Brett Hansen

CST 373-40

April 11, 2017

Ethical Implications of Diesel-Gate

INTRODUCTION

My name is Brett Hansen. Im a CS Online student at CSU Monterey Bay currently

enrolled in CST 373: Ethics & Current Issues in Communications & Technology. I have an

abiding love of both history and math, especially applied mathematics. As you might imagine,

Im a very big fan of applications of mathematics to history and economics. I currently work as a

Realtor; and I believe that my background in the business world gives me a unique perspective

on issues relating to the ethics of technology based businesses. I entered the real estate business

during the recovery period following the great real estate crash of 2007-2008. It was very clear to

me from the beginning of my career that the world was still recovering from the fallout of

mathematics used for malicious purposes. By using theoretically valid (but fundamentally

unsound) methods for quantifying default risk for home loans, lenders could sell packages of

mortgages on the secondary market with the promise that they carried much less risk than they,

in fact, did. As such, Ive gained a deep appreciation of what happens when

In this paper, we will be exploring the ethical issues related to the Volkswagen emissions

scandal that came to light in 2015. The scandal revolves around allegations (now substantiated)

that Volkswagen had built systems into their TDI Turbocharged Direct Injection that would

detect when the vehicle was being put through an emission test. If the systems in the vehicle

recognized that the car was being through an emissions test, it would modulate the engine

systems to minimize emissions while harming other areas of engine performance such as
horsepower, fuel economy and responsiveness. In test cases, there were cars that were certified

to produce emissions below the legal limit but were shown on actual road tests to have emissions

over 10 times higher than the legal limit.

The details of this case are particular to the auto industry. However, the broad strokes and

themes of this situation underlay many scandals that affect a multitude of industries. At its core,

this is a story about a company falling prey to the rationale of the tragedy of the commons. The

Tragedy of the Commons is a logical trap where an individual overutilizes a public resource to

public detriment. This is seen as a logical course of action in games like environmental

protection because the utility lost by an individual (in this case via increased air pollutants and

greenhouse gasses) is considerably smaller than the gain by the overutilizing individual.

However, the true cost is only seen when we look at the aggregate picture to see the damage

done.

In this case, by putting environmental regulations behind their own market capitalization,

Volkswagen contributed to significant environmental damage by fielding 11 million cars that put

out emissions far above government mandated levels. This issue is worth studying because it is a

parable that perfectly illustrates the first step in most business-related scandals: individuals or

corporations put their own interests before the interests of the public to public detriment.

HISTORY

Our issue deals primarily with the subversion of laws meant to monitor and limit

emission of pollutants by automobiles to a manageable and safe level. Historically we are living

in the most environmentally conscious period since the before the industrial revolution. The

history of environmental regulation for cars is not a long one.

 In 1930, in Belgium there was a peculiar meteorological event called a temperature

inversion that kept industrial exhaust close to the ground in Meuse Valley. This led to 60 deaths

and thousands of injuries via toxin exposure. In 1948, a very similar situation occurred in

Donora, Pennsylvania. This incident led to nineteen deaths and more injuries. These events pale

in comparison to the 1952 London Fog event that led to an estimated four thousand deaths due to

respiratory problems brought on by a smog so thick it limited visibility. Events such as these

precipitated the first air protection acts. However, the eye of government regulation didnt set its

sights on the auto industry until the 1960s.

California was a vanguard for many environmental regulations that trickled out to the

nation and the world. In 1961 they passed the first technology forcing legislation (meaning

legislation that demands that technology be developed and utilized) mandating a series of

technologies that reduced blow-by gasses by cycling them back through the engine. The next

major technology on the chopping block was the additive tetraethyl lead (which was used for

many years to reduce engine wear and as an anti-knock agent) though via an indirect source. In

1975, California mandated catalytic converters to reduce exhaust pollution. Catalytic converters

are brilliant devices that use precious metal and clever chemistry to convert harmful emissions

into less harmful ones. However, they dont play well with leaded gasoline and as such this

helped put pressure on the auto industry to phase out leaded gas. Further innovations occurred in

the mid 1980s with the CA smog check program.

There were other non-regulatory mechanisms that led to more environmentally friendly

automobiles as well. The energy crisis of the 1970s and rising fuel costs led to the development

of lighter weight vehicles and more methods of promoting fuel economy. This led to a peculiar
interplay between fuel efficiency and emission efficiency that has led to auto manufacturers

pushing constantly towards perfecting the technology of the automobile.

Naturally, while the result of these regulations and initiatives was a better automobile, it

was costly and thus unpopular with automakers along all along the way. The 1970s saw major

US automakers suing the EPA to try and prevent tighter regulatory standards for emissions. This

is one excerpt from many battles between auto manufacturers and regulatory agencies.

While the United States with California at its head has spearheaded the charge against

auto pollution, the rest of the world has not stood still. Indeed, the United Nations has published

the Kyoto Protocol which sets emission targets. The EU has also adopted their own loose

regulatory framework with member nations making decisions on in country adoption. Indeed,

emissions are addressed by regulations in just about every country on earth. However; this can be

a double-edged sword as emissions efficiency is often achieved by detuning an engine and

making it less fuel efficient.

Our modern geopolitical & economic climate is causing a spike in fuel prices for a

number of reasons. Instability in the middle east, tighter economic controls on oil extraction, and

the depletion of oil fields yielding to resorting to more expensive mechanisms of crude extraction

to maintain supply are all factors leading to upwards trending pricing. While we may have spot

fluctuations, the price of oil must invariably be increasing as worldwide oil reserves are depleted.

Thus, automakers are under a large economic pressure to make vehicles which are more fuel

efficient, thus saving the consumer money. This leads to a situation where manufacturers are

trying to skirt emission regulations and pass by a narrow margin in order to maximize fuel

efficiency.
 This slippery business climate led to the scandal which is the subject of this paper.

Around 2006 it came to the attention of a VW design team that they could not build a diesel

engine that combined the fuel economy that the market demanded with the stricter emission

standards that were about to be put into effect by the United States. Obviously, the US is a

gigantic market for cars, and it would be unacceptable for an international corporation like the

Volkswagen Group to be unable to access such a market. They then realized that reaching the

emissions targets and reaching the internal performance standards were mutually exclusive goals.

In response to this problem, they developed a defeat device. This defeat device was a hidden

software package in the cars brain that would use logic & various sensors to detect when it

was being put through an emissions test. This exploit relied on the fact that emissions tests are

undertaken in a proscribed fashion to get a fair reading (on a dynamometer, same speed, same

internal settings, etc.). When an emissions test was occurring, the car would engage various

mechanisms such as the nitrogen oxide trap which lowered tailpipe emissions to acceptable

levels. During regular use, these emissions reduction mechanisms were disabled in order to

maximize fuel economy which was a major selling feature of the TDI line. Thus, Volkswagen

could have the best of both worlds: they passed emissions tests easily and they had best in their

class fuel economy and performance.

MEDIA VIEWS

In my introduction, I had noted the similarities between the Volkswagen emissions

scandal and the real estate crash of 2007-2008. One of the major points of commonality that I see

is the way in which the media seeks to tell a cohesive story with a common enemy. Oftentimes

that enemy is big business. In the real estate crash the big culprit in the cultural narrative was

banks (who did play a major part in the crisis). However, forgotten were regulatory agencies who
had basically let financial institutions police themselves. Also forgotten were regular

homeowners who took mortgages without any anticipation of risk, reduction of equity, or

inability to refinance at the due date of balloon payments. The truth is that with any major

economic instability, many sources share a portion of the blame. But that viewpoint doesnt sit

well and as such, we often eschew it in favor of a simpler narrative that generally devolves into

sophomoric us vs them sensibilities.

In this case, Volkswagen is functioning as the scapegoat for an entire industry that tries to

maximize performance by skirting regulations. Additionally, I struggled to find a single source

that focused on the culpability of US regulatory agencies in the scandal. It is distinctly possible

that emissions standards could have been set which ignored market expectations and gave

companies a very strong incentive to cheat. Additionally, the EPA has been running essentially

the same test for decades. They developed a regulatory landscape that was easily gamed by

clever software. In the mid 1990s, researchers developed a mobile emission testing system that

allowed for cars to be tested under real world conditions. Their test results noted a 10%-20%

worse emissions performance in practice than the models were rated for on average per the

Washington Post. However, they also ran some tests that indicated hugely different emissions

numbers. However, instead of the EPA taking notice of this and investigating, they quietly shut

the lab down instead. In 1998 a researcher named Kageson actually published an article that

detailed exactly how the emissions tests could be beaten. The truth is that the EPA shares a huge

amount of the culpability for this scandal, but very few sources are taking them to task for it.

Auto Pacific noted that following the breaking of the scandal that a survey theyd

conducted came back with 64% of respondents indicating a negative or untrusting view of

Volkswagen. This attitude was reflected in the media as other auto manufacturers distanced
themselves from Volkswagens crime and denounced their practices. Any public support of

Volkswagen would have been considered a tacit approval of corruption in the court of public

opinion.

OTHER VIEWS

This scandal is almost universal in its scope because it affects every oxygen breathing

creature on the planet. Environmental protection is one of the most important issues of our time

because the current trajectory of environmental health is leading us down a path of complete

environmental breakdown. That said; there are a few stakeholders in this case which have more

immediate concerns such as other auto manufacturers, the environmental regulatory agencies,

and the shareholders of Volkswagen to name a few.

For other auto manufacturers, the Volkswagen scandal represents a gigantic source of

liability. The fallout from the scandal could be far reaching and pervasive in the way it alters the

political landscape. Given how much has been written about cheating emissions tests and the

number of smaller scale incidents that have occurred, it is possible that emissions test breaking is

far more pervasive than is currently known. It is distinctly likely that the revelation that

Volkswagen spent 8 years blatantly flouting regulations will impel the environmental regulatory

agencies to re-evaluate their policies implement tighter controls on testing procedures to ensure

that such a situation doesnt happen again. Additionally, it is drawing public interest into the area

of emissions reduction, which may lead to increased funding (giving regulatory agencies more

teeth to keep companies in line). Lastly, from a purely PR perspective this scandal makes

people mistrustful of automobile manufacturers, lowering consumer confidence. In response to

this auto manufacturers immediately went to work issuing press releases distancing themselves

from Volkswagens actions and noting that they follow the law to the letter.
 This is also a major issue for regulatory agencies. This was happening right under their

noses for years. In the end, the story wasnt even broken by the EPA or any other regulatory

agency. Instead it was broken by a team of researchers at West Virginia University who were

testing their equipment. This kind of event and the EPAs total ignorance of it shakes confidence

in the agencies themselves.

Lastly; anyone holding stock in Volkswagen was hugely damaged when the cheating

came to light. The company lost consumer confidence and that translated into a lowered stock

price. This is hugely problematic as Volkswagen is now staring down the barrel of massive fines

and mandatory recalls that would be easier to shoulder if they hadnt just lost a not insignificant

chunk of their market value.

Its interesting to note that all these groups have different viewpoints on this issue.

Automakers are concerned with putting out a message that problems existed but were isolated to

Volkswagen. Regulatory agencies are happy with the popular line that the fault is solely

Volkswagens. The corporation itself and its shareholders are trying to put out the message that

the malfeasance was limited to a small number of Volkswagen employees and have even had the

CEO publicly resign in order to appease the public.

ETHICAL PERSPECTIVES

The first ethical framework well be examining this situation with is the framework of

egoism. Volkswagens actions were guided purely by self-interest. They sought out the solution

to a complex regulatory and engineering problem which offered them the maximum return for

the most minimal cost. In maximizing their own profits and expanding their opportunities for

business by technically passing all tests, theyve nearly behaved in an ethically consistent way
from an egoist perspective. There is one issue however: they were actively engaged in deception

which is inconsistent with the egoist perspective.

Another ethical framework well examine this situation with is the framework of

utilitarianism. Under this view, we examine what is the greatest good for the greatest number of

people. This viewpoint offers a very different perspective on Volkswagens actions. In betraying

the publics trust and engaging in environmentally unsound practices they have damaged the

environment. By putting out cars that have driven for the past 8 years spewing many times their

allocation of emissions they have lowered air quality. While the impact of each car is

immeasurably small, the impact of their crime in the aggregate has helped to accelerate climate

change and increase environmental pollution levels to the detriment of all mankind.

Lastly we will examine this situation through the lens of cultural relativism. This is a very

interesting way to view this situation since the deception was sparked by the inability of a

European auto manufacturer to meet American regulatory standards. Indeed, the whole scandal

was due to an attempt to adapt a vehicle to a foreign regulatory body. By this standard, what they

did was wrong but was an understandable attempt to cope with a foreign culture.

Its fascinating how the different frameworks lead to different value judgements of

Volkswagens actions. By the tenets of egoism, Volkswagens actions were basically ok even if

they strayed over the line legally due to regulations specifically prohibiting defeat devices.

Likewise, cultural relativism takes a lenient view of the situation. By contrast, utilitarianism

strongly condemns Volkswagens actions due to the fact that the ill that they have done is spread

over the entirety of world, affecting all of mankind. Truth be told, I did not expect to find ethical

frameworks that essentially condoned Volkswagens immoral behavior.

FUTURE CHALLENGES
 We are still coping with the idea that human activity has caused and will continue to

cause progressive, pernicious, and quite possibly irreversible harm to our planet. The size of the

world population is rising and shows no signs of stopping. The Malthusian Dilemma is a dismal

prediction that humankind will literally succeed itself to death by growing a population so large

the environment can no longer sustain it. History is full of major innovations that came about

because the only alternative was stagnation and decay. Farming, Industrialization, the Haber

process of nitrogen fixation, these are just a few of the innovations that came because we as

humankind couldnt advance or survive if they didnt. Sometimes it seems like we are racing a

doom clock and we keep pushing back the minute hand through the sheer power of human

ingenuity.

However, the news isnt totally bad. Per research put out by the California Air Resource

Board, in 2000 Annual vehicle miles traveled (VMT) reach[ed] 280 billion miles. Cumulative

California vehicle emissions for nitrogen oxides and hydrocarbons [were] about 1.2 million tons

per year. This [was] 200,000 tons/year less than 1990 despite an increase in VMT of 40 billion

miles per year. This indicates that even as our population is growing, we are learning to reduce

our environmental impact through cleaner technology and more conscious consumption.

The issue of auto emissions will likely be a moot point within the next 20 years or so. A

combination of high efficiency driverless vehicles and perfected hydrogen cell/electric vehicles

will lead to the elimination of the gas-powered car as we know it today almost entirely. Ian

Bogost of the Atlantic predicts that human directed cars will be totally outlawed within the next

50 years or so. This will lead to significant changes in the way the automotive industry operates

& could indeed spur the auto industry to abandon the gas-powered car in favor of more lucrative

pursuits.
MY REFLECTIONS

I walked into this assignment with a very clear idea that VW was the sole responsible

party for what happened. However; looking at the situation now, I am a firm believer that the

blame also lays with regulatory agencies who did nothing to stop this behavior when they knew

it was occurring. Their willful ignorance is one of the real tragedies of this whole story.

It is my opinion that the only real solution must be a regulatory one. First, regulatory

agencies need to be empowered to affect change. Secondly, they need to zealously investigate

manufacturers and unyieldingly enforce their own rules. In many ways, major corporations are

like kids: theyll do whatever they can get away with. Or to put it less patronizingly, any

business will take the most expedient path to their goals, over and above any ethical

considerations.

As such, regulatory agents need to both provide the carrot and be the stick that keeps

companies in line. The alternative is a downward spiral of environmental health as scandal after

scandal picks away at our natural resources.

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