In June, 2016, the U.S. Department of Justice issued a partial consent decree settling claims by the U.S. EPA and the Federal Trade Commission against German automaker, Volkswagen AG (VW). The civil complaint filed against Volkswagen claimed that the automaker installed software in its 2.0 liter diesel engine vehicles to disable emission controls under normal use and to turn on emission controls only when the vehicle was being tested. This “defeat device” resulted in better real world fuel mileage and driving performance, but also resulted in the release of thousands of tons of NOX emissions in excess of regulated limits. Researchers conducted on-road testing of VW models equipped with 2.0 liter turbocharged 4-cylinder diesel engine in May 2014. The testing revealed that average emissions in on-road testing exceeded federal NOx limits by between 9 and 38 times the U.S. limit depending on driving conditions, which is roughly equivalent to real-world emissions from a modern tractor-trailer truck. Volkswagen agreed to spend $14.7 billion to settle allegations of cheating emissions. The settlement is divided into three distinct parts. Ten billion dollars of the settlement money will be used to buy back or modify diesel vehicles from consumers. Modifications are expected to be proposed as they are developed, and will be approved by the U.S. EPA and California Air Resources. The second requirement of the settlement is that VW must create a National Zero Emission Vehicle (ZEV) Investment Plan and spend $2 billion on ZEV infrastructure and programs and brand neutral media activities aimed at increasing public awareness of zero emission vehicles. The amount will be divided between California ($800 million) and the rest of the U.S. ($1.2 billion). The third component of the settlement is the environmental mitigation trust. To mitigate environmental damages from violating the Clean Air Act, the settlement requires VW to invest $2.9 billion in an independently administered environmental mitigation trust, which will fund projects to reduce diesel emissions.
States, tribes, Puerto Rico, and the District of Columbia have been allocated a portion of the trust (based on the number of affected vehicles in their jurisdiction), and must file as “beneficiaries” to receive their allocations. Beneficiaries will develop a “beneficiary mitigation plan” that provides a high-level summary of how they intend to spend their allocated funds. The settlement provides detailed information on the types of projects states can undertake (known as “eligible mitigation actions”), which will allow states to repower or replace vehicles, develop shore power for ports, build out electric vehicle charging station infrastructure, and expand other emissions-reducing programs. How each state will choose to invest its funds will be determined by state air, energy and climate goals, existing infrastructure, expected emissions reductions benefits, and many other variables. While the environmental mitigation trust’s chief aim is to reduce NOx emissions in the transportation sector, states have a unique opportunity to invest in forward-thinking projects that have the potential to transform markets and achieve significant gains.
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