Renewables Update

The right conclusions from the VW scandal in Japanese

22 October 2015 Craig Morris, Editor of Renewables International
and lead author of GermanEnergyTransition.de.

Within Germany, Volkswagen’s cheating on emissions is largely being discussed in terms of its impact on the overall economy. Politicians fear – justifiably – not only that German car sales might plummet, but that the German brand could suffer in general internationally. In reality, the event not only shows how not to do business, but also suggests what should be done.

Largely at the behest of the German government and lobbyists for the German automotive industry, the EU has turned a blind eye to indications of this cheating. As we now know, the European Commission has known about discrepancies between emissions results from lab tests and the real world since 2007. Dutch experts reported the same discrepancy in 2010 and again in 2013 (PDF). So did German environmentalists in 2011 (report in German). The suspicion that car companies were cheating must have been widespread among German politicians because the German Green Party asked the government to look into the matter in July. No doubt, the next few weeks and months will further reveal how much insiders actually knew.

Volkswagen aimed to become the biggest car company in the world back when it rolled out the EA189 turbo diesel motor in question back in 2008. Specifically, the goal was to overtake Toyota, whose Prius was a hot seller in the US in particular (report in German). But instead of coming up with a truly new technology like hybrid vehicles, VW stuck with what it knew: diesel. And Germany’s best engineers couldn’t get it to work at the right price – hence the cover-up.

That’s all in the past now. What about the future? The first lesson has to be that clean diesel is not a winner for the mass market. The diesel version of the Skoda Fabia – the hottest selling small car in Germany – costs 16,000 euros, several thousand more than the gasoline version. To encourage diesel car sales, the German government provides lower taxation for diesel fuel, which costs around 25 percent less than gasoline. Roughly half of the cars in Germany sold last year were diesel, and the number rises to 70 percent in France – numbers that cast the recent smog levels in Paris – as high as in Chinese cities –in a different light. The tax incentives for diesel therefore must go.

In producing clean cars, Toyota has performed much better, and Tesla is coming fast. German car firms embraced hybrids late and reluctantly, and they have done little with electric vehicles. In comparison, Toyota has not only mastered hybrids, but now plans to make fuel cell vehicles finally work. For what seems like forever, Mercedes has been working on its own fuel-cell vehicle; in 2014, it announced plans to start leasing – not selling – the car in 2017. There is a fierce debate about whether battery vehicles or fuel-cell cars will be better, but however you come down on that debate there is no denying that German automobile makers are not leaders in either. What they do best is gas-guzzling luxury sedans and sports cars that are killing the climate. The German government should make sure that a network of charging stations is set up for electric vehicles, not turn a blind eye to pollution.

Chancellor Merkel has famously stated that one out of every seven jobs directly or indirectly depends on the automotive sector in Germany. To stay alive, German engineers need to start mastering new technologies the way their Japanese competitors do – and also the way newcomers like Google will with its driverless cars. 10 years from now, we may all prefer to give up owning a car in order to take advantage of super-efficient self-driving (largely) electric vehicles in combination with public transport.

Finally, there is no way around it: the future of mobility is not hybrids or electric cars, but walking, cycling, and public transport. This transition will require better urban planning and coordination of multiple transport modes. As a result, car sales will drop. Car companies will shrink, and jobs will be lost. The climate will benefit. Those laid off will need to find work elsewhere. Those jobs will be there: in electric mobility, software networking, battery storage, etc. German policymakers can start shaping this process now – or let the market do it uncontrollably next decade.

German automotive expert Harald Linné recently stated that the VW scandal is “Germany’s Fukushima,” adding that “the transport transition starts now” (report in German). It’s a poor comparison given the number of Japanese citizens whose lives changed forever after the nuclear meltdown. In other respects, I wish I could agree; almost all of Germany’s energy transition has taken place within the power sector, so a transport transition would be great. It would be easier to like the comparison with Fukushima if the Japanese government drew the right lessons from that disaster. Here’s hoping the German government will draw the right conclusions from the meltdown of Germany’s largest carmaker.