Clean Diesel, Zero Emissions Vehicles Get Boost From VW

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By Patrick Ambrosio

June 29 — The proposed $14.7 billion Volkswagen settlement is expected to speed up adoption of clean diesel trucks and zero-emissions vehicles thanks to the inclusion of a pair of multibillion-dollar environmental remediation funds.

The proposed partial settlement , announced June 28, includes a total of $4.7 billion to offset the increased nitrogen oxides emissions caused by Volkswagen's use of illegal technology known as defeat devices. Clean transportation advocates told Bloomberg BNA that the settlement would allow for an exponential expansion of a popular grant program aimed at older, higher-emitting diesel technology, while also bolstering infrastructure and awareness for electric vehicles.

Environmental Protection Agency officials expect those programs to more than offset the excess nitrogen oxides emissions caused by hundreds of thousands of Volkswagen diesel vehicles that were equipped with software that allowed them to pass emissions tests despite emitting as much as 40 times the allowable amount of pollution under actual driving conditions.

“What we can say is the mitigation fund is totally sufficient to cover the excess emissions under any possible scenario,” Cynthia Giles, EPA's assistant administration for enforcement and compliance assurance, said June 28. “We will get more than enough to mitigate the NOx emissions, historic and future.”

Massive DERA Expansion

One part of the Volkswagen settlement, a $2.7 billion environmental remediation fund that will be allocated to states and tribes over the next three years, is modeled after the Diesel Emissions Reduction Act grant program, commonly known as the DERA program. The grant program, administered by the EPA, funds projects to replace or upgrade heavy-duty trucks, diesel buses and diesel equipment used at construction sites and ports.

The $2.7 billion included in the Volkswagen settlement represents a “tremendous” investment in addressing older, higher-emitting diesel technology, according to Drew Kodjak, executive director of the International Council on Clean Transportation. The ICCT, a nonprofit focused on mitigating climate change and air pollution effects of the transportation sector, is the organization that commissioned West Virginia University to test the actual tailpipe emissions of diesel vehicles sold by Volkswagen in the U.S., which first identified the excess emissions.

“It's an order of magnitude bigger than what DERA has previously had,” Kodjak said. “It's a major, major increase in funding to address what we call the legacy fleet of older diesel vehicles.”

The DERA program received a total of $520 million between fiscal year 2008 and fiscal 2013, including a significant funding boost to the program under American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111–5), according to Allen Schaeffer, executive director of the Diesel Technology Forum. That organization includes leading companies that make diesel vehicles and equipment such as General Motors Co., Ford Motor Co., Caterpillar Inc., and even Volkswagen of America Inc.

Congress appropriated an additional $100 million to the diesel grant program between fiscal 2014 and fiscal 2016.

Quick Investments Possible

Directing the Volkswagen environmental remediation money into a fund based on the DERA framework will allow for the money to be allocated quickly because the EPA has the structure in place to administer the program, Schaeffer told Bloomberg BNA.

“You can achieve some pretty quick impact because the program is already set up,” Schaeffer said. “I think the prospects for success are significant.”

State air agencies were pleased that the structure of the proposed settlement is “very similar” to their recommendations, Bill Becker, executive director of the National Association of Clean Air Agencies, told Bloomberg BNA. That association in May adopted a set of recommendations for the Volkswagen settlement, including suggestions that funding be directed toward a DERA-type program and toward the promotion of zero-emissions vehicle technology.

Becker said the $2.7 billion DERA-type fund can be used for a variety of projects, including the repowering or replacement of diesel trucks, marine engines, non-road construction equipment and airport ground equipment.

“Basically any vehicle-related source or activity that is emitting diesel and/or NOx-pollutants is eligible for this funding, so long as these projects haven't already been federally mandated,” Becker said. “This is state money that will be used as quickly as possible to clean up the air.”

Becker had no prediction on how quickly project funding will be available, but he said state agencies would be discussing the program with the EPA over the next few days.

Opportunity for Discounted Truck Replacements

The settlement will fund 40 percent of a project to repower diesel vehicles and equipment by taking out older, higher-emitting engines and putting in new, cleaner diesel or natural gas engines. The settlement also will allow for the funding of projects to replace older diesels vehicles with vehicles that have new clean diesel or natural gas engines.

The DERA-style fund also incentivizes the adoption of electric vehicles, as it will fund up to 75 percent of the cost of a repowering with an all-electric engine or part of the cost of replacing the vehicle with an electric one.

Schaeffer said the availability of funding to cover 50 percent of the cost of a new truck is a “significant” opportunity for the trucking industry.

“That will be an opportunity that truckers will not see again,” he said. “I would imagine that most of the interest gravitates that way.”

Schaeffer said the availability of $2.7 billion in funding could “absolutely” be a positive development for companies that manufacturer new, low-emitting diesel trucks. Some of the largest heavy-duty truck manufacturers include Daimler AG and Volvo Trucks.

America’s ports also could benefit from the Volkswagen settlement through the funding of projects to replace ferries, tugboats and other diesel-powered equipment, according to the American Association of Port Authorities. Kurt Nagle, president and chief executive officer of the association, said in a June 29 statement that upgrading heavy-duty trucks that carry goods to and from ports with green vehicle technology also would help reduce nitrogen oxides emissions at ports.

‘Tremendous Boost' to Electric Vehicles

The other $2 billion fund that would be established under the Volkswagen settlement is dedicated to programs that support and advance adoption of zero-emissions vehicles, including electric cars, over the next 10 years.

Electric car manufacturers, including Tesla Motors, urged the federal government to require the settlement to include such funding, Julie Domike, a partner at Haynes Boone LLP and a former EPA attorney, told Bloomberg BNA.

“I think it's a very interesting move,” Domike said of the $2 billion fund. “I think it's a tremendous boost to the electric vehicle industry.”

The funding will be available to projects related to zero-emissions vehicle infrastructure, access and education. That will include funding for public charging stations, a development that could help “fill gaps” in current electric vehicle infrastructure, Kodjak said.

“That's always been a challenge,” Kodjak said of charging station availability. “Range anxiety has been one of the foremost barriers.”

The availability of funding for the promotion of zero-emissions vehicles also is an “extremely useful” aspect of the Volkswagen settlement, Kodjak said. He said he was not aware of any money currently dedicated to “brand-neutral” advertising, as opposed to ads for a specific automaker's electric vehicles.

California Well Positioned

Of the $4.7 billion dedicated to environmental programs under the Volkswagen settlement, about a quarter of that money will be allocated to California. That includes $800 million for zero-emissions vehicle programs.

Mary Nichols, chairwoman of the California Air Resources Board, said June 28 that the settlement is “laying the groundwork for the vast expansion” of zero-emissions vehicles in the state.

California already is a leader in driving investment toward electric vehicles, as the state has worked with auto companies since the 1990s, Kodjak said.

“Of all the states that we have, California is far and away the best poised to use that money effectively,” he said.

With assistance from Carolyn Whetzel in Los Angeles and Brandon Ross in Washington

To contact the reporter on this story: Patrick Ambrosio in Washington at pambrosio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

The proposed partial consent decree is available at http://src.bna.com/gjs .

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