Smokestacks vs Tail-Pipes: Putting Volkswagen’s Emissions Scandal in Perspective

On Monday, the School of Public policy posted a blog piece (see below) that I put together on the aggregate value of Volkswagen’s excess emissions resulting from the diesel engine scandal (in which VW used a “defeat device” to cheat the EPA’s emissions testing). Shortly after that piece was posted, Dr. Keith Stewart (head of energy campaign Greenpeace Canada, @climatekeith on twitter) sent me an email and a tweet pointing out my error.

“Hi:

I think you are confusing NOx (nitrogen oxides = NO and NO2) and which are not potent GHGs with nitrous oxide (N2O), which is a very potent GHG.

See http://www.ghgonline.org/othernox.htm

Keith”

I want to thank Dr. Stewart for pointing out my error. In my experience, blog posts and related social media work best when they generate useful feedback, debate and constructive critique.

In particular reference to my earlier post (see above/below) Dr. Stewart pointed out that I confused “nitrogen oxides” with “nitrous oxide.” To clarify the difference, as I now understand it:

Nitrous Oxide (N₂O) is a very potent greenhouse gas which, gram for gram, has around 300x the global warming potential as Carbon Dioxide (CO₂).

Nitrogen Oxides (NO and NO₂), which VW is guilty of producing in quantities exceeding EPA standards, are damaging pollutants. But they are damaging due to their effects on local air quality, not due to their global warming potential.

My error was to convert VW’s Nitrogen Oxide emissions to CO₂ equivalents using the conversion factor for Nitrous Oxide. This was incorrect as Nitrogen Oxide has no relevant global warming potential.

This means that the EPA standard on Nitrogen Oxides (NO_X) emissions is in place to limit the level of damage to local air quality. I found this realization intriguing since I had (incorrectly) assumed that the attention being paid to the VW scandal was the result of fears over global warming.

In fact, we are talking here about two different, distinct and damaging forms of emissions: local particulate matter (NO_X) and emissions with a global warming potential (like CO₂). So, VW’s cheat has led to a social cost resulting from environmental damage, but not the kind of environmental damage I had assumed. The affected VW fleet is not leading to an excess amount of global warming, but rather contributing to damage in local air quality and associated negative health effects.

Late last week a group comprised of researchers from the Massachusetts Institute of Technology and Harvard University published a paper titled “Impact of the Volkswagen emissions control defeat device on US public health.”[1] In that paper the authors estimated that the cost of excess VW NOx emissions from 2008 to the end of 2015 was somewhere between $72m and $1.2b.[2] They presented $450 million dollars as their best estimate within this range.

The sales of affected VW’s were about half a million cars in the US. Taking the $450m USD value and converting it to a per-vehicle measure, the resulting figure is about $900 USD per car.

With that measure in mind, let’s use a simple ratio to scale the per-car cost to the entire global sales of affected VW’s (11 million cars). Using the MIT/Harvard paper damages range of $72m to $1.2b, the range of comparable global damages is $1.6b USD to $26.4b USD, with the most likely number being somewhere around $10b USD.[3]

So, how does this compare to the elephant in the room; Canada’s oil sands?

Between 2009 and 2013 (the most recent year for which data is available) operations in the Canadian oil sands produced about 55,000 Kilotons of CO₂e per year (see my earlier post). Using a measure of $37 USD/ton (a standard for environmental accounting)[4] this works out to about $2B in implied environmental costs per year. So, over the same period (2008 to 2015), the environmental damage from the Canadian oil sands works out to about $16b.

This means that the financial costs associated with the negative health impacts of the excess VW NO_X emissions are likely about 2/3^rds as large as the environmental costs associated with the emissions from the Canadian oil sands over the same period ($10b USD vs $16b USD). However, given the confidence interval cited in the MIT/Harvard paper, reasonable estimates for the VW number could be as low as $1.6b USD, or as high as $26.4b USD. So, it is possible that the VW damage could actually be more costly than the oil sands, although these costs manifest in a very different way (negative effect on local health outcomes, rather than in increased global warming potential). This means that my initial estimate may not have been too far off in terms of the actual cost of the damage, although the type of damage is different from what I assumed.

Possibly the most important insight I have gained from looking at this is the nature and complexity of emissions. Since diesel vehicles actually do produce fewer CO₂ emissions per mile than conventional gasoline engines,[5] there is a tradeoff in vehicle choice between damage to local air quality and damage caused by global warming. In its decision to cheat on the EPA tests VW hid much of the damage to local air quality implied in this tradeoff from regulators, making diesels appear more attractive overall than they actually are. But even if VW had actually met the EPA standards some of the tradeoff would have persisted.

Given this apparent tradeoff, there is an important question of how we should be weighting local health impacts vs. global warming potential when considering the environmental damage caused by different emissions sources. Unfortunately, this is a question I am not sure I see a clear answer to, but in continuing to think about this I am certainly open to feedback, debate and other constructive critique.