If the government did nothing at all in the matter, I believe car companies wouldn't care less about emissions (though perhaps it would result in higher CO2 emissions but lower NOx emissions and perhaps that would have been a net benefit to society - but I'm not sure about that, so I wouldn't make an argument hinging on this being true.) Personally I would not advocate stripping the government of the power to regulate emissions (though I'm not at all sure how to get them to do their job properly), on the theory that with all the unintended consequences of regulation including higher NOx emissions, it's still better than nothing. But I have a feeling that jailing regulators is a promising approach to improving future regulators' performance, and this approach seems underrepresented in public discourse, perhaps because most people prefer to either abolish regulation altogether or to always blame the regulated industry. The main reason I mentioned stripping regulators of their power is that this is the logical conclusion of the assumption that we should expect competent, honest regulators to fail to detect fraud at such a huge scale.