Diesel Emissions Cheating, Regulation, and the Crony State

One of my favorite correspondents, also the proprietor of the Finem Respice blog, sent me a note today about my article the other day about cheating on diesel emissions regulations.   The note covers a lot of ground but is well worth reading to understand the crony-regulatory state.  They begin by quoting me (yes, as I repeat so often, I understand that "they" is not grammatically correct here but we don't have a gender-neutral third person pronoun and so I use "they" and "their" as substitutes, until the SJW's start making me use ze or whatever.)

"My thinking was that the Cat, Cummins, and VW cheating incidents all demonstrated that automakers had hit a wall on diesel emissions compliance -- the regulations had gone beyond what automakers could comply with and still provide consumers with an acceptable level of performance."

Exactly. More importantly, the regulators KNEW it. I was researching energy shorts and had a ton of discussions with former regulatory types in the U.S. I was stunned to discover that there was widespread acknowledgement on the regulatory side that many regulations were impossible to comply with and so "compliance trump cards" were built into the system.

For instance, in Illinois you get favorable treatment as a potential government contractor if you "comply" with all sorts of insane progressive policy strictures. "Woman or minority owned business" or "small business owner", as an example. Even a small advantage in the contracting process for (for example) the State of Illinois puts you over the edge. Competitors without (for instance) the Woman or Minority Owned Business certification would have to underbid a certified applicant by 10-15% (it's all a complex points system) to just break even. It got so bad so quickly that the regs were revised to permit a de minimis ownership (1%). Of course, several regulatory lawyers quickly made a business out of offering minority or women equity "owners" who would take 1% for a fee (just absorb how backwards it is to be paying a fee to have a 1% equity partner) with very restrictive shareholder agreements. Then it became obvious that you'd get points for the "women" and "minority" categories BOTH if you had a black woman as a proxy 1% "owner." There was one woman who was a 1% owner of 320 firms.

Some of my favorites include environmental building requirements tied to government contract approval. The LEED certification is such a joke. There are a ton of "real" categories, like motion detecting lights, solar / thermal filtering windows, CO2 neutral engineering. But if you can't get enough of that, you can also squeeze in with points for "environmental education". For instance, a display in the lobby discussing the three solar panels on the roof, or with a pretty diagram of the building's heat pump system. You can end up getting a platinum LEED certification and still have the highest energy consumption density in the city of Chicago, as it turns out.

U.S. automakers have been just as bad. There's been a fuel computer "test mode" for emissions testing in every GM car since... whenever. Also, often the makers have gotten away with "fleet standards" where the MPG / emissions criteria are spread across the "fleet." Guess how powerful / "efficient" the cars that get sent to Hertz or Avis are.

Like so many other things in the crony capitalist / crudely protectionist United States, (e.g. banking prosecutions) foreign firms will get crucified for industry-wide practices.

Gee, I wonder if state-ownership of GM has been a factor in sudden acceleration / emissions prosecutions?

BTW, I wrote about the silliness of LEED certification here, among other places, after my local Bank of America branch got LEED certified, scoring many of their points by putting EV-only spaces (without a charger) in the fron of the building.  In a different post, I made this comparison:

I am not religious but am fascinated by the comparisons at times between religion and environmentalism.  Here is the LEED process applied to religion:

  • 1 point:  Buy indulgence for $25
  • 1 point:  Say 10 Our Fathers
  • 1 point:  Light candle in church
  • 3 points:  Behave well all the time, act charitably, never lie, etc.

It takes 3 points to get to heaven.  Which path do you chose?


  1. gr8econ:

    I used to say that our tax code was designed to turn us all into crooks. Now it appears that that is the point of most regulations.

  2. Bram:

    I kept hearing how Mazda, Honda, and Subaru were all going to bring their Euro-spec diesels to the U.S. None of them ever showed up because the American diesel standards were simply impossible to comply with (without an expensive urea system). I wasn't shocked to hear that the cheap VWs without urea systems were cheating - their engineers aren't any smarter than Honda's or Mazda's.

    But, go over to Europe where those diesels are perfectly legal - and the cities aren't covered in smog.

  3. joe:

    This is somewhat similar to the ethanol mandate. Currently gas is blended at 10%, which is acceptable (not withstanding the slightly lower gas mileage and slightly higher pollution with the ethanol).

    However, in order to consume all the ethanol that the mandate requires, the ethanol blend needs to be in the 15-20% range which past approx 12-13% blend starts to damage engine components, especially older model cars. This is fairly common knowledge with the EPA, which explains why the EPA has postponed the shift to requiring to 15%

  4. equity private:

    Right about when we started getting three to four prospectuses for debt to finance ethanol plants PER WEEK is when we went short some of the more vulnerable names. It's all nonsense at this point and most ethanol advocates are too blinkered to hear the evidence that its far worse for the environment than most alternatives (not to mention the social cost of rising food prices for basic grains).

  5. jdgalt:

    Even if not having the rules resulted in Beijing-level smog, that still wouldn't kill the hundreds every year who die because EPA's CAFE rules force them into smaller cars that can't stand up to wrecks. Regulations that kill people can only ever be acceptable if not having them kills more people.

  6. jdgalt:

    The only people still advocating it these days are (1) dupes and (2) lobbyists in the pay of Arthur Daniels Midland.

  7. Marc PL:

    I just wanted to post as a shamless equity private fan boy.
    Come back equity and please post more

  8. Andrew_M_Garland:

    My two cents on "they". I have seen all over the place this use of "they" instead of a singular "him" or "her". I suggest a choice:

    () Stand fast against political correctness and use "his" for singular, unknown gender. Using "they" violates single/plural and is sometimes mind boggling to figure out what is really going on.

    Possibly, nod to PC by writing "his or her" at the first use, or all the time.

    () Embrace political correctness and use "ze". Preserve single/plural. Don't bother with the other made-up pronouns. When referring to a married, unknown gender, use "Z. Walters" as an example.

    Let's begin by nodding to our betters/masters, and only knuckle under when they (zhey?) begin to imprison people for thoughtcrime.

  9. Dan Wendlick:

    "Him or her" is politically incorrect because it reinforces a binary view of gender.

  10. jdgalt:

    If anyone complains about that, from then on its pronoun is "snowflake".

  11. Matthew Slyfield:

    Sorry, I too find that a singular they grates and don't like using it. However, you can't lay they singular use of they on "political correctness". The use of they as a singular goes all the way back to the 14th century.


  12. Matthew Slyfield:

    For my part, anyone who complains about the use of the him or her is relegated to being an it. And if it doesn't like it, it can go pound sand.

  13. Matthew Slyfield:

    Fuel ethanol is mostly made from corn, specifically field corn (not from sweet corn), which is not used directly as human food, it's mostly used for animal feed. However, the corn mash left over from the ethanol production process is also used as animal feed, so while there probably is some impact on food prices, that impact is a lot lower than most ethanol opponents claim.

  14. Andrew_M_Garland:

    I can recognize a good idea, and "it" is it. References to gender or even plurality involve an unwanted intrusion and judgment about the person or thing being referenced. This would also make English an easier language to learn and use.

    I embrace the future of egalitarian reference. "It" or "comrade" fron now on.

  15. Jerryskids:

    One additional note on the issue of efficiency - the higher cost of higher-efficiency stuff is generally sold on the idea that the savings on the fuel or power bill means the thing will pay for itself. In reality, making it cheaper to operate just means you're going to operate it more. Nothing promotes efficiency better than an electric bill higher than your house payment.

  16. SouthTexas:

    Saw a lot of this being in construction for 40 years.

  17. Maks Swing:

    Not true. The stronger European Diesel cars have to use ad blue Urea mixes. Although only in Germany, which makes driving them outside of Germany very difficult (Germany is the master of stupid regulations after all).

    However, the city of Stuttgart, where I live, is constantly clouded in smog, if the city warnings are to believed. However, it is not the kind of smog you see in Bejing, it is government invented "small particulated matter dust". A new invention by crazy germans (and there is a whole religion behind it, including an artist!).
    Also, public transportation reduces prizes by half of the standard fare during those days..
    So guess, why it is signalled so often =)

  18. Dustoff:

    No matter what. It's still a bad idea. Farmers will plant that corn instead of sweet corn, so yes you do impact the market.

  19. Bruce Zeuli:

    This is true for people with leased solar panels as well. They must pay the solar company for every watt generated (consumed or not) and must also pay the utility for every watt consumed. So folks heat their pool and cool their house during the sumny day even though they are not home. Then at night they "conserve" by using less from the utility as the house warms and the pool cools. Makes sense to me. But more energy consumed overall.

  20. Gary:

    I live in an area with winter "burn" restrictions (condition green/yellow/red for wood burning fireplaces), to limit 'smog'? buildup during air temperature inversions. Problem is that something like 80% of the particulate is ROAD DUST, not having anything to do with wood burning...

  21. Matthew Slyfield:

    I didn't say it was a good idea.

    I also didn't say it wouldn't have any impact on food prices, all I said was that the impact on food prices is being exaggerated by opponents of the mandate. The food price issue seems to be the argument against the mandate that gets the most play, but of all the arguments against the mandate, it's actually the weakest.

  22. marque2:

    "specifically field corn"
    Dent corn

    Though some is used for human food, in the form of starches added to food, also non sweet corn products like Tortillas, and Corn nuts. But you are right most dent corn is used for industrial purposes and cattle feed, which is why farmers can produce certain GMO corns which are not allowed for human consumption (Bt corn as an example)

  23. marque2:

    To some extent, yes, because farmers will choose dent corn over sweet corn, but the farmers are really finding "new lands" to farm. Land that normally wouldn't be farmed is now farmable due to subsidies. Of course corn grown in these sub optimal land take more energy per unit of corn produced, and probably cause a net loss in the energy balance when producing corn to ethanol.

  24. marque2:

    You are on the right track though, It is unlikely that Iowa and Nebraska farmers would all of a sudden grow sweet corn for all the acres of dent corn. It is making animal feed more expensive though, which is affecting egg, poultry, beef and pork prices.

  25. Mercury:

    Remember, alcohol is the (waste) product when yeast consumes sugar (let us all bow our heads in a moment of silence). Not surprisingly sugar crops are a much better feedstock for ethanol production than starchy vegetables like corn. See one comparison here. The US can’t really grow sugar….but it can grow lots of corn. So, basically US corn ethanol is the high-fructose corn syrup of fuel. And similarly, the only reason that sweet goo got invented was so US farmers could offer an inferior, more expensive substitute for imported sugar, which they couldn’t produce in Kansas.

    Ethanol does badly wear on rubber and plastic parts in engines. This has sucked for those of us who make rely on a lot of small, 2-cycle engines especially. I don’t think Florida ever adopted an ethanol mandate for marine gas and they may have recently allowed pure gasoline throughout the state.

    Of course the laws of physics, thermodynamics and hydro-carbon chemistry provide maximum limits to how efficient internal combustion engines can be. I’m pretty sure good Mercedes engineer in 1952 could have explained how exactly how efficient an engine could get given that certain lightweight materials were substituted for steel, pipes and conduits molded into the engine block etc. We’re obviously pretty much there now – many high-end sports cars now have fake, macho sounding engine noises pumped through the audio system because the engines are so efficient they no longer make an aesthetically pleasing amount of noise. Anyway, to get more efficient cars either the regulators have to cheat, manufactures have to cheat, we all lie to ourselves or a mixture of all three.

    You’d think Volkswagen would be shown just a bit of deference from the “Green” Left for putting a sizable percentage of the world’s population into smaller, affordable, fuel-efficient cars decades before it became fashionable. If you can buy a VW “cheater” diesel at a significant discount, do it.

  26. Mercury:

    Just wait until the SJWs discover that romance languages divide most nouns into boy and girl words - mon dieu!

    However, I have always supported Gloria Steinem's invention of "Ms." as the functional equivalent of “Mr.” but beyond that I’m of the mind that Bruce Jenner is simply a dude in a dress.

  27. Geoffrey Newbury:

    The problem with buying a 'cheater' is that some jurisdictions may require that the car be "brought up to standard" before it can be re-licenced. And there are, as yet, no legal fixes for most of the engines. (Apparently there is a proposed fix for some 3 litre engines)

  28. Matthew Slyfield:

    "It is making animal feed more expensive though, which is affecting egg, poultry, beef and pork prices."

    Again, the depleted corn mash (distiller's grain) left over after making ethanol is also used as animal feed. In fact many food livestock operations prefer distiller's grain to raw field corn because weight for weight, it's higher in protein which means more meet production for unit of feed. Oh, and the current market price of distiller's grain is about half that of raw field corn.

    Sorry, while there is a slight bump in animal feed prices, the aggregate effect is much smaller in magnitude than you think it is.

  29. DFCtomm:

    So bankers nearly bring down the entire financial system in a crisis that would have caused a great deal of damage to nearly everyone, but nobody goes to jail. Now, a bunch of automakers commit fraud, that harms, no one, but they are being prosecuted and may see jail time. Most conservatives, however, will tell you that the banking sector hasn't become to closely intertwined with government.

  30. DFCtomm:

    No, I wouldn't buy one unless I could guarantee that the software hadn't been patched, or I intended to "chip" it myself. I imagine that the intakes will foul like they use to back in the early 2000s when it was first required to have a EGR valve installed on diesel cars, but if you've never tried to clean out an intake full of tar mud then be my guest.

  31. Matthew Teague:

    I'm no fan of the EPA, but if you took the time to look at traffic deaths in the USA over Time, you would see that cars have been getting continuously safer for DECADES.


  32. Mercury:

    You might need to operate in a state without inspection stickers then. I wonder if the EGR could be removed without causing temp problems? I always thought that my '83 Mercedes diesel should have been given credit for permanently retiring carbon in the form of the black dust it left behind.

  33. CapitalistRoader:

    So bankers nearly bring down the entire financial system in a crisis that would have caused a great deal of damage to nearly everyone, but nobody goes to jail.

    That's one way of looking at it. Here's another. Quote:

    These numbers show, beyond question, that it was government housing policy that caused the financial crisis.

  34. Mercury:

    I think that's mostly because cars have become better performing over time period. They brake better, they corner better, they crash better (for their weight), they last longer, deteriorate slower and various systems fail less. Seat belt awareness has probably helped too but a 2016 Honda Civic is just a better car by all non-aesthetic metrics than a top of the line Cadillac circa 1965.

    You can always kill yourself via user error of course but it’s much easier to appreciate this perspective in a boat. Being in a crappy, poor performing boat dramatically increases your risk of misadventure.

  35. marque2:

    As I mentioned the mash is very bitter and most animals won't eat it. Second problem, the primary source of energy is missing so you aren't getting all that much for your animals, third the stuff needs animals really close by so energy doesn't have to be used to dry the mash so it won't spoil. Drying the mash makes it an energy negative proposition.

    Mash is not the panacea of the ethanol business, lots of problems.

  36. jdgalt:

    True but irrelevant.

  37. jdgalt:

    I can't wait until "cheater chip" sets start circulating in the black market (so that after the authorities force the automaker to "fix" your car, you can make it run well again). Ideally these can be made to look just like the approved sets and maybe even able to spoof tests designed to spot the "cheaters." It'll be an arms race, and like other good tech products, the rich will be guinea pigs for the rest of us.

  38. Matthew Slyfield:

    The distillers take mostly take care of the drying process, you can buy dried distiller's grain by the ton. The price of dried distillers grain is half that of field corn. It's not just the ethanol fuel companies that supply it either,. All the liquor distillers sell it as well.

    If they weren't selling it as animal feed, it would be a waste product that they would have to pay to dispose of.

    It has been in use as animal feed for decades, long before the ethanol mandates. The problems with using distiller's grain as animal feed are far less than you think. The product is very popular with livestock operations. If it was as problematic as you think, there wouldn't be such a big market for it.

  39. DFCtomm:

    Yeah, because the bankers never wanted to make money hand over fist. The government forced them to. The best you can hope for in that argument is the "br'er rabbit" defense. The bankers demanded that the government throw them into that thar briar patch.

  40. CC:

    The government punished banks that didn't loan enough in poor neighborhoods and if you rejected applications for too low of an income it was "discrimination". HUD was giving out loans for 3.5% down payment and no PMI. Still is. Once they lowered the standards, middle class people and investors got in on it also. A bubble resulted.

  41. Geoffrey Newbury:

    You don't actually need to change/replace the chip set. They can be re-programmed in place with the correct software (HP Tuners is one of many). And, of course, re-flashed back to 'standard' if necessary. But in this case, the 'standard' will be the present "cheater" code. If you search you will find lots of links..

  42. CapitalistRoader:

    Yeah, because the bankers never wanted to make money hand over fist. The government forced them to.

    Take off your reactionary-left blinders. Even left-leaning Wikipedia acknowledges that government was the central cause of the financial meltdown:

    The Financial Crisis Inquiry Commission wrote that Fannie Mae and Freddie Mac, government affordable housing policies, and the Community Reinvestment Act were the primary causes of the crisis.

    Perhaps a little Milton Friedman is in order:


  43. marque2:

    Dude, you are not understanding at all. First, the market isnt as big as you claim. Second, Iowa State is doing tons of research in distillers mash to try to make it pallitable to animals. I.doubt they would be doing the research if it wasn't a problem. It is interesting that cows will eat the stuff and pigs won't which is a problem for Iowa, since there are lots of pigs, not many cows. Finally imam correct that the mash is low energy, they took most of it out for the distallation process.

    But the big issue is energy balance. Yes the distillers could.dry the grain leftovers, there is no technilogical reason they couldn't, however, they are trying to show that growing corn for ethanol has a positive energy balance. If they expend energy to.dry the mash enough for long term storage and transport, the energy balance goes way negative. They really try to ship the stuff moist (they press out most of the water but don't dry)

    Somehow I am guessing that there is enough difference between what you and I are saying that you are probably mixing up some other mash, with that created by fuel Ethan distillers.

  44. DFCtomm:

    Let's see if I can put this in terms that you understand. If it were all the governments fault, and the banks knew this was all going to end poorly, then why did they ever buy any of their own CDOs? How did they all get caught with their pants down owning paper they knew was garbage? The government had provided them with a legal path to dump those shitty loans on the securities market, that's what the nature of the CDO. If the banks were acting responsibly, and knew the government had, forced them to make all that money against their will via liar loans, then how come they got caught? Yes I know they had it hedged with CDSs via AIG, but if thats another topic.

  45. DFCtomm:

    Let's forget details, you guys don't seem to be up on what actually happened, so I'll go general. The banks had a plan to make a shit ton of money, and the government had a plan to win over minority voters, and some moron figured out a way to bring those two massively bad ideas together. It, very nearly, destroyed the country economically, but nobody, and I mean nobody got an orange jumpsuit out of it, but now a bunch of German auto makers who hurt no one because they're cars are still very clean, may see jail time.

  46. jdgalt:

    The big screw-up by the government was to fail to define CDSes as insurance, thus putting them under existing safeguards that would have made it illegal for AIG to write them without having the ability to pay claims.

  47. CapitalistRoader:

    ob•fus•cate (ŏbˈfə-skātˌ, ŏb-fŭsˈkātˌ)
    To make so confused or opaque as to be difficult to perceive or understand.

    CRA and GSE affordable housing mandates created a whole lot of crappy subprime loans. Housing took a downturn and all those crappy loans went belly up. Getting into the weeds about how those crappy loans were collateralized is just a smokescreen. If the government and GSEs wouldn't have forced lenders to make those crappy loans then the crisis would have never happened. You do know about President Awesome Boyfriend was a a plaintiff's lawyer in a lawsuit against Citibank, claiming that it wasn't making enough crappy loans in Chicago, right? Back when he was a crusading community organizer. Way to go, Barry. And who can forget:


  48. DFCtomm:

    You don't know what your talking about except in the most general terms. The devil is in the details.

  49. DFCtomm:

    You aren't allowed to take out insurance on something that you don't own, and that's most likely why they didn't call it insurance, but yes if it had been governed by insurance regulations that demanded X amount of capital for X amount of exposure via CDSs then it would have saved AIG and certainly might have limited banks exposure to CDOs because they wouldn't have been able to "hedge" their exposure.

  50. jdgalt:

    The trick, then, is to download the software now, so you'll be able to reinstall it after the government forces the companies to change it and take the cheating version out of circulation.