For emission fraud, only penal action will not be enough; need regulations to fix accountability
The day of reckoning is here. The National Green Tribunal (NGT), in its order of January 17, 2019, cracked down on Volkswagen Group for not depositing Rs 100 crore as an interim measure till the actual quantum of penalty is decided. The penalty will be based on the report of an expert committee report investigating the emission fraud and environmental damages. Volkswagen has, in the meantime, appealed to the Supreme Court saying it is abiding by the law of the land.
While this sets the stage for one of the biggest penal action for emission fraud in the country, it also raises the fundamental question about regulatory framework to fix manufacturers’ responsibility for emission performance of vehicles.
Reportedly, tests by the Automotive Research Association of India (ARAI) revealed five to nine times higher real world emissions of nitrogen oxide (NOx) from the concerned Volkswagen engine series than the levels tested during approval stage. According to an official submission to the Lok Sabha in April 2017, Volkswagen had recalled about 2.75 lakh vehicles for software update and repair. The test results and the expert committee report should be in public domain for transparency.
This development is an aftermath of the global scandal, in which Volkswagen was caught using cheating devices in their two-litre turbo diesel engine cars in the US, Europe and other major markets. These devices allowed cars to cheat and pass America’s stringent emission test for NOx. This came to light when International Council on Clean Transportation (ICCT) found a disparity between lab and on-road results.
When this was made public, the environmental regulators in the US confirmed these results and took the company to task. This corporate fraud blew the lid off the dieselgate across Europe where large numbers of diesel brands were found emitting nine to 12 times higher NOx than the certification level.
India must snatch this opportunity to frame regulations to establish responsibility of vehicle manufacturers for on-road emission performance of vehicles, instead of treating this corporate fraud as a criminal case for penal action.
Establish manufacturers’ responsibility
The NGT, in its order, upheld ‘polluter pays’ principle by saying the liability for causing harm to the environment extends not only to compensate the victims of pollution but also the cost of restoring the environment. The tribunal has also drawn on the precedent of the Sterlite case stating that the measure of compensation must be correlated to the magnitude and capacity of the enterprise to ensure it has a deterrent effect.
It is unfortunate that India’s first ever attempt to bring a law to introduce a recall programme through the amendment of Motor Vehicle (Amendment) Bill 2017 is still gathering dust. This draft bill, passed in Lok Sabha, is awaiting a nod from the Rajya Sabha.
It proposes that the central government can direct manufacturers to recall sold vehicles if they have defects and cause harm to the environment. Manufacturers will have to reimburse the buyers for the full cost of the motor vehicles and replace the defective motor vehicle. If manufacturers also notice any defect, they will have to inform the Centre and initiate recall proceedings. The testing agencies will test vehicles drawn from the production line to verify the conformity with regulatory provisions. If the motor vehicle, with a type-approval certificate, is recalled, the testing agency, which has granted the certificate, will be held liable and its accreditation and registration will be cancelled. This rule and amendment must be implemented immediately as a priority.
India must acknowledge that after dieselgate, Europe brought in tighter real world-driving emission requirements, improved testing procedures, and in-service compliance regulations. India’s BSVI regulations have also adopted real world driving emission requirements based on portable emissions measurement system (PEMS) of moving vehicles on the road for certification. But PEMS monitoring must be applied for periodic testing of on-road vehicles as well. The Volkswagen scandal shows cheating can go undetected for a long time even with stringent in-use compliance regulations and penalty . We therefore need robust and stronger compliance regulations.
It is still not well understood in India that as emission control systems for particulate matter and NOx in diesel vehicles become more complex and expensive, propensity for corporate frauds/compromises on quality as well as cheating by vehicle users will increase. For instance, for NOx control, adblue, a urea-based solution, is regularly filled in the Selective Catalytic Reducing (SCR) system attached to the exhaust of the modern diesel vehicles. As refill is a recurring cost, defeat devices tempt users to disable the SCR system.
This is also why Volkswagen had used defeat devices to reduce severity of the SCR system to reduce urea dosage. Defeat devices are openly available on the internet for anyone to use and disable SCR systems to avoid the extra cost of urea solution. Countries like Brazil have reported rampant use of defeat devices.
Even though emission regulations require vehicle manufactures to install auto checks in the vehicle to sense depletion of urea solution and stop the vehicle automatically, defeat devices can disable this in-built check and allow vehicles to run even with depleted solution and not let onboard diagnostic flash red alert. If this is not checked, India will experience uncontrolled NOx emissions even after introducing BSVI.
India has yet not woken up, but other countries have adopted regulations for defeat devices. The US regulation defines a defeat device as “an auxiliary emission control device that reduces the effectiveness of the emission control system”. Any element which senses temperature, vehicle speed, transmission gear, or any other parameter for the purpose of activating, delaying, or deactivating the operation of any part of the emission control system are liable for severe penal action. The US Environmental Protection Agency levy civil penalties of up to $37,500 per vehicle and $3,750 per sale of defeat device.
The EU framework regulation empowers the European Commission to adopt “requirements for implementation”. A review by the ICCT shows that the EU vehicle emissions regulation directs member states to “lay down the provisions on penalties applicable for infringement by manufacturers of the provisions of this Regulation and [to] take all measures necessary to ensure that they are implemented”. Penal action includes fines, withdrawal of type approval, recall, repair obligations, and prison.
Dieselgate is ominous in dieselised India. Complexity of real world diesel emissions has led to serious backlash against diesel cars in Europe leading to decline in diesel car sales. Even in India, public health concerns around diesel toxicity and judicial action have made a dent in the sales curve. New generation emission regulations will have to be about in-use compliance and manufacturers’ responsibility for real world performance.
A government must quickly enforce strong, independent and transparent emission testing regime and in-use compliance mechanism with a recall programme. We cannot be fooling the system to negate air quality and public health benefits of new investments.
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