VW-EPA settlement presents opportunities for cities and states

Alternative-fuel and electric vehicles could benefit from the $14.7 billion in penalties Volkswagen will pay for equipping millions of vehicles with devices to cheat U.S. emissions testing.

The penalties are part of a final settlement announced in October between the German automaker and federal and California regulators for installing software designed to beat emissions tests on more than a half million diesel vehicles with 2-liter engines. The software reduced the vehicles’ emissions during testing to levels that were up to four times lower than they were during normal road use.

While a large part of the settlement is being set aside for a leasing and buyback program for VW owners, $4.7 billion will be spilt among two investment projects that mitigate the pollution emitted from these cars and invest in zero emission technology. The billions of dollars in these two programs provide ample opportunity for cities and states to reduce pollution and greenhouse gas emissions by expanding alternative-fuel projects and electrifying existing vehicle fleets.

The Nitrogen Oxide (NOX) Emissions Mitigation Trust and the zero-emissions technology investment plan are intended to reduce the adverse environmental impacts of VW vehicles that violated the law, and to address the fact that consumers bought these cars under the mistaken belief that they were lower-emitting than other commercially available vehicles. 

  • The NOX Emissions Mitigation Trust is a $2.7 billion fund that will be administered to U.S. states, the District of Columbia, Puerto Rico, and Native American tribes over three years, starting once the trust is fully funded. Each has been allocated a certain percentage of the money based on the amount of VW 2-liter vehicles sold and operated there. The awards range from $7.5 million (Alaska, Hawaii, North Dakota, South Dakota, and Wyoming) to $381 million (California). This money can be put toward upgrading aging medium- and heavy-duty diesel-powered vehicles, by repowering them with either new diesel or alternative fuel, or all-electric versions. Additionally, each state can use up to 15 percent of its allocation to install and maintain light-duty zero-emission vehicle (ZEV) supply equipment such as EV charging stations.
  • Through two separate zero-emissions technology investment plans, Volkswagen must invest $2 billion to promote and advance the use and availability of ZEVs in the United States. Some $1.2 billion will be directed toward an EPA-approved national National ZEV investment Investment plan, while $800 million will be earmarked toward a California-specific plan. Volkswagen will be responsible for selecting and granting the funds to proposed projects that install and operate ZEV infrastructure, build public awareness of ZEVs, and improve access to ZEVs without requiring consumers to purchase or lease a ZEV at full-market value (such as developing a ZEV ride-sharing program). 

Cities and states can provide input in the distribution of these two VW programs at several points along the way and may be direct beneficiaries of VW funding. For the NOX Emissions Mitigation Trust, each state must submit a mitigation plan. These plans must incorporate public comments on issues such as states’ overall goals for the fund, the amount of funds apportioned to each project, and an assessment of potential emission benefits, particularly in areas with a disproportionate share of air pollution. These state mitigation plans specifically provide the public with insight into a state’s vision for the use of the money and encourage municipal participation in the process. 

City officials will also have an opportunity to weigh-in on the national ZEV investment plan. Volkswagen has about four months to create a draft of the investment plan. The draft must incorporate meaningful input from states, municipalities, and tribes, and identify opportunities where ZEV investment is needed most. Cities can be on the lookout in November for Volkswagen’s outreach plan, which provides a timeline for receiving comments and guidance. Similarly, the California Air Resources Board will share its state-specific plan with the public for comment.

In the meantime, cities can prepare by identifying key projects in their communities for improving public and private fleet emissions, building EV charging infrastructure, and increasing public awareness of ZEVs. Local officials can also collaborate with school boards, businesses, utilities, charging service providers, and low-income community advocates to help select possible projects to be included in both of VW’s settlement funds.

For more information, C2ES will be releasing a fact sheet detailing more specific ways cities can potentially influence the distribution of the VW settlement. Additional information can also be found on VW’s official settlement website.