The UK's diesel emissions crisis is another gift from the EU

Statism and corporatism led to misplaced support for flawed diesel engines, argues James Lewisohn.


Mazda sold over a million Wankel-engined RX-7 and RX-8 sports cars
(Image credit: National Motor Museum)

In 1956, Ford Motor Company's legendary product manager Donald Frey (the man who went on to create the Ford Mustang) threw down the gauntlet to automotive engineers of the future. He challenged them to find a genuine challenger to the four-stroke petrol engine, one that could beat it in all or nearly all respects. At the time it was the predominant car engine type in the US, and, according to Mr Frey, was likely to stay that way. It was, in the capitalist terminology, the "better mousetrap" a technology simply too good to challenge.

Since then, a number of attempts have been made to usurp the four-stroke petrol engine the current re-imagination of the 1891 electric car by buccaneering entrepreneur Elon Musk being just the latest. Back in 1969, Britain's Tiny Rowland bet his company on another engine technology: the 1957 Wankel rotary petrol engine. Rowland became so convinced of the Wankel's technical superiority, he forgot to ask the Board of his financially stretched company for its consent before agreeing to pay Wankel's German owners £12m for the engine's licensing rights.It looked good.

A Wankel beat a four-stroke engine in many ways, not least of which was in using a total of just five, instead of 42, moving parts. It was also light, compact, smooth-revving and powerful. Unfortunately for Mr Rowland it also came with useless fuel economy, filthy emissions and a genuinely awful reliability record. Half the world's carmakers tried developing Wankel-engined cars in the 1960s. Few made it into production. Mazda was by far the most successful it sold over a million Wankel-engined RX-7 and RX-8 sports cars. But it eventually gave up, building its last rotary engine in 2012. Score one to Mr Frey.

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The next challenge was better diesel. It had little promise as a car engine in the early days. By Frey's time the technology wasn't new (the first engine that could burn the energy-richer heavier distillates from the oil-refining process dated from 1897), and the engines produced so much more smoke and noise than a petrol engine that its transportation uses were mostly limited to large trucks and shipping.

A few purpose-built taxis were almost the only diesel cars on the road, and most diesel fuel an inevitable product of the refining process was considered nasty stuff and sent away for use in domestic heating and electric power stations. It might have been energy richer, but with higher initial costs, weight, emissions and noise, no one in their right mind would have wanted to swap a petrol car engine for a diesel one. The first VW Golf diesel in 1977 cost more than the petrol car, but had 40%less power and sounded like "being inside a garbage can during a hail storm" on start-up. Improved fuel economy was its sole saving grace. SurelyFrey should have been safe?

Yet, the success of the Golf diesel showed fuel economy could trump diesel's downsides if emissions could be ignored. Thanks to France, they would be. In the wake of the 1973 oil crisis, France decided to give up its expensive reliance on foreign oil and to build up to 80 nuclear power stations instead.At thesame time Europeans started to use grid gas for central heating instead of oil (easier, cleaner). By the early 1980s, Europe's oil refiners (a third of whom were in state hands) were in trouble: lots of diesel; fewer buyers.

To up demand, France agreed with Peugeot to lower duty on the sale of diesel fuel and Peugeot agreed to develop a new diesel car engine.The Peugeot 205 GRD was born in 1982 with an engine 15% lighter than any previous diesel. By the early 1990s, 10% of new car registrations in Europe were diesel and the European car makers were the leaders in this new market.

The cars weren't as awful as they could have been. Innovations such as common rail fuel injection helped diesel engines run much more quietly, and newer diesel engines were technically impressive using less fuel per mile than their petrol counterparts and, critically, emitting less carbon dioxide per mile. Next came lobbying. Having developed a successful market in something that had once looked so unpromising, the car makers needed a little help to make sure the long-term market conditions were favourable. They got it.

1997's Kyoto Protocol committed the EU to reducing carbon-dioxide emissions by 8% by 2012. The following year the European Union, led by its transport commissioner, Neil Kinnock, came to an agreement with its car manufacturers committing passenger car-makers to reduce CO2 emissions by 25% over ten years.But the EU did nothing to incentivise investment in alternatives technologies (such as petrol hybrid engines, pursued successfully by Japanese manufacturers).Instead it stacked its regulations heavily in favour of diesel cars.

Diesels produce 15% less CO2 than petrol, but can emit four times more nitrogen dioxide pollution.In 1997, the Euro II legislation had allowed diesel engines to emit 40% more NOx emissions than petrol ones, and in every subsequent legislation change including the current Euro VI standard diesel cars were allowed to be more polluting than petrol ones. Meanwhile, EU governments cut taxes on diesel fuel and diesel car sales.

While non-EU carmakers cavilled in 2003, Toyota predicted "when equipped with all future after-treatment equipment, diesel cars will become as expensive as hybrid cars" EU diesel car sales multiplied: by2011, nearly 60% of European new car registrations were for diesel cars (and mostly, forEuropean-made diesel cars). Good news for refineries and for European manufacturing. But, as it now turns out, very bad news for the rest of us. NOx gases are extremely harmful to humans; exactly how harmful has become increasingly clear, especially within the last two years.

So, while diesel might have been a commercial success (until now anyway), the fact that most Europeans now drive diesel cars does not mean that Mr Frey's challenge has been met. The rest ofthe world continues to drive petrol-engined cars, and diesel engines only beat petrol ones in all or nearly all respects if you are prepared to overlook the fact that 50,000 people a year die early in Europe as a direct result of their use.

In fact, we still don't really know if diesel could eventually beat Mr Frey's four-stroke petrol engine in every single way. That's because innovation is expensive, and instead of focusing their attention on technology solutions for diesel's Achilles Heel of emissions, Europe's carmakers apparently felt it would be more profitable to cheat the regulators instead. This hasn't been a successful strategy: VW's current and former CEOs are under investigation in Germany for market manipulation, and it has a $25bn liability for emissions cheating in the US.

Meanwhile, the VW Polo 1.4 TDI currently on sale in the UK has NO2 emissions 13 times higher than the EU legal limit. And afterVW, the US Department of Justice has Mercedes, Fiat and GM amongst other carmakers in its sights.

We also can't yet say if the reincarnation of the electric car can beat Mr Frey. The Tesla Model X I drove the other weekend had stonking acceleration, but there was no disguising the vast weight of its batteries it handled like a cow. For now, I'm sticking with petrol perhaps even a Japanese petrol-hybrid. You should too.

James Lewisohn began his career as an investment banker in New York with Bear, Stearns & Co. He went on to work as an M&A advisor in London at UBS Warburg, and was head of private equity for Lord (Jacob) Rothschild's investment group, including RIT Capital Partners Plc and the Yad Hanadiv Foundation. 


James currently works as an advisor to investment funds, family offices and companies, and is chairman of the Investment Committee of Poul & Erna Sehested Hansens Fond, a Danish medical and educational charity. He is also a trustee of Barry & Martin's Trust, a UK charity dedicated to HIV/AIDS prevention and care in China.