USEPA’s Volkswagen Settlement Update

Our last post regarding the Volkswagen settlement included the initial “partial settlement” that was enacted in July 2016 through the U.S. Environmental Protection Agency (EPA) and Justice Department, included the following stipulations for the company to comply with nationally:

  1. Recall of 85% of affected 2.0 liter vehicles by June of 2019 through buy backs, lease termination, and hardware/software modifications.

  2. Creation of a $2.7 billion national fund to remediate NOx emissions where violating VW vehicles operated or continue to operate; particularly on impacted disadvantaged communities.

  3. Investment of an additional $2 billion on zero emission vehicles and infrastructure to support and educate recharging or refueling over the next 10 years.

Additionally, Volkswagen is required to pay $85 million for each percentage point behind the national 85% recall rate it fails to reach. The modifications are targeted at NOx reduction due toits major impacts on environmental and human health. The EPA estimates these modifications will reduce emissions of this particulate by 80-90%.

As of Mid-December, Volkswagen has come to a partial settlement on its 3.0 liter vehicles. The summary is as follows:

  1. Recall of 85% of affected generation 1 vehicles by November 2019, and 85% of generation 2 vehicles by May of 2020.

  2. For every percentage point they do not reach for generation 1, VW is required to pay out $5.5 million, and conversely must pay an additional $21 million for every unreached percentage point of generation 2.

  3. VW must contribute another $225 million to the national emission mitigation trust fund.

As of today, neither of these “partial settlements” resolve the Clean Air Act civil penalties or the criminal investigation that is still facing the company, according to the Department of Justice.

While the initial $2.7 billion national fund is to be split and administered among the states and is mostly accepted by environmental groups, there is some concern over the $2 billion fund. The issue lies in the stipulation that Volkswagen, not regulators, will have almost complete control of how to invest these funds. There are a few safe-guards: VW built infrastructure must be compatible with all vehicle types and that investment is to be separated into four 30-month periods. These requirements will help avoid VW using the program to its advantage, and ensuring that these investments will be valuable in the future.

There are worries by some charging station network operators that this settlement, instead of a punishment, will act as a catalyst for VW to take a portion of the EV market that they otherwise would have most likely avoided in the foreseeable future. ChargePoint, who estimates the entire EV infrastructure market at $800 million, is concerned that this settlement actually gives Volkswagen the incentive to promote its own interests and take control of the emerging market.

It must be noted, though, that opinions differ across the industry. EVgo, believes that this is a good “down-payment” towards adding the necessary infrastructure that will be needed to keep pace with the growing electric vehicle market—that all stakeholders in the industry have the opportunity to gain from this investment.

As we await the decision of how the settlement money will be divided among the states, and the final verdicts of the outstanding civil and criminal cases facing Volkswagen, Clean Fuels Ohio will continue to track the situation. We are working with the Ohio EPA, stakeholders and partners across the industry to do our best to insure Ohio will receive the greatest benefit for our people and environment.

For more information and a complete history of the Volkswagen settlement, please visit the EPA's Volkswagen Settlement Page.

If you have any questions, please reach out to CFO’s Jason Phillips at 614-884-7336.

Other sources used for this article:

Bloomberg News

Charged EV Magazine

Connor Herman, Development Assistant

Clean Fuels Ohio

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