Volkswagen Group made a deliberate, calculated decision to make cars that were more fuel efficient, better performing and better for the environment at the expense of taking liberties with ill-conceived and somewhat arbitrary emissions standards.
In the end, I expect they will be exonerated for considering the long-term greater good even at short-term disadvantage to themselves.
A diesel engine operates fundamentally differently to a spark-ignition engine. Diesel engines require very high pressure in the combustion chamber, and consequently very high combustion temperatures. This enables them to be more fuel efficient and cleaner-burning than gasoline/petrol engines while producing more torque at lower RPMs. That means that a given vehicle with a diesel engine can go further faster on less fuel with less CO2 emissions than the same vehicle with a gasoline/petrol engine. Add a turbocharger and it gets even better: the engine can be smaller and lighter, meaning the vehicle chassis can be smaller and lighter, less steel is required (meaning less lifecycle CO2 burden) and fuel consumption falls even further, as do direct CO2 emissions.
However the higher combustion temperature comes with a sting. Air is only 21% oxygen, the component required to burn fuel and release the stored energy therein. The rest is mostly nitrogen (78%). And at high temperatures, fuel isn't the only thing burning. Nitrogen burns, too, and produces oxides of nitrogen, NO and NO2, collectively called NOx. (Not to be confused with N2O, also sometimes called "nitrous" or "NOX.")
NOx can contribute to smog and acid rain, is a short-lived greenhouse gas, and ends up contributing to nitrogen content of soils and waterways. While it is therefore undesirable on the whole, it is not the worst thing ever. There are much worse things, which we will get to in a moment.
In order to reduce NOx emissions, the combustion temperature must be kept in check. In a diesel engine this has the direct effect that cylinder pressure is also proportionately reduced, and therefore torque output is reduced, and therefore power is reduced, and therefore efficiency is reduced. Also, fuel combustion can be negatively impacted by lower temperature, resulting in more soot, more un-burned hydrocarbons (HCs) and volatile organic compounds (VOCs) coming out the tailpipe. Lower efficiency and lower specific power means higher fuel consumption and higher CO2 emissions.
Hydrocarbon emissions and VOCs can have direct adverse effects on human health. NOx emissions on the other hand have only indirect effects, as a part contributing factor to smog (the main factors being ozone, particulates and coal-fired power plants). NOx also contributes to acid rain, but there again the main culprit and more dangerous one is sulfur compounds emitted by coal-fired power plants.
While NOx can be a short-lived greenhouse gas, CO2 is by far the greater long-term threat, because it persists in the atmosphere forever and ever, or until absorbed by a plant. Or deliberately captured and stored by humans at considerable monetary and energy cost.
Therefore, when striking the balance between NOx and the far worse HCs, VOCs, and CO2, what should we do? What should Volkswagen have done? I am convinced that VW did the right thing. This episode will undoubtedly draw attention to the current incorrect balance in emission standards, and prompt a re-evaluation and rationalization of them. Perhaps different emission standards for diesel and gasoline/petrol vehicles would be appropriate.
On the whole, small efficient diesel cars are better for the environment. The fact that they are now being made imminently drive-able by innovative carmakers like VW makes them more attractive and promotes their widespread acceptance. This is a good thing, and VW was undoubtedly considering the greater good when they unilaterally decided that a bit of NOx was a small price to pay for the significant benefits to human health and the environment of better fuel efficiency and lower HC/VOC emissions. Way to go, Volkswagen! Keep it up.