Researchers at Harvard and MIT estimate the health and social costs of Volkswagen's emissions deceit, including potential loss of life and a financial burden of at $450 million in the US. The latter figure is projected to be much higher without a prompt recall.
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It will be years before the penalties imposed on Volkswagen for systematically cheating on automotive emissions tests are known. But academics from two leading universities in the US have calculated what the scandal will cost in human lives.
As it happens, the Environmental Protection Agency has placed a value on human life. This is based not on the way people value loved ones, but rather on what people will pay to avoid environmental health risks. Under such a framework, a vote against a tax to ensure clean water, for example, could be taken as a vote to lower the value of life.
The agency says the "Value of a Statistical Life" (VSL) is $7.4 million in 2006 dollars. Based on the Bureau of Labor Statistics' Consumer Price Index inflation calculator, this value should be $8.73 billion in 2015 dollars. But the General Counsel of the Department of Transportation in July said the VSL should be $9.4 million this year.
For the purposes of the Volkswagen emissions study, researchers Steven Barrett, Raymond Speth, Irene Dedoussi, Akshay Ashok, and Robert Malina from MIT, and Sebastian Eastham and David Keith from Harvard propose $8.1 million per life as a mean. According to their calculations, the health and social costs imposed by the excess emissions from Volkswagen's non-compliant diesel engines will reach $450 million by the end of 2015.
If there is no recall of the affected vehicles, and no further sales after September 2015, the monetized mortality cost is predicted by the researchers to reach an additional $910 million in the years after 2015. In addition, if nothing is done to remove the affected vehicles from the road, the researchers expect 140 additional people to die prematurely.
The total cost that will occur without recall is, therefore, expected to be approximately $1.4 billion, or approximately $2,800 per vehicle. According to the researchers, if the affected vehicles are recalled at a constant rate from the start of 2016, and all devices replaced by the end of 2016, the total cost of future mortality impacts could be reduced by 93% to $61 million.
The researchers expect various additional health effects, including: an estimated 31 cases of chronic bronchitis, approximately 34 hospital admissions, some 120,000 days of restricted activity, around 210,000 days limited by respiratory issues, and approximately 3,000 days of increased bronchodilator usage.
As a point of comparison, the researchers note that the projected number of premature deaths due to emissions-related factors is about 56 from a similar sized group of vehicles over a similar period (2008-2015). These estimated premature deaths represent 20% of the 280 people in the US who could be expected to die in automotive accidents involving a similar size group of vehicles (482,000) driving 40.5 billion kilometers (25.2 billion miles).
The EPA could potentially seek a penalty against Volkswagen of as much as $37,500 per vehicle, which would come to about $18 billion for 482,000 non-compliant cars in the US. But judging by past settlements, a figure in the hundreds of millions would be more in keeping with precedent. Volkswagen will also face civil litigation and other costs in the US, as well as regulatory penalties and litigation abroad.
The researchers argue that as a matter of effective policy, the fines assessed should be significantly higher than the projected health and social cost of the emissions. If regulators agree, Volkswagen could be looking at a penalty of several billion dollars in the US alone.
Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful ... View Full Bio
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