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See below for the calculation. The relative environmental costs are debatable but NOx being 34 times worse is a stretch. Protectionism may be a factor -- domestic automakers have little incentive to push back on NOx.

The response is punitive because VW acted deliberately but otherwise far out of proportion to the harm. The article mentions that buybacks cannot be resold unless EPA approves a fix. I hope they do, because their embodied energy will dwarf by a significant margin everything else being considered here and scrapping them would be a disaster.

Fortunately internal combustion engines are nearly obsolete for light automobiles and this will all be moot in a decade.

  VW light vehicle sales: 50M worldwide since 2009 [1]
  Affected cars: 500,000 US, 11M worldwide [2]
  VLKAY price: 70% pre-scandal level [1]

  For the United States...

  Annual average miles traveled per car: 11,000 [3]
  NOx emissions allowed: 0.06 g/mi [1]
  Actual TDI emissions: 1.6 g/mi [1]

  11,000 mi * 500,000 * 1.5g/mi = 8,200 tonne NOx per year

  CO2 from gasoline combustion: 8.9 kg/gal [4][5]
  CO2 from diesel combustion: 10.2 kg/gal [4]
  Jetta fuel efficiency: 27 mpg [6]
  Jetta TDI fuel efficiency: 36 mpg [6]
  Jetta carbon efficiency: 330 g/mi
  Jetta TDI carbon efficiency: 280 g/mi

  11,000 mi * 500,000 * -50 g/mi = -275,000 tonne CO2 per year


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