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VW settlement includes $2 billion for EV promotion, infrastructure

A federal judge on Oct. 25 approved a partial settlement with Volkswagen in the VW emissions-cheating scandal that will cost the car manufacturer $14.7 billion over 10 years. As part of that settlement — one of the biggest consumer settlements in U.S. history — Volkswagen will have to invest $2 billion over the next decade in electric vehicle charging infrastructure and in the promotion of zero-emission electric vehicles. The settlement also includes $2.7 billion over three years for an environmental trust to remediate the illegal levels of nitrogen oxides emitted by the VW vehicles.

U.S. District Court Judge Charles Breyer in San Francisco signed off on the deal, which includes settlements with the U.S. Department of Justice (on behalf of the Environmental Protection Agency), the state of California, the Federal Trade Commission, and individual consumers who bought or leased the diesel cars in question and who were part of a class-action suit.

In September 2015, Volkswagen "publicly admitted it had secretly and deliberately installed a defeat device — software designed to cheat emissions tests and deceive federal and state regulators — in nearly 500,000 Volkswagen- and Audi-branded TDI diesel vehicles sold to American consumers," said the U.S. District Court for the Northern District of California, in an Oct. 25 order approving the settlement (MDL No. 2672 CRB (JSC)). The vehicles, which include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3, emitted up to 40 times the legally allowable amounts of nitrogen oxides, or NOx, according to the EPA.

‘Defeat device' was used to cheat emissions test

According to the civil complaint against Volkswagen that was filed by the Justice Department on behalf of EPA in January 2016, Volkswagen equipped its 2.0-liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on full emissions controls only during that testing process. During normal driving conditions, the software renders certain emission control systems inoperative, greatly increasing emissions. This is known as a "defeat device."

Use of this device "results in cars that meet emissions standards in the laboratory, but emit harmful NOx at levels up to 40 times EPA-compliant levels during normal on-road driving conditions," the EPA said in a news release the agency issued this summer in announcing the settlement with VW.
The EPA noted that the settlement agreements, filed in court papers in late June, amounted to only a partial settlement, not a full one.

The settlements partially resolve allegations by EPA, as well as the California Attorney General's Office and the California Air Resources Board, or CARB, under the Clean Air Act, the California Health and Safety Code, and California's unfair competition laws, relating to the vehicles' use of defeat devices to cheat emissions tests. The settlements also resolve claims by the FTC that Volkswagen violated the FTC Act through the deceptive and unfair advertising and sale of its "clean diesel" vehicles. The settlements "do not resolve pending claims for civil penalties or any claims concerning 3.0 liter diesel vehicles," and also do not address any potential criminal liability, the EPA noted in a June 28, 2016 news release.

A $2 billion boost for electric vehicles

The EPA said the settlement agreement filed with the court requires Volkswagen to invest $2 billion in charging infrastructure for zero-emission vehicles and to promote zero-emission vehicles, or ZEVs. Volkswagen will invest $800 million in California and $1.2 billion in the rest of the nation, over the next decade, the agency said, noting that VW "will invest more in California than in other states due to California's pivotal role in the case and the market demand for charging infrastructure in California."

The investments in ZEVs "are intended to address the fact that consumers purchased these illegal vehicles under the mistaken belief that such vehicles were lower-emitting than others," the EPA explained. "Examples of ZEV investment for which Volkswagen may obtain credit against the $1.2 billion commitment include, for example, level 2 charging at multi-unit dwellings, workplaces, and public sites, direct current fast charging facilities accessible to all vehicles utilizing non-proprietary connectors, and brand-neutral education or public outreach that builds or increases public awareness of ZEVs."

California and national ZEV plans; a role for government agencies

Volkswagen will submit a series of ZEV investment plans to the California Air Resources Board for review and approval, for ZEV investments in California. The car company also will submit a series of ZEV national investment plans to the EPA for review and approval, for ZEV investments in the rest of the country.

The settlement requires Volkswagen "to provide notice and opportunities for certain government agencies to provide suggestions, observations, and offers of assistance or support for potential ZEV investments that VW may make under its national plans," the EPA said in its summary of the settlement, adding that Volkswagen must provide reasonable notice of these opportunities on www.vw.com and www.VWCourtSettlement.com.

$2.7 billion trust fund to pay for NOx-reducing efforts

The EPA noted that the settlement "will require Volkswagen to fund a $2.7 billion mitigation trust fund. The mitigation trust fund will pay for defined eligible projects that reduce NOx (eligible mitigation actions). The total $2.7 billion funding for the mitigation trust fund is intended to fully mitigate the total, lifetime excess NOx emissions from the 2.0 liter vehicles."

The agency said that NOx "is the major excess pollutant from these vehicles and is a significant health concern."

The mitigation trust will be administered by a trustee, once a trustee is selected, the EPA said. After that, "potential government beneficiaries must elect to become beneficiaries" under the Clean Air Act 2.0 liter partial settlement and the trust agreement. All 50 states, Puerto Rico, the District of Columbia, and Indian tribes may elect to become beneficiaries, according to the EPA.

"Each participating beneficiary will receive a specific allocation of funds from the total $2.7 billion that can be used for any of the listed eligible mitigation actions," the EPA continued. "The allocation structure is primarily based on the number of registered illegal Volkswagen vehicles within the boundaries of the beneficiary. Therefore, those beneficiaries with more illegal 2.0 liter cars will receive a larger allocation of trust funds."

Electric-powered buses, chargers for passenger vehicles

"Eligible mitigation actions include projects to reduce NOx from heavy duty diesel sources near population centers, such as large trucks that make deliveries and service ports, school and transit buses, and freight switching railroad locomotives," the EPA said. For example, eligible mitigation actions "could include replacing or repowering older engines for newer engines at a rail switchyard, or could include replacing older city transit buses with new electric-powered transit city buses."

Eligible mitigation actions could "also include, in a more limited capacity, charging infrastructure for light duty zero emission passenger vehicles," the EPA said. "Beneficiaries have the flexibility to choose which projects on the list of eligible mitigation actions are the best options for their citizens." Any member of the public interested in specific eligible mitigation actions should contact their state attorney general's office, the EPA added.

More information, including court documents, is available on the court website for the Volkswagen "clean diesel" multi-district litigation.