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  • Volkswagen Scandal Could Be Death Sentence For Diesel

    The emissions cheating scandal ignited by Volkswagen is now spreading throughout the auto-industry, and could be the beginning of the end for diesel. The Wall Street Journal reports that the revelation automakers were cheating regulatory standards has cast doubt on the environmental efficacy of diesel engines.

    A shift away from diesel could be devastating to the auto industry, which The Wall Street Journal reports, “Volkswagen and other European car makers and components suppliers have invested in heavily over the years.” In the face of the VW scandal, U.S. and European governments will likely step up regulatory standards on auto-makers, particularly when it comes to diesel.

    The environmental regulatory debate is at the heart of this issue, with some arguing that overregulation has strangled the auto industry, and forced them into this position. While that does not excuse VW from cheating emissions laws, it is symptomatic of a system plagued by central planning and big government.

    The regulatory burden felt by the Environmental Protection Agency’s actions on oil for example, are felt throughout the U.S. consumer market, costing Americans an estimated $250 billion in potential savings at the pump each year. This is the same EPA that fined GM only $900 million for a defect that killed 174 people, but may fine Volkswagen $18 billion for skirting emissions tests.

    It is unclear what the future holds for diesel technology, however in an interview with The Wall Street Journal, Bernstein Research automotive analyst Max Warburton did not mince words, saying, “Diesel has been under growing pressure in recent years, as regulators recognize that it is still not as clean as gasoline, despite meeting official tests. The EU’s promotion of diesel in the 1990s was surprising, and seemed to be driven by a focus on CO2 and global warming ahead of local air quality.” When pressed on whether he believes this means diesel is dead, Warburton responded, “Yes, it probably does.”

    Volkswagen’s CEO Martin Winterkorn resigned last Wednesday. On Monday, according to The New York Times, German prosecutors announced they would be investigating Winterkorn for any potential wrongdoing. On Thursday the European Union urged its member states to launch investigations into diesel engine production across the auto-industry. Germany’s transport ministry announced it would be conducting “spot checks” throughout the country on diesel engine vehicles. Volkswagen has prepared a $7.3 billion fund to deal with the coming fallout.

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