Volkswagen's so-called "dieselgate" emissions scandal highlights the need for standardized reporting on avoided emissions.
Reporting on avoided emissions aids comparison between sustainable products and their competition. It is the difference in emissions from using, for example, fuel-efficient tires versus their counterparts. There’s just one big issue with this seemingly useful data—companies can skew their reports, and it’s difficult to verify their claims.
We saw this most prominently with Volkswagen’s so-called “dieselgate” emissions scandal back in 2015. According to the U.S. Environmental Protection Agency (EPA), the company manipulated its diesel engines to engage emission controls during testing, but not during real-world driving. Research indicates that Volkswagen vehicle emissions exceeded U.S. regulations by over 40 times their limit.
A standard model for evaluating avoided emissions could provide clarity for consumers and other stakeholders—and prevent a scenario like dieselgate from happening again. Let’s take a closer look.
The Volkswagen dieselgate scandal came to a head in 2015 and has since evoked an onslaught of lawsuits from government agencies, the most recent case being from the U.S. Securities and Exchange Commission. It involves a decade of deceit spurred by the inability of the company’s new diesel engine, introduced in 2005, to meet U.S. and European emissions restrictions. Software was later installed to disguise the engine’s shortfalls during testing. These diesel engines were key in Volkswagen’s ambitions to become the world’s largest car maker. The diesel Jetta TDI, released in 2009, sold out immediately in the U.S., partly based on emissions claims.
The scheme began unraveling in 2015 after a research study conducted by West Virginia University revealed discrepancies between vehicle road tests and reported findings. Within two weeks, nearly US$37.5 billion of Volkswagen’s market value was erased.
Newly appointed CEO Herbert Diess shows promise in realigning the company’s culture toward clarity and frankness with investors. Volkswagen plans to be carbon-neutral by 2050. It has been putting its money where its mouth is by increasing research and development expenses by 3.8 percent from last year to expand into electric vehicles.
It is in the best interest of companies such as Volkswagen—and all stakeholders—to have a standard system of assessing avoided emissions. Without an agreed-upon framework, it is up to individual companies to define and measure avoided emissions, causing inconsistencies. A loose definition of avoided emissions also leaves loopholes in the guidelines for multinational companies such as Volkswagen.
A proposed framework in a recent research publication offers solutions to this issue. The system, called the Product Standard, is designed to facilitate informed decisions for companies looking to reduce their products’ emissions. The importance of the Product Standard has been emphasized by Volkswagen’s bout of troubles and increasing stakeholder and consumer demands for clarity in products’ greenhouse gas emissions. The research from the World Resources Institute (WRI) addresses these concerns by tailoring the Product Standard to individual companies and products.
A car maker such as Volkswagen can use the Product Standard to gradually improve the emissions of its various models. The system provides the guidelines needed to identify key issues, coordinate solutions and verify companies’ emission claims. Consumers can further utilize the system to compare models and be assured of accuracy in results.
There is a clear need for a measurement method of avoided emissions, and the Product Standard offers an option that didn’t exist before. The benefits for consumers, businesses and shareholders would be enormous as we work toward a sustainable future.
Image credit: Shrek/Flickr
Jenna Ammann is a student finishing her senior year studying Corporate Finance and Hospitality at UMass Amherst. She has a focus on investigating environmentally and financially sustainable food service business models. Jenna is from Westport, Massachusetts.