Volkswagen and the EPA's Dirty Little Secret

Emissions in tailpipe may be greater than they appear.

Photographer: Sean Gallup/Getty Images

Cheating reflects badly, first and foremost, on the cheater -- and so it is with Volkswagen, whose shocking manipulation of U.S. emissions tests continues to exact a price in market value, legal costs and reputation. At the same time, it's not unreasonable to ask how the cheating happened in the first place, and that question implicates more than just Volkswagen.

For years, automakers have been able to exploit lax testing systems in the U.S. and Europe. Regulators owe it to both car buyers and the environment to make these systems more rigorous.

As things work now in the U.S., carmakers test their own vehicles and send the results to the Environmental Protection Agency, whose engineers review them and, usually, apply a rubber stamp. The EPA allows manufacturers broad latitude in determining test conditions, an invitation to hanky-panky. The agency does some independent, random testing -- but on just 10 percent to 15 percent of new models. Only in rare cases does it test cars that have actually been driven off the lot.

The problems with this regime were obvious even before VW's shenanigans. In 2013, Consumer Reports found that 55 percent of hybrids and 28 percent of turbocharged cars fell short of their EPA fuel-efficiency ratings. Last year, the Justice Department reached a $350 million settlement with Hyundai and Kia for overstating gas mileage. Ford, Mercedes, Mini and other manufacturers have restated their official mileage ratings in the last three years, usually under threat of consumer lawsuits.

Europe, where automakers also test their own vehicles, has its own issues. Just before the VW scandal broke, a European environmental advocacy group released test results showing major discrepancies between lab and real-world emissions in cars made by BMW, Mercedes and Opel. The European Commission has announced that all passenger cars will be undergo "real world" emissions testing starting in 2017.

Any system will inevitably rely on self-reporting to some extent. Government regulators simply don't have the money or personnel to test every new vehicle. But they can enact safeguards on a system that is all too easy for carmakers to game.

First, the EPA should have some of its engineers on hand at the industry labs to oversee compliance. Carmakers have a bevy of little tricks that can increase efficiency -- low-resistance tires, removing side mirrors and taping over cracks between panels -- and while the EPA has done better than the Europeans at closing loopholes, vigilance must be maintained. The agency should also vary the testing routines periodically so that carmakers won't know in advance exactly what they are in for. (The current regime's predictability may well have been a big part of VW's successful deception.) The EPA should consider following the EU's lead with on-the-road studies, for gas mileage as well as pollutants.

Also, the so-called defeat device VW used to game the emissions test was actually a pretty simple software tweak. It shouldn't be too hard for the EPA to invest in some computer forensic capabilities to track what's going on in our increasingly computerized vehicles. 

Just as important, there need to be greater consequences for cheating. Any company caught in violation should lose its self-monitoring rights for a number of years. It should have to dig into its own pockets for trials by neutral third parties, such as parts manufacturers, which have the necessary equipment.

What Volkswagen did appears to be in a category all its own, and it deserves special condemnation. But other carmakers game the system, and regulators tolerate it. That is the dirty little secret of emissions and efficiency testing, and the EPA needs to clean it up.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.