https://youtu.be/w8r2xnITnqA
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Diesel had the side-benefit of basically being a handicap for European automotive OEMs; the Americans, Koreans and Japanese didn't really have competitive diesels until much later. In markets outside of Europe, CTDI was losing to hybrids badly, so a little plausibly-deniable protectionism with a dash of greenwashing seemed like a great idea.
There's a theory that the only reason the European regulators finally closed the loophole is that Toyota and Hyundai's diesels were finally competitive and, in turn, European hybrids weren't underperforming glitch-ridden pieces of crap, so the sop to Mercedes and VW wasn't worth it any more.
His opinion is that the EU wasn't strict enough to prevent manufacturers from cheating on emissions tests for diesel cars
The EU incentivised deisel a lot more than other regions under the misguided assumption that deisel would reduce CO2 emissions and that NOX emissions would be easy to reduce in future, but in actuality they ended up being about the same as regular petrol cars once NOX emissions were actually reduced.
They had a big incentive from oil refineries in the EU to use diesel after the oil crisis as diesel is always produced during oil refinement, and from car manufacturers to be able to keep selling diesel cars. Because of this they continued using outdated emissions tests for diesels cars for decades.