Final chapter of emissions scandal clean-up begins

It has been nearly two years since the Volkswagen emissions scandal was discovered in the US, however this week, national governments agreed on their version of new rules on car emissions rules at a meeting of the European Council, kicking off the final phase in the negotiations for a new framework in response to the scandal. 

The rules governing type approval and market surveillance, i.e. how a car gets on the road, and how it is monitored on the road, have seen big divisions between national governments anxious to ensure their national car industries - often not only big employers, but also important  symbols of national pride, are not disadvantaged. 

No one wants to see the car industry in Europe unable to compete with Asian and North American competitors, but the car industry failed consumers and has to ensure it plays in part in rebuilding trust and confidence in the industry. 

Over a year and a half ago some Volkswagen cars were found to be producing emissions far in excess of the legal limits, having used defeat devices to trick the initial tests.

This turned out to be the tip of the iceberg and significantly damaged consumer confidence. What drivers had long suspected, that car fuel efficiency and emissions stats were misleadingly optimistic at best, turned out to be far worse than anyone imagined. This industrial-scale mis-selling of cars left drivers who had carefully chosen cars for their environmental performance feeling cheated and with significant inconveniences of recalls and potential loss of value of their cars.  

It left people such as myself who believe in the free market and minimal regulation, particularly angry. I spend most of my time fighting unnecessary regulation, but I cannot defend the car industry in the current situation. 

In the 18 months since the scandal broke, little has changed, yet more companies have become embroiled in it, reducing trust even more in the industry.

The old framework was open to abuse.  Car companies clearly broke the spirit of the law, but whether they broke the letter of the law remains contested. Apart from some reputational damage there has been limited negative impact so far for those who cheated the system.

The new type approval and market surveillance framework aims to address the legislative failings that led to the scandal.

Now, the Council has agreed its version of the text, a couple of months after the Parliament voted by a large majority to back my report, it is time to negotiate the final rules. I have already been in touch with both the Maltese and Estonian Presidencies of the Council (in charge of organising the Council’s participation in negotiations) over the last few months to ensure we can get started as soon as feasible.

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So what happens now?

  • The European Parliament approved its version of the new rules (Dalton report) by a large majority at the start of April.
  • The European Council, made up of national governments representatives, concluded agreement on its draft text on the 29th May by qualified majority.
  • Now the Parliament, the Council and the European Commission will sit together to agree a final package that must then be approved by votes in the Parliament and the Council. This process is called ‘Trialogues’.

 

What do I want to see as the end result?

The new rules in my report backed by the whole Parliament in April are a fundamental overhaul of the old EU system, changing the relations between car manufacturers, national governments and the European Commission.

The inquiry into the emissions scandal the Parliament held which concluded at the same time as my report has shown blame on all sides, plenty of people knew there were problems, or reports of potential problems, every part of the chain of responsibility failed to properly investigate and follow-up, turning an accidental or deliberate blind eye. That was partly because responsibilities were not laid out as clearly or firmly as they could have been, meaning the impetus to act on the part of public authorities was lacking.

The key changes in the Dalton report are as follows:

  • Independent auditors will regularly review the work of national type approval authorities to make sure they are carrying out their responsibilities to check cars have been tested properly to go on the road. The Commission will have the power to sanction an authority still failing to do its job after being warned following an audit. This will enhance both consumer trust in the system and national governments trust in each other’s type approval authorities.
  • A forum which the Commission will direct as an ‘Umpire’ will bring together national authorities to exchange information and best practices and will receive evidence from third parties about potential problems in the EU car market, enhancing transparency and ending the information blindness so many authorities claimed existed in the wake of the emissions scandal.
  • National governments will be obligated to undertake market surveillance on 20% of all vehicle types placed on their national market in the previous year. They will have to submit their market surveillance plans to the Commission, which will help it identify weaknesses and ensure national authorities are not excessively duplicating each other’s work and between them are covering the range of vehicle types sold in the EU market.
  • The European Commission will have the power (and the obligation) to undertake its own market surveillance whenever and wherever it wishes, with the intention it will be aiming to check and correct weaknesses in the national programmes it has already received.
  • When non-conformities are found manufacturers will face much greater fines, and these will be directed firstly to compensation to victims, rather than disappearing into general budgets.

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Where differences lie between national governments and the Parliament

There are a number of areas where the rules agreed by national governments differ from my report, but I am confident that we can reach a sensible agreement at the end of the trialogue process.

Some key areas of differentiation are:

  • The scale of market surveillance, where the Council has proposed to test only 1 in every 50,000 new vehicles registered the previous year.
  • Peer / independent review – This is reduced to peer review and scaled back in frequency and scope in comparison to the parliament proposal, and if a type approval authority designate all their technical services on the basis of accreditation of internationally recognised standards they will not face any peer review.
  • The role of the Commission in the Forum – The Commission’s role in the Forum is less powerful, reducing its ability to act as an Umpire.

Clearly there going to be some tough negotiations ahead, which is why I am keen to start as soon as possible, but I am positive that we have already brought national governments a long way down the road towards accepting the status quo cannot continue. A complete overhaul of the current system is in the interests of everyone – drivers, governments and even the car industry, who desperately need to regain consumer trust in their industry.