IN THE landmark $15 billion settlement Volkswagen struck with the federal government and the state of California on Tuesday, the massive automaker admitted no liability. But it is clear enough that the company brazenly defied the law, unfairly undercut its competitors, cynically betrayed its consumers and damaged the country’s air quality. It deserves to pay for tricking drivers and regulators into thinking its “clean diesel” vehicles met federal air pollution standards — and it will. This is, on balance, a just result.
But the Volkswagen affair is not over. The government still needs to decide how to spend the money the company will give it; on that score, officials have already made at least one mistake. Moreover, Volkswagen may still be on the hook for more penalties, which raises the possibility that the government will end up being excessively and counterproductively punitive.
The bulk of Tuesday’s settlement — $10 billion — will go to Volkswagen consumers who bought two-liter cars equipped with “defeat devices,” which allow them to appear to pass emissions tests when they should not. The company must fix or buy back at least 85 percent of the half-million offending vehicles in the United States, and it must compensate buyers for deceiving them about their cars’ capabilities.
Volkswagen will also have to make good with the environment. Its rigged cars have been spewing dangerous nitrogen oxides into the air at well past legal limits ; the chemicals form dangerous smog and soot and are linked to a variety of health conditions. It will have to pay $2.7 billion to fund projects that reduce this sort of air pollution — retrofits of old diesel freight engines, for example — to make up for what it is responsible for emitting.
So far, so good. Yet, on top of all that, the government also got the company to agree to pay $2 billion into a fund that will promote zero-emissions vehicles — electric or fuel-cell cars, for example — and the infrastructure environmentalists believe is crucial to making them more attractive to consumers. This is less defensible. The government’s desire to drive money into clean energy is laudable, but there is no reason it needs to be earmarked for zero-emissions vehicles. The government already has significant power to progressively cut back carbon emissions from cars and trucks without specifying in detail the sorts of vehicles consumers must drive. There are, meanwhile, emissions-cutting investments that would likely offer more bang for the buck — promoting various types of energy efficiency, for example.
Volkswagen also faces the potential of more penalties, in part because this settlement covers most — but not all — of the crooked cars it sold. Tuesday’s settlement equals nearly a fifth of the company’s value. Just paying for this piece will probably require it to slash its research-and-development budget. More penalties to come might make the company incapable of investing in new models that could be cleaner and more efficient. The government has already sent a strong message. Going forward, the regulators and the courts must be careful not to hobble one of the world’s largest carmakers.