Putting the Volkswagen Settlement into Context

Recently, the Environmental Protection Agency (EPA) fined automobile manufacturer Volkswagen (VW) for cheating on their emissions tests and making false representations to customers. VW had engineered their products to determine when testing was taking place and then reduce emissions, below what would have occurred during normal driving operations, also known as a “defeat device.”

The VW fine is historic in its scope, $14.7 billion, and in its reach. If it were a regulation, it would be one of the most expensive of all time. There are certainly many in Congress who would want to direct $2 billion toward zero emissions vehicles. What they cannot achieve through majority votes in Congress, EPA has extracted from VW as a result of the company’s maleficence. The amount of the fine might well be justified, even though it’s 25 percent of the company’s market cap. Directing $2 billion of it to pet projects is dubious and raises notable legal concerns.

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