Apparently VW admitted it, but haven't managed to find an official statement yet on what they did admit. EPA case appears to hinge on "defeat device" - so the lawyers will be weighing in heavily when it comes to the money. From a PR perspective, looks like VAG is trying to get all the dirty laundry out now so that future press will be positive rather than negative.
The reason the anomaly showed up was because the real world test of 3 vehicles - 2 VAG, 1 BMW X5 - the BMW did better that the VAGs by a long way. But BMW has been fitting LNT for a lot longer. So probably random luck that the testers pinned that on a software fix, given the test results in the ICCT white paper which is far more inclusive. The ICCT looks pretty squeaky as far as independent non-profits go. But the experimental data came courtesy of the "Allgemeiner Deutscher Automobil-Club (ADAC)". So maybe VW has been working hard behind the scenes to have ICCT bring out this timely report.
It was the ICCT who originally contracted Center for Alternative Fuels, Engines and Emissions at West Virginia University to conduct in-use testing of three light-duty diesel vehicles, using a portable emissions measurement system (PEMS). So the anomalous results led to the broader investigation in the white paper.
This problem has been known for years in Europe - ICCT 2012. Laboratory versus real world: Discrepancies in NOx emissions in the EU | International Council on Clean Transportation
Similar problem for CO2 and fuel consumption - real world vs test. Vehicle emissions testing in the EU: Why we are still struggling with the dead hand of the past—and what the future is likely to bring | International Council on Clean Transportation
Note new Euro standards will permit 2x NOX in real world test vs lab test.
I agree that our cars should test better with better fuel. No doubt the storm will generate more research activity.
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