Making Lemonade Out Of VW Lemons

The Volkswagen emissions cheating scandal is another sad example of corporate malfeasance. For those not following the story, the basics are as follows: Volkswagen secretly installed “defeat devices” on approximately 11 million vehicles worldwide that could detect when the cars were being tested for emissions and then reduce the emissions to avoid being penalized. While the vehicles performed well during laboratory testing, in reality the emissions were up to 40 times the legal limit. You can see the map of affected areas from the pollution via Grist here.

So what remedies should California, as the state most immediately affected, seek from VW? At a minimum, state leaders should use the opportunity to bolster reduced emissions from vehicles going forward.  And that means improving the deployment of battery electric technologies in vehicles.

VW should do more than NRG to support electric vehicles.

VW should do more than NRG to support electric vehicles.

California has gone down this path before. When Enron and other energy companies defrauded electricity ratepayers with the rolling black-outs in California back in 2000 and 2001, the state eventually settled with NRG, the corporate entity that assumed the liability through corporate acquisitions. State negotiators required that NRG spend $100 million on electric vehicle charging infrastructure.

But that settlement has so far not worked out well. NRG is way behind schedule and state auditors are investigating what’s going on. So state leaders need to learn from that experience and find a more direct way for VW to pay for its malfeasance and pollution.

A relatively simple way to do it would be to require VW, via settlement terms, to purchase a set amount of “zero emission vehicle (ZEV)” credits from automakers making battery electrics. That would boost their supply and reduce the costs of electric vehicles. Or VW could pay into a fund that reduces the cost of purchasing or leasing electric vehicles, via a point-of-sale cash rebate, for example.  And to be clear, these requirements should not be the only settlement terms, but the ones directly related to repairing the harm to the environment from this cheating.

Of course, we have years of litigation to come on this scandal.  But state leaders should start thinking now about how to make some lemonade out of these bitter VW lemons, while learning from past experiences.


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