Legal settlements that German automaker Volkswagen reached with U.S. and California agencies will also generate billions in new funding for states and other applicants to replace older diesel engine equipment across the country, while a separate settlement with most states will spread hundreds of millions of dollars among them.
The new program funding could spur a wave of project requests by states, transit agencies, ports and tribes to use the money to replace aging diesel vehicles from school buses to heavy trucks, marine engines including those of passenger ferries and diesel freight-handling equipment with cleaner-burning new models throughout the transportation system.
The American Association of Port Authorities said one part of the agreement will fund projects to reduce nitrogen oxides emission. Besides setting aside funds for each state by formula, the AAPA said it specifies that port projects such as those related to drayage trucks, rail freight switchers, ferries or tugs and ocean-going vessels using shore power are all eligible for funding.
Currently, state departments of transportation and other agencies can tap a Federal Highway Administration program under the Highway Trust Fund for Congestion Mitigation and Air Quality or CMAQ grants, which is funded this year at $2.3 billion.
Applicants can also seek project grant funding under the EPA's much smaller Diesel Emissions Reduction Act program. Pending Senate legislation would reauthorize it for five years at $100 million a year.
But the EPA said the Volkswagen settlement – to resolve allegations that it widely used "defeat devices" to cheat on emissions tests for nearly 500,000 diesel cars sold in the United States over the 2009-2015 model years – requires the company to put $2.7 billion into a new trust fund to finance more emission-reduction projects.
"Volkswagen will place the funds into a mitigation trust over three years, which will be administered by an independent trustee. Beneficiaries, which may include states, Puerto Rico, the District of Columbia and Indian tribes, may obtain funds" for emission reduction projects, the announcement said.
On top of that, Volkswagen is to invest $2 billion over 10 years "toward improving infrastructure, access and education to support and advance zero-emission vehicles."
Of that amount, $1.2 billion will go to a national EPA-approved program and $800 million will to a California-specific plan to be approved by the California Air Resources Board. "As part of developing the national plan, Volkswagen will solicit and consider input from interested states, cities, Indian tribes and federal agencies," it said.
The company also announced that it will provide most states with additional compensation under a separate agreement. Volkswagen said "it has agreed with the attorneys general of 44 U.S. states, the District of Columbia and Puerto Rico to resolve existing and potential state consumer protection claims related to the diesel matter, for a total settlement amount of approximately $603 million."
Volkswagen is also required to spend up to $10.03 billion to compensate customers who bought the cars thinking they were compliant with emission requirements.