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EPA accuses Volkswagen of cheating Clean Air Act, orders recall

Volkswagen has been cheating on federal emission standards, equipping its cars with a "defeat device" that fools the official test, regulators said.

Volkswagen has been cheating federal emission standards since 2008, spewing as much as 40 times more pollution than allowed by equipping its cars with a "defeat device" that fools the official test, the Obama administration said on Friday.

The violations carry potential fines of more than $35,000 per vehicle, which means the German automaker is on the hook for as much as $18 billion, plus the cost of retrofitting nearly 500,000 recalled vehicles. The Environmental Protection Agency issued a notice of violation to the company, citing two breaches of the Clean Air Act, and ordered the recall.

"These violations are very serious," Cynthia Giles, an assistant administrator in the EPA's enforcement office, told reporters on Friday. "Using a defeat device in cars to evade clean air standards is illegal and a threat to public health." 

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The violations pertain to four-cylinder diesel engine Jettas, Beetles, Audi A3 and Golf models built between 2009 and 2015, and Passat models made between 2014 and 2015. "Volkswagen admitted that the cars have defeat devices," the EPA said. In a statement to CNBC, Volkswagen said they are cooperating with investigation and are unable to comment further.

"Using a defeat device in cars to evade clean air standards is illegal and a threat to public health."'

The EPA worked in conjunction with the California Air Resources Board to uncover the defeat device, which is described as a piece of sophisticated software embedded in the cars' computer systems. When the car is undergoing its official emissions test, the software turns on a full suite of emission controls, according to the regulators. That allows the car to pass test and be certified for the open road.

Under normal driving conditions, however, the emission controls fall away, according to regulators, and the vehicles emit nitrogen oxides at 10 to 40 times the legal limit. Nitrogen oxide is a major component of smog, or ground-level ozone pollution and particulate matter, which has been linked to asthma attacks and serious respiratory illnesses. Exposure to ozone pollution and particulate matter has even been linked to premature death, often related to heart problems. Children and the elderly are particularly susceptible, and VW may be liable for civil penalties as a result of its actions.

The alleged scheme was uncovered by the California Air Resources Board (CARB), which worked with researchers from West Virginia University. 

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Richard Corey, the executive director of CARB, said that the existence of the defeat device was confirmed by a piece of special software developed by the regulators themselves, although he declined to detail the countermeasures. Questions about VW cars were first raised by the International Council on Clean Transportation, a non-profit advocacy group based in Europe. 

This is "thanks to the dogged investigations by our laboratory scientists and staff," Corey said in a statement. “Our goal now is to ensure that the affected cars are brought into compliance, to dig more deeply into the extent and implications of Volkswagen’s efforts to cheat on clean air rules, and to take appropriate further action.”

The affected vehicles are still safe to drive, legal to buy and sell, and the recall will be at no cost to the owners, the EPA said. It could take up to a year for VW to develop a recall plan, regulators said, and in the meantime owners are told to keep driving as usual — and keep checking the mail for a notice from VW.