Monday

25th Mar 2019

Investigation

Diesel cars still dirty, despite huge EU loans

In 2009 and 2010, the European Investment Bank lent €7.5 billion to the automotive industry as part of a funding programme aimed at developing cleaner cars.

What has the programme achieved?

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  • (Photo: EIB)

One thing it has not done, was contribute to a fleet of clean diesel vehicles.

Following the Volkswagen Group scandal one year ago, national authorities discovered that not just Volkswagens, Skodas, Seats, and Audis were emitting more on the road than in the laboratory, but models from virtually every big carmaker.

Based on these new measurements of real-world emissions, environmental lobby group Transport & Environment (T&E) estimated that there are around 29 million “dirty” cars and vans on the road - three times above the EU limits for nitrogen oxides (NOx).

T&E said in a report published on Monday (19 September) its estimates were “conservative”, and that they corresponded to around 76 percent of all diesel cars and vans sold between 2011 and 2015.

(Photo: Transport & Environment)

Many car companies admitted to national authorities that their cars were switching off, or turning down their emissions control system during certain conditions on the road. They said they did so because it was technologically not possible to have the system running full time without harming the engine.

But what about the EIB loans?

As part of a financing programme called the European Clean Transport Facility (ECTF) – approved by finance ministers in 2008 – the bank funded €7.5 billion in research, development, and innovation (RDI) projects.

The project was part of the European Economic Recovery Plan, aimed in part at making sure the European automotive industry, responsible for many jobs in the bloc, remained competitive during the economic crisis.

The money went to many of the major carmakers, including Volkswagen, Fiat, PSA Group, Renault, Volvo, Jaguar, Nissan, and Ford.

According to an internal EIB paper, seen by EUobserver, the programme's “primary objective” was “to provide, in the short term, support to investments targeting emission reduction and energy efficiency in the European transport vehicle sectors”.

Which emissions, were not defined.

Focus on CO2

Now, however, an EIB official told EUobserver that “the main focus” of the ECTF programme “was reducing CO2 emissions”.

“The European Commission had just made the target of bringing CO2 emissions down to 130 grams per kilometre by 2015 the cornerstone of their policy,” said the EIB source, who asked not to be named.

“At the time, diesel was seen as one major solution to cut CO2 emissions, including by the EU legislature.”

In other words, petrol engines produce mostly CO2 emissions, while the problem with diesel engines is the emission of NOx.

CO2 is a powerful greenhouse gas, helping to cause potentially disastrous climate change in the long term, while NOx is a pollutant, damaging to environment and health in the short term.

Carbon emissions have been steadily dropping for new petrol cars.

Nevertheless, there were some projects funded under the programme which had reducing diesel emissions as one of the goals.

High emissions, despite RDI

In July 2010, the EIB announced a €550 million loan to Ford, for “research, development and innovation of a new generation of fuel efficient and low-emission diesel and petrol engines”.

But according to T&E's estimate, Ford had sold 1.5 million diesel vehicles emitting at least three times the EU limit, since the loan was granted.

A €400 million loan to French carmaker PSA Group, signed in April 2009, had as its goal “to upgrade its range of cars to Euro 5 and Euro 6 standards”, although it did not specify if the project involved diesel cars or petrol cars.

“The purpose of the project is to develop cleaner propulsion technologies, thereby reducing the environmental impact of car travel,” the loan's project page said.

Yet according to T&E, PSA Group's daughter companies Peugeot and Citroen have since 2011 sold 3.7 million vehicles in the Euro 5 category that were emitting on-road three times above the EU limit, and 843,000 vehicles in the Euro 6 category, since 2014.

VW and a €400m loan

And then there is Volkswagen.

The German industrial giant, Europe's largest carmaker, received a €400 million loan from the EIB in 2009.

“With this loan, we are pleased to be able to promote green technologies in Europe while actively helping the car industry in these difficult times,” said one of the bank's vice-presidents, Matthias Kollatz-Ahnen, in a press release.

But Volkswagen Group had by then implemented another tool to pass emissions tests: the defeat device.

According to a complaint by New York state's attorney general, in 2009 VW began to develop its fourth generation emissions cheating software, the first one having been developed by daughter company Audi in 1999.

In October 2015, shortly after the Volkswagen scandal became public, the EIB announced it would investigate if VW had misused parts of its loans.

EIB president Werner Hoyer said in January that the bank “cannot exclude that there may be a link with a part of a €400 million EIB loan to Volkswagen” and the car company's emissions fraud. The investigation is still ongoing.

Confidentiality

This website asked in a freedom of information request documents which showed what the criteria were under which VW received the loan. The EIB released only two heavily redacted documents.

The first was a three-page document titled Finance Contract for disclosure, dated 16 February 2009, but which censored the majority of the text.

It only included a very general clause on criteria, saying that the borrower “shall follow the environmental rules in EU and German law”.

The second document, a 2011 letter from VW to the EIB, was also heavily redacted.

It referred to a VW web page which no longer exists, and to attachments which were not included in the released documents.

The EIB official explained to EUobserver that “performance targets linked to our finance contracts are confidential because competitors could deduce trade secrets from them”.

He added that targets are checked, but that it is difficult to specifically determine what environmental benefits the loans have caused.

“The EIB does not finance the development of a complete engine, it finances only the development of parts of it, which are only basic technology, nothing that is purely model-specific,” the EIB contact noted.

Difficult to quantify

“In addition, when we speak to a car manufacturer, it is very early in the development process to know exactly to how much emissions reductions the project will lead, because the final reductions depend on so many factors. It can vary from car model to car model and from engine to engine,” he said.

“There is a range in which improvements are expected to lie, but it is difficult to quantify specific reduction targets ex ante.”

Even after the programme ended, questions remain on whether the ECTF achieved its goals, and whether there was any effort made to measure this.

The internal EIB document referred to earlier, dated February 2011, was titled Results of the European Clean Transport Facility, and was sent to the board of directors of the bank.

But a redacted version of the paper, seen by this website, only mentioned procedural achievements.

It said that 36 projects had been backed, with companies in Germany, France, and the UK being the main beneficiaries.

Under the title Impact, it only reported that the “investment plans are broadly on schedule, with R&D objectives and budgets largely unchanged”. It did not make mention of any aimed or achieved emissions reductions.

The EIB is not alone in taking a purely procedural view.

The EU commission, in a 2013 evaluation of public-private partnerships, said the programme “exceeded expectations”, because it provided over €8 billion in lending, instead of the initially expected €4 billion.

“This lending, as co-financing, helped catalyse an investment in the sector with a volume of more than €20 billion,” the commission paper said.

Apparently, the commission had no expectation relating to how much cleaner cars would become.

“This investment helped primarily the private sector to retain its RDI programmes and therefore its competitiveness in a period of unprecedented weakness in demand,” it said.

The European Parliament also never asked the EIB or the commission what the environmental benefits of the €7.5 billion in loans have been.

In a 2011 non-binding text about the bank's 2009 annual report, it only said it supported “the use of innovative instruments” like the European Clean Transport Facility.

The only time an MEP sent a written question to the commission about the ECTF, was in relation to troubled carmaker Saab.

It was from far-right Dutch member Laurence Stassen, who only wanted to know if the EIB would still be repaid.

ECB in ‘bail-out’ of scandal-tainted VW

The ECB has started to “bail out” Germany’s Volkswagen Group by buying its corporate bonds, but other EU-linked banks continue to shun the scandal-tainted firm.

Investigation

EU bank accused of muzzling watchdog

An ongoing review of the the European Investment Bank's "complaints mechanism" could make the oversight branch less independent and less effective.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

EIB silent on report into 'fraudulent' VW loan

European Investment Bank vice-president Taylor tells EUobserver the fraud investigation into a €400 million EIB loan to Volkswagen had 'considerable ramifications', but didn't want to explain why the report was kept secret.

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