US, EU regulation to toughen on VW failure

Significance

Winterkorn was the first casualty at VW of the widening scandal caused by the company's installation of 'defeat-device' software to manipulate emissions testing. In the United States, VW could become an early test case for the new declared willingness of the Department of Justice (DoJ) to bring criminal prosecutions against executives for corporate wrongdoing. The scandal challenges both US and EU anti-emissions policies that depend on industry good faith to be effective.

Impacts

• The scandal torpedoes VW's US expansion plans, based on promoting 'clean diesel' without sacrificing fuel economy or performance.
• It raises governance issues for VW, even if senior executives were unaware of the alleged violations.
• The episode threatens European policies of providing incentives to promote diesel to reduce fuel consumption.
• The scandal calls the EU's anti-emissions stance into question in the run-up to the COP21 climate change conference in Paris in December.