Analysis: Volkswagen Smog Cheating Should Cost Company at Least $25 Billion

A new analysis from the Center for Biological Diversity estimates that Volkswagen's vast cheating scandal on smog testing also emitted powerful greenhouse gases equivalent to adding at least 32.2 million tons of extra carbon pollution into the atmosphere -- or the emissions of 6.8 million cars.

The Center also calculated that financial penalties for Volkswagen's environmental violations should at a minimum be $25.1 billion in the United States alone, which includes $18 billion in Clean Air Act penalties and another $7.1 billion for the damage to the world's climate based on the social and ecological cost of burning fossil fuels. Those figures are based on estimates of the greenhouse gases emitted in tandem with NOx emissions above allowable limits, and the cost of carbon reported in a study that appeared this year in the journal Nature Climate Change.

This climate cost could be even higher because the CO2 emissions of these vehicles could double the levels normally expected, based on a report from the International Council of Clean Transportation last year. The Center today filed a Freedom of Information Act request to the Environmental Protection Agency seeking a full accounting of the actual amount of pollution released because of Volkswagen's deception -- information that's likely to drive up the total estimated penalties.

"What Volkswagen did wasn't just consumer fraud, it was a crime against our climate and against future generations relying on us for a livable planet," said Peter Galvin, director of programs at the Center. "The public has a right to know exactly what greenhouse gas pollution was released and in what amounts. What's clear, though, is that this will have a far-reaching effect on our clean air and climate."

The Center today called on the Obama administration to fully prosecute Volkswagen executives and consider financial penalties far beyond the $18 billion that's been discussed so far, consistent with tougher new U.S. Department of Justice policies on the prosecution of white-collar crimes.

Here's how the Center arrived at the $25.1 billion in environmental penalties:

The maximum penalty for Volkswagen cheating on its emissions standards certification is $37,500 per car, amounting to $18 billion based on 480,000 cars sold in the United States. The $7.1 billion in climate costs is based on the extra nitrous oxide (N2O) that was released with the increased NOx emissions. N2O is a powerful greenhouse gas that is also emitted as NOx increases. The Center estimated the global average of extra NOx emissions based on annual car sales for model years 2009 to 2015 and the EPA estimate that the vehicles polluted 10 to 40 times above EPA standards during that period. Excess of N2O was assumed to be 20 percent of extra NOx produced, based on peer-reviewed studies. As a greenhouse gas, N2O is 298 times more powerful than CO2. Thus, this greenhouse gas equivalency was used for the social cost of carbon placed at $220 per ton based on the Nature Climate Change study.

The $25.1 billion does not include additional potential penalties related to recalls, consumer payments and other factors not related to environmental damage.

"Make no mistake: What happened here is a national and international disaster, and history will mention it in the same breath as Exxon Valdez and the BP oil spill," Galvin said. "Volkswagen did this intentionally and knew that the effect would be a staggering release of pollution. It has to be held to account for what it's done -- and we must signal to other companies that this sort of crime can never be tolerated."