Dieselgate shows weakness of EU federalism-lite
By Peter Teffer
The current level of EU integration - somewhere between a system of fully sovereign nations and full-fledged federalism - leaves few people enthusiastic.
While establishing a single market has had the support of most politicians, member states are less keen on centralising power - also known as handing over authority to EU institutions in Brussels.
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In the field of passenger car certification, this half-hearted integration has led to a situation where it is no big surprise that a Volkswagen-style scandal could happen.
To make the single market work, European lawmakers decided decades ago that a car manufacturer should need to apply for a sales certificate only once. After a company has acquired the so-called type approval, the model can be sold anywhere in the EU.
The system was largely uncontroversial until Volkswagen Group admitted in September 2015 that it had equipped millions of diesel cars with cheating software.
Embarrassingly for the European certification and market surveillance agencies, the admission was compelled by authorities in the United States. It raised the question: why did no-one suspect or act in Europe?
Analyses by the European Commission, testimonies in the European Parliament and the UK's House of Commons, and research done by this website, show the EU system of car certification has created an environment in which enforcement is negligible, conflicts of interests loom, and responsibilities evaporate.
Carmakers are free to choose in which of the 28 countries they acquire their type approvals.
Many decide to stay close to home.
Non-governmental organisation Transport & Environment (T&E) looked at 30 diesel cars recently identified as emitting more emissions on the road than in the laboratory.
It found that three quarters of the vehicles had been approved by the authority in the company's home country.
“What else than Dieselgate do you expect when Germany approved Mercedes, France Renault, the UK Jaguar and Italy Fiat,” the group asked, referring to each country’s principal car making firms.
T&E's Greg Archer said at a recent event organised by the Greens group in the European Parliament that national authorities “are not scrutinising vehicles properly, but are trying to help their manufacturers achieve a competitive advantage over other companies”.
But the story is more complicated than that.
Sometimes carmakers choose to apply for type approval in a less obvious place, as evidenced by data on the period 2004-2009 published last January by the EU commission.
The two smallest member states of the European Union, Luxembourg and Malta, are punching considerably above their weight.
Together, the Luxembourgish and Maltese type approval authorities are responsible for the granting of a quarter of all certificates. Yet the countries in which they reside represent only 0.2 percent of EU population, and zero percent of car manufacturing.
Luxembourg in particular does a lot of certification. It is second only to Germany.
“The reasons for the high number of type approvals granted in Luxembourg cannot be fully understood,” said a legal study presented on 4 July in the European Parliament's inquiry committee into the Dieselgate affair.
The EP had commissioned the study from the Environment Agency Austria, a public enterprise.
Malta? 'No idea'
According to car industry lobbyist Erik Jonnaert, Luxembourg is popular because of its central location, speed and efficiency.
However, the secretary-general for the Brussels-based European Automobile Manufacturers Association could not say why Malta was also popular.
“I have no idea about the figures for Malta. It is the first time I hear about Malta,” said Jonnaert.
Geographical proximity to manufacturing plants is not always a factor that determines where a carmaker applies for its type approval.
Look at where Swedish car company Volvo acquired certificates in 2014, as found by non-governmental group International Council on Clean Transportation.
Most came from Spain, with smaller numbers of approvals granted by the Netherlands, Ireland, Hungary, Luxembourg, and Latvia, despite Volvo not having any factories in those countries.
“The rationale is rather based on capacity/availability for witnessed testing at our Research & Development facility in Sweden, accreditation regulatory competence and various fields of expertise,” Stefan Elfstrom, Volvo spokesman, told this website in an email.
But if the selected authority deviates from where a company is a regular customer, the rationale may be unknown even to spokesmen.
The BMW Group in 2014 acquired almost all of its approvals in its home country Germany. However, one was granted by Latvia.
“If I understand the process correctly, it could be a dealer-related matter than can occur when importing a used vehicle into a new market where that model was not sold originally,” said Oskar Sodergren, spokesman of BMW in the Baltics.
The European Commission published an impact assessment last January in which it analysed the current system before proposing changes.
It noted that the foundation of the system was “the mutual trust between member states with regard to the stringency applied in enforcing the type approval requirements”, and identified a risk that “the weakest links in the chain … could be targeted by applicants who want to cut corners”.
The commission noted that the uneven distribution may “simply” point to different qualities. In other words, maybe Luxembourg, Malta and the Netherlands are just that good.
“However, it could also be related to differences in the stringency that type approval authorities and their technical services apply, which could induce applicants to selectively apply for type approval with those approval authorities who are likely to be the most lenient,” the commission study said.
The authors of the European Parliament's legal study identified four features that it says determine which countries car companies will use for the process.
Companies prefer authorities that have a short processing period, “preferably only a few days”, a low frequency and intensity of checks to confirm if the produced cars match the approved example vehicle, a low rate of reviews of the test results, and low costs.
The picture that is painted above, only relates to the certificate for the whole vehicle - the final diploma, so to speak.
But carmakers are allowed to acquire approval for individual tests - for emissions, but also for components such as air bags or tyres - from authorities different from the one that gives the final stamp of approval.
They could request tests in a number of countries and select the one where they came out best.
Environmental campaigner Greg Archer said some companies go “type approval shopping” for the intermediate steps.
It has not been proven, but the car industry has not gone to great lengths yet to explain the mysterious discrepancies.
No public information is available on where companies acquired their approval for the individual tests.
At the Greens event, the Dutch type approval authority RDW presented its database of European type approvals.
“The open data we supply gives the identity of who has made the whole vehicle approval. And that's it,” said Bert de Rooij of RDW. “We don't have any data concerning the process before that.”
But lobby group T&E said it knew of “many” car manufacturers that had their emissions tested through the approval authority in Luxembourg.
“Luxembourg doesn't even have an emissions laboratory,” said T&E's Archer.
This may sound contradictory, but it is not.
Emissions tests, like other steps of the approval process, are often done at the premise of the car companies. They carry out the tests under supervision of a so-called technical service to which the authority has outsourced the testing.
This fits with the high level of trust policymakers have placed in carmakers, because they saw the industry more as a partner that created jobs than a sector to oversee.
For example, at a February hearing in the House of Commons in the UK, a representative of one technical service said it “could be argued” that market surveillance on emissions “has been weak in the last few years”.
“I think the last time we were asked by an approval authority to do some conformity of production testing for emissions was perhaps five years ago,” said Tony Soper, technical specialist at Millbrook.
His company is one of the 300 technical services that have been accredited by one or more of the 28 European approval authorities.
He noted that the quality differs across Europe.
“It is fair to say that some of the European approval authorities are quite small organisations and the depth of their technical competence may be questioned,” said Soper.
Where car types are approved is highly relevant, because it only the authorities in that country are legally entitled to take action if something suspicious occurs.
Is Malta up to that task?
A 2014 government document showed that Malta had €167,089 available for market surveillance activities, but this covers all consumer products.
“With the current resources available … monitoring and enforcement operations have to be prioritised,” it said.
The Maltese government “relies heavily on notifications by importers and other member states for enforcement operations on motor vehicles”.
Michael Cassar is market surveillance director at the Malta Competition and Consumer Affairs Authority.
He told this website by phone that overseeing the motor vehicle market is “not a high priority”, because Malta does not host car manufacturers.
When this website noted that the country that approves the cars also has the responsibility of overseeing the market, Cassar asked to respond by email. He has yet to reply.
Malta has only one technical service, whose director did not respond to questions from this website.
But this is not only a problem for the EU's smallest member state, the authors of the European Parliament's legal study wrote.
“Market surveillance programmes are expensive,” the study noted. Moreover, only the authority that approved the car is able to withdraw the certificate.
“Any member state that decides to finance such a programme is confronted with the fact that, if any discrepancies or cases of non-compliance are revealed, it has no legal right to take proper action.”
Will commission proposal hold?
The European Commission has proposed changes that aim to resolve many of these issues.
However, it is not guaranteed that the commission proposal, published last January, will be adopted in an unchanged form.
On 22 June, member states published an amended version of the proposal.
They scrapped the requirement for type approval authorities to “have a sufficient number of competent personnel at its disposal for the proper performance of the tasks foreseen by this regulation”.
Ministers are expected to discuss the proposal in November, a spokeswoman for the Slovak EU presidency said.
More changes can be expected as the file moves higher up the diplomatic ladder, and the fallout of the Brexit vote increases the desire to maintain a single market but without what they see as red tape from power-hungry Brussels.
However, the complex case of car certification gives stronger arguments to both hardcore Brexiteers and federalists than to those defending the middle way.