphasize the general power of its authority. In order to preserve its legitimacy with the other testing it administers across industries, the U.S. had no choice but to use this as opportunity to make a statement. Former Attorney General Jeff Sessions declared, “if you try to deceive the United States, then you will pay a heavy price”. As a result, the EPA issued a civil fine of at least $25 billion and a criminal fine of $2.8 billion for VW to pay towards clean air programs.
Let’s consider the hypothetical circumstance VW sold the same volume of cars with the same emission production and kept them all in Germany. Based on the relative lack of punishment Germany inflicted in the actual scenario, would there be significantly less money to benefit environmental health initiatives in response to the same degree of damage done? In the case VW was not multi-national, it would not have been possible to claim money from there being U.S. Customs and Border Protection customs fraud. Are there any opportunities the U.S. government did not seize that would have brought them even more money from VW? Would Germany have acted similar to the U.S. if the two countries exchanged positions with each other?
On the surface, it seems the U.S. was very inclined to imprison the company’s higher level management because of the severity of the environmental health damages. However, while EPA Administrator Scott Pruitt said, “the indictment of former VW CEO Martin Winterkorn should send a clear message that EPA and its law enforcement partners will seek to hold corporate officers accountable for alleged criminal activities at their company,” the U.S. doesn’t hold domestic companies accountable to limiting damage to environmental health other cases. It is evident in the case of the Love Canal and other Superfund sites. The U.S. enforcement leaders were more concerned with the criminal allegations even though the civil fines brought the most money in for clean air programs. Instead, Pruitt is emphasizing any sort of criminal activity a corporate officer does is unethical, and that is not necessarily related to clean air. While, theoretically former U.S. Attorney Matthew Schneider stated, “the U.S. Attorney’s Office is committed to pursuing accountability for corporate crimes, and the Winterkorn prosecution is a reflection of that commitment,” the commitment is not to environmental health. It’s a commitment to preserve American authority. As FBI Special Agent in Charge Timothy Slater phrased it, “accountability will be sought for any individuals or corporations that cheat American consumers or harm the environment by circumventing the standards set by our legal system”. Once again, in the eyes of the United States government, the problem was not the environmental health issue in itself but rather how it was done. Is there a way we can frame other situations that fall under the environmental law system, such as the lengthy collection of NPL sites that PRPs are not cleaning up, as a disgrace to the American government’s authority in order to increase compliance enforcement?
Although the United States was not able to imprison VW CEO Martin Winterkorn, the indictment itself helped bring forth a crucial study by the International Council on Clean Transportation (ICCT). The study gathered important data in terms of elevated NOx levels (one car was emitting 35 times above the environmental standard) which communicated the massive scale of impact. The insight from this organization played a key role in terms of timing. It brought increased American enforcement rage as the company continued to deny the existence of emissions cheating in its vehicles until late summer 2015 even though it received the ICCT study’s published results in 2014. Also, without that study being done by the independent international entity, we cannot be certain German scientists wouldn’t have been bribed or in some other way financially incentivized to do its own study and skew the results. Either way, by the summer of 2015, U.S. regulators threatened to withhold authorization for VW to sell Model Year 2016 diesel vehicles in the U.S. until VW answered their questions about the discrepancies uncovered by the ICCT study. It was while answering those questions that, in discordance with instructions from the company’s management, a VW employee said the organization had been cheating U.S. emission tests. Less than a month later, the company officially admitted it installed defeat devices inside vehicles sold all over the United States. Clearly, the ICCT and U.S. government were absolutely instrumental in discovering the deception and pressuring VW to admit its fault.
While the gains from outside entities were astounding, the VW case also brings a lesson in terms of the limits international actors face to hold multi-national corporations accountable. The European Commission took legal action against seven nations including Germany for not inflicting harsh punishment on VW for its emissions cheating. While Germany failed insofar as not giving any local drivers settlements and only arresting 2 out of the 40 individuals said to be involved, investors have the potential to make a significant impact. After word spread about the official admittance, the stock decreased by 40% in the span of two days. It dissolved confidence among consumer and regulators in diesel technology. Since then, investors are demanding compensation for their losses, saying Volkswagen needed to be directly transparent about the risks. This is the first major trial related to the VW case in Germany, where previously only a few individual customers have brought the multi-national corporation to court and the outcomes are still private. Due to the fact the case with investors concerns how and when the group communicated with financial markets, the court must release a timeline of the scandal to essentially determine when executives knew about the cheating. The world’s largest automobile distributer ended up sharing that information available at the time did not make correspondence with shareholders legally necessary. They argued that the software installation was dictated by a select group of engineers acting without managerial consent.
This week’s lecture emphasized the benefits of checks and balances between states in the case of Georgia v. Tennessee Copper Co. I imagine it as comparable to the United States v. VW case on the state instead of federal level. Here is the instance of a company conducting business operations that are bringing environmental health concerns to citizens outside of its home state as sulphurous dioxide was seeping across the border. Justice Oliver Wendall Holmes declared the current domestic destruction Georgia’s crops, trees, orchards, forests and mountains have already faced should not be further polluted by the sulphuric acid gas beyond its control. In the end, the court granted Georgia’s request for an injunction against Copper Works in Tennessee. It’s interesting to see a form of checks and balances can be implemented as a response to one entity being negatively impacted by another’s actions. Considering funding is scarce, the VW case brings a great lesson that outside states can go after corporations to generate money without suffering political consequences. This is particularly noteworthy considering the 1967 Clean Air Act was declared dead in 1970 due to inadequate funding on state and local levels even with $55 million authorized for two years. However, another main issue was the air quality management (AQM) approach established by the Air Quality Act of 1967 which increased federal power in establishing air quality control regions (AQCR), criteria for state standards, review of state standards, control plans, and authority to intervene. Pennsylvania Air Director Vic Sussman defined the AQCR as “a pointless charade”. Both the VW case and the 1970 Clean Air Act setback show the intrusion of some sort of outside entity is crucial for other Clean Air Act enforcement strategies. Or, can we create plans that minimize the administrative burden? The lecture mentioned adjusting the EPA’s role to be less procedural but more so focused on developing the strategy’s substance and creating models. Then, all the states need to do is carry out the plan and track performance. Do you think the EPA is capable of adjusting goal attainment efforts in a timely manner in the case tracking at a specific state indicates a strategy is not working well?
While the punishment was still not as strong as it could’ve been, it was actually advantageous the situation didn’t completely destroy VW because we can use the large scale quality of this multi-national corporation to bring environmental health benefits. The company could’ve afforded to pay even more and this should have been evaluated when settlement proposal materials were being evaluated by the multiple countries against VW. In terms of overall sales, VW was still the largest manufacturer in the world with 10.7 million cars delivered in 2017. A multi-national corporation should not be able to recover that quickly from this. However, at least the case altered the product to support the environment so that its successful business can be an avenue for renewable energy transportation. In September 2018, VW declared spending over $62 billion on battery technology as it aims to create 300 electric models by 2030. VW is also expected to invest $800 million for zero-emission vehicle projects in California over a 10-year period. Additionally, the promise to install over 80 new electric and plug-in hybrid models by 2025 brings a bit more sense of urgency to these words. Following management changes, stock shares in VW soared. America’s power to scare multi-national corporations into being environmental health stewards is a lesson to be learned for other Clean Air Act enforcement strategies.
Allocating $68.7 million in settlement money to the Colorado Department of Public Health (CDPHE) reminds everyone involved oxides of nitrogen (NOx) is a major pollutant that poses a serious health concern. This is important considering the U.S. government’s focus was more so on the deception taking place rather than the damages to public health. While the funds are going to be used to reduce air pollution in Colorado, I wonder why the department specifically said the account is only used to fund “certain eligible projects”. What may the eligibility parameters of these projects be?
Side Note: The EPA is collaborating with the California’s Air Resources Board to implement the settlement with V.W. California is expected to be allocated $423 million from an Environmental Mitigation Trust designed to counteract the lifetime excess NOx emissions of the VW vehicles with the defeat device. Is that appropriate considering Colorado received only 16% of that amount? How much does California’s standing as a leader in the renewable energy section contribute to that number? Does it have to do with the number of innovative car companies headquartered there? Is it just a matter of serving a larger population or amount of unsafe VW vehicles sold in that area?
I see the CDPHE acting in a similar role to the federal government as a lead agency who focuses on the administration of the trust. Then, the other agencies helping to draft the plan would be similar to state entities. Based on what we’ve studied so far, do you see this model being successful without the separation between federal and state? I found the latest version of the Beneficiary Mitigation Plan (BMP) very useful because it’s responding to lessons learned during the first year of jumpstarting the trust. It was awesome to see Governor Jared Polls updated the BMP to implement his executive order to “focus all remaining eligible investments on supporting electrification of transportation, including transit buses, school buses, and trucks”. With the renewable energy car industry constantly inventing increasingly efficient models, I agree with updated information on currently available and anticipated technology being the third aspect to improve upon. I also agree with public transparency of trust expenses being a value mentioned and reiterated multiple times in the report. There is also a sense of urgency as all the funds are set to be distributed within approximately five years. The fact that they’re using programs that are already in place hopefully negates some of the administrative issues a new program may pose. The primary reason I support the BMP is because it foresees offering incentives for public and private fleets to cover 110% of the difference between a new zero-emission and new diesel vehicle. From my professional experience, a major drawback of financing a residential solar panel systems through a loan provider was that even with the 30% tax credit applied to the total system cost, solar was not always cheaper the first month compared to if the homeowner continued to purchase electricity from the utility provider. It was difficult to sell homeowners on leaving the current utility provider if it wasn’t cost-effective for them to switch to solar right now even if it helps in the long run. The BMP zero-emission model guarantees the buyer who makes the clean energy choice is going to immediately save money.
CNN Business. “Germany Fines Volkswagen $1.2 Billion Over Diesel Scandal.” Accessed April 19, 2020. https://money.cnn.com/2018/06/13/investing/volkswagen-fine-germany/index.html (Links to an external site.) (Links to an external site.)
Colorado Department of Public Health and Environment. “Volkswagen Diesel Emissions Settlement.” Accessed April 19, 2020. https://www.colorado.gov/pacific/cdphe/VW (Links to an external site.) (Links to an external site.)
Environmental Protection Agency. “Former CEO of Volkswagen AG Charged with Conspiracy and Wire Fraud in Diesel Emissions Scandal.” Accessed April 19, 2020. https://archive.epa.gov/epa/newsreleases/former-ceo-volkswagen-ag-charged-conspiracy-and-wire-fraud-diesel-emissions-scandal-0.html (Links to an external site.) (Links to an external site.)
Environmental Protection Agency. “Volkswagen Violations.” Accessed April 19, 2020. https://www.epa.gov/vw/learn-about-volkswagen-violations (Links to an external site.) (Links to an external site.)
Wheels 24. “Six Things To Know About Volkswagen’s Latest Court Case.” Accessed April 19, 2020. https://www.wheels24.co.za/News/Industry_News/six-things-to-know-about-volkswagens-latest-court-case-20180907