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Staff at Volkswagen headquarters in Wolfsburg had salt rubbed into their wounds over the weekend when the local soccer team suffered a 5-1 defeat at the hands of Bayern-Munich. The Bavarian team is league champion and shares its home with BMW, and it is tempting to believe that the Munich car maker is gloating over the misfortune of its rival from Lower Saxony that faces many billions of euros in fines and costs after admitting that it rigged U.S. emissions tests on its diesel cars.

Tempting, but unlikely. Instead, the BMW board has probably sent hares chasing around the firm with demands for answers to big questions: What impact will the VW scandal have on the diesel car market? What further measures are being considered to curb diesel emissions? And are our models fully compliant with the new European emissions standards, in force this month? Even if BMW has not (and we must assume it has not) installed so-called "defeat" software in its diesel cars that can manipulate emission data during tests, every diesel car maker is today contemplating its future.

Apart from ambulance-chasing lawyers and the U.S. government, which will collect billions of dollars in fines, the long-term beneficiary of Volkswagen's cheating is likely to be the electric car.

Diesel cars used to be a niche business, a nice addition to the huge market in diesel trucks and tractors. They were popular among taxi drivers who liked the greater fuel efficiency that could be as much as 30 per cent but, until the 1997 Kyoto agreement on climate change, no one thought of pushing smelly, noisy and sluggish diesel engines on consumers. But the big European car makers saw an opportunity to make money from the new climate change agenda. Not only do you get more miles to the gallon with diesel but the engines produce less carbon dioxide. BMW, Daimler and VW in Germany and Peugeot in France told the European Commission that they had the answer. It would be a quick carbon fix with diesel, supporting the EU's target C02 reduction of 25 per cent over a decade.

It was a huge success. The car companies perfected new, quiet diesel engines with turbo chargers that delivered as good acceleration as a gasoline rival. Governments cut the taxes on diesel and oil companies made cleaner diesel that produced less soot. From being a mere 10 per cent of the EU car park, diesel cars are now the majority, such that Europe is forced to import diesel fuel from Russia and the Middle East to meet demand. Until recently, European refiners were selling unwanted gasoline to the United States.

Unfortunately, diesel remains a major source of nitrogen oxides, linked to respiratory disease, asthma and cancer. Health officials in Britain were banished from policy meetings as the motor industry hitched a diesel tender onto the Labour government's climate change bandwagon. Motor vehicle taxes were geared to carbon dioxide emission levels. The dash toward diesel has left Britain with a fleet of more than 11 million diesel cars and a brown nitrogen oxide haze has enveloped British cities. So severe is the pollution that 38 out of 43 air quality zones are in breach of acceptable levels and Britain's Supreme Court ordered the government to produce an air quality plan to cut nitrogen oxide. Birmingham is proposing to tax diesel vehicles that enter the city centre and the London borough of Islington is introducing a £96 ($195) parking charge for diesel cars. In a bid to remove smog that is blotting out views of the Eiffel tower, Paris is to ban diesel cars built before 2011 and the mayor is considering an all-out prohibition of diesel.

The promotion of diesel fuel has been a colossal error, a policy fudge confected to appease two powerful interest groups. Unlikely bedfellows – the climate change and motor industry lobbies – transformed the European motor industry and their efforts to push the policy in North America had the blessing of the oil industry that needs new markets for America's surplus diesel. Europe's romance with diesel has been a useful outlet for refiners in America where diesel is unpopular.

It would be rash to predict global market consequences from a corporate scandal. But The writing for diesel may be on the wall as the inquest into VW's behaviour propels the linkage between air pollution and respiratory disease high up the political agenda in Europe.

We must hope that Volkswagen's slippery behaviour will encourage the public to ask questions of politicians about transport and environmental policy. No one asked consumers where their priorities lie. No one said the diesel policy was a tradeoff between poisonous fumes that may harm the health of your child today against the economic risks that he might face from a warmer planet in 50 years' time.

There are always tradeoffs in environmental policy but they are rarely thought through. If the global car industry shifts more toward gasoline, logically the price of the commodity will rise but the main effect of the current health scare over nitrogen oxide emissions is likely to be an unexpected and unintended boost to electric car manufacturers. Again, We don't know what the outcome will be but the power industry has barely started to even consider the consequences to electricity grids when millions of motorists attempt to charge their car batteries.

We could be moving even faster toward a new world of electricity grid dependence. The freedom to roam on the roads with cheap fuel conveniently stored at depots may gradually disappear; more people will migrate to cities that will suck in more power in all its forms. Public transport will absorb more resources. It's a world that many will welcome and others might find repellent. What is certain is that we will not be consulted.

Carl Mortished is a Canadian financial journalist based in London.