Briefly, VW appears to have admitted that engine management software used various clues such as wheel alignment to detect when emissions tests were being run as opposed to normal road driving.
The EPA has discovered that if a test situation was detected, the software would turn on an "auxiliary emissions control device" designed to remove oxides of nitrogen from exhaust gases. Once normal driving was detected again, the software would turn off the emissions control. The reason seems to be related to vehicle performance, but there may be other factors.
The health issues are complex. Millions of UK citizens subject themselves and their children to atmospheric NOx pollution by living in cities, but for a number of reasons concentrations in the UK are declining. No thanks to VW apparently.
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