Green Fleet

What You Need to Know About the Volkswagen Settlement

March 2017, Government Fleet - Feature

by Roselynne Reyes - Also by this author

Illustrations: istockphoto.com
Illustrations: istockphoto.com

As a result of Volkswagen’s diesel emissions scandal, the automaker has committed to buying back vehicles, establishing an environmental mitigation trust to fund clean vehicle technologies, and investing billions of dollars in zero-emission vehicle (ZEV) infrastructure.

With so many sources of funding, it can be difficult to keep track of what’s coming in and whether it affects public sector fleets. Clean energy experts share some insight into the settlement and what fleets should prepare for.

Note: This story is constantly developing, and all information is what we know as of mid-February 2017.

At a glance:

In preparation for the Volkswagen settlement, fleets should

  • Participate in any state-level conversations about funding allocation
  • Research alternative fuels to find what fits best
  • Connect with peer fleets with successful alt-fuel programs.

What’s Included?

The most known part of the settlement is vehicle buybacks, which have already begun. Fleets and consumers can look up their vehicle online to see if it is eligible for buybacks or vehicle modifications. In addition, the automaker announced two major investments in clean vehicles.

The Environmental Mitigation Trust includes nearly $3 billion distributed among the states, tribes, Washington D.C., and Puerto Rico. Funding allocation has been determined by the amount of vehicles that were affected in each state and, once the funds are distributed, the states will be in charge of allocating them. California is set to receive the most funding, about $422 million, followed by Texas and Florida.

A third part of the settlement covers all of the company’s ZEV investments. Electrify America, LLC, is Volkswagen’s newly formed subsidiary that will manage the $2 billion investment. Electrify America is a 10-year project made up of four 30-month cycles. Every 30 months, the company collects ZEV project ideas from the public, decides which projects to pursue, and allocates funding. The first round of submissions closed in January, and Electrify America plans to release a list of approved projects soon.

The settlement also included funds specific to the State of California. As part of Electrify America, Volkswagen is creating a Green City initiative, in which two cities in California receive funding to host pilot projects that will develop sustainable mobility. This will be similar to the U.S. Department of Transportation’s Smart Cities program, which awarded $40 million to the City of Columbus, Ohio, to increase mobility through new technologies.

Electrify America

Colin Santulli, director of clean transportation programs for the Center for Sustainable Energy, said he sees a lot of potential in Electrify America. He hopes this money is used to build on programs that have already seen success.

“We definitely hope that Electrify America and Volkswagen look to existing incentive programs. States like California and organizations like the Air Resources Board that have been at this for a while have already ironed out many of the kinks to incentive programs, and have established best practices for incentive programs,” he said.

The nonprofit Center for Sustainable Energy engages in a wide range of clean energy initiatives with an emphasis on low- and zero-emission vehicle adoption and infrastructure programs. It administers four alt-fuel vehicle incentive programs in California, Massachusetts, and Connecticut and advocates for smart transportation program design and smart policies with consumers and fleets. It also conducts alternative-fuel fleet evaluations.

According to Rick Sapienza, clean transportation program manager with the North Carolina Clean Energy Technology Center, Electrify America received close to a million submissions from the public in its first round of funding. He hopes that these incentives will accelerate a paradigm shift away from petroleum fuels.

“In the end, we eventually hope that these [alt-fuel] technologies will stand on their own and not need the subsidy. But until we get more widespread adoption for economies of scale, we do need it,” he said.

Santulli said the center has submitted a project concept to Volkswagen, outlining some best practices it has encountered. The center has also consulted with local public fleets in preparing their own proposals for Electrify America and the Green City initiative.

“We’ve provided input on those programs because we want to see the most innovative projects get awarded,” Santulli said.

Environmental Mitigation Trust

Some states have considered putting the money toward one type of investment, such as transit buses. Other proposals have asked states to consider more funding for specific technologies or more funding for heavy-duty vehicles.

Since states set the parameters for their environmental mitigation trust funds, local governments should get involved on the state level, pushing for funding that benefits public fleets. Michael Terreri, clean transportation project manager for the Center of Sustainable Energy, noted that regardless of the final allocation, this amount of funding will have a big impact.

“For fleet managers who may be concerned about the availability of incentive funding over the next 10 years or longer, this is a reassurance that there is going to continue to be incentive funding for clean transportation technologies for public fleets,” Terreri said.

Some states are accepting proposals for the trust, so pay attention to state-specific deadlines. The National Association for Clean Air Agencies has created a repository for state and local agency information, including links to state-specific information. It can be viewed at www.4cleanair.org/Volkswagen_Settlement_Information.

What Now?

It is important to note that, even with all these investments in place, it is not known how much of it will benefit fleets. This will depend on the projects chosen by Electrify America and the terms of the trust as chosen by the states.

The actual timeline for fund distribution is not clear. Early estimates say funding might arrive by late summer 2017, with later estimates set at spring 2018. Sapienza said this is the time for fleets to research the types of technologies they want and need.

“I’m urging folks to participate [in the planning process] or contact groups like mine or Clean Cities to influence the governors or the agencies that are going to be involved in distributing this money,” he said. “They should be vetting technologies and running pilot programs to determine their target technologies and fuels for which they will want to request support.”

Terreri agreed, emphasizing the importance of gathering expertise to adjust budgets accordingly.

“There are plenty of examples of fleets leveraging not just incentive money but really thinking critically about life cycle cost analysis to make a compelling case for clean transportation technologies and alt-fuel vehicles,” he said. “Fleets and administrators of incentive funding should each be thinking about the types of equipment that are going to be available over the next 10 years and how they can prepare themselves and their capital budgets for the opportunities ahead.”

What to Invest In?

With such a large amount of funding, government entities have the potential to green their fleet significantly. But which investment is best?

The Diesel Technology Forum has called for an investment in clean diesel, which it believes would make the largest impact on limiting nitrogen oxide (NOx) emissions.

In an editorial, business magnate T. Boone Pickens suggested offering incentives to improve vehicles that already perform below federal NOx limits, rather than targeting new vehicle purchases alone. He also suggested looking to natural gas instead of electric, which will make a larger impact with over-the-road trucks.

Rick Sapienza, clean transportation program manager with the North Carolina Clean Energy Technology Center, said this is the perfect opportunity to look at the alternative fuels available and decide which would best benefit the fleet.

“In the alt-fuel arena it’s not a one-size-fits-all,” he said. “It’s really based on your duty cycle and operating environment. In some cases electricity comes out to be the winner, in others it could be propane or natural gas or another technology.”

Sapienza also noted that adopting a new fuel is a long process — it can require new infrastructure, new maintenance policies, and more training for employees. It may also require a long approval process from your government. To make sure all concerns are covered, he advised fleets to consult agencies that are already running these fuels successfully.

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