Volkswagen’s Emissions Cheating Settlement: ZEV Investments and EPA Role

The House Energy and Commerce Committee held an investigative oversight meeting with EPA to determine EPA’s role in the “ZEV Investments” portion of the Volkswagen Emissions Cheating Settlement and the potential impacts on the policymaking landscape. 

In January, the United States sued Volkswagen and a federal judge approved a nearly $15 billion settlement between VW and the U.S. government and consumers. Just over a year ago, VW admitted it installed software on its diesel vehicles that cheated on emissions tests.

The settlement requires VW to invest a substantial amount of money in infrastructure and education to expand the market for zero emission-vehicles, such as plug-in electric cars—coincidentally, just as VW is launching a new strategy to enter and grow its share in the electric vehicle market.

You can find information about this settlement, including a copy of the CD, at EPA’s website: epa.gov/vw. Additional information is available at Volkswagen’s site VWCourtSettlement.com, the court website cand.uscourts.gov/crb/vwmdl, and CARB’s website arb.ca.gov/msprog/vw_info/vw_faq.htm.

Background on Settlement

The settlement partially resolves allegations that Volkswagen violated the Clean Air Act (“CAA”) by the sale of approximately 500,000 model year 2009 to 2015 motor vehicles containing 2.0 liter diesel engines equipped with “defeat devices” (“CAA 2.0 liter partial settlement”).  The allegations were set forth in a complaint originally filed by the United States on behalf of the EPA on January 4, 2016 and amended on October 7, 2016, alleging that these vehicles are equipped with defeat devices in the form of computer software designed to cheat on federal emissions tests.  The settlement is a partial settlement because it only addresses what Volkswagen must do to address the 2.0 liter cars on the road and the pollution from these vehicles, and does not address other aspects of the United States’ complaint. The major excess pollutant at issue in this case is oxides of nitrogen (NOx), and is a serious health concern.

The CAA 2.0 liter partial settlement requires Volkswagen to invest $2 billion in ZEV charging infrastructure and in the promotion of ZEVs.  To that end, Volkswagen will invest $800 million in California and $1.2 billion throughout the rest of the nation, over the next decade. Volkswagen will invest more in California than in other states due to California’s pivotal role in the case and the market demand for charging infrastructure in California.

The Zero Emissions Vehicle Partial Consent Decree

The ZEV investments required by the CAA 2.0 liter partial settlement are intended to address the fact that consumers purchased these illegal vehicles under the mistaken belief that such vehicles were lower-emitting than others.  Examples of ZEV investment for which Volkswagen may obtain credit against the $1.2 billion commitment include, for example, level 2 charging at multi-unit dwellings, workplaces, and public sites, direct current fast charging facilities accessible to all vehicles utilizing non-proprietary connectors, and brand-neutral education or public outreach that builds or increases public awareness of ZEVs.

 

Under the ZEV investment commitment in the Partial Consent Decree, VW must spend $800 million over the next ten years into infrastructure and market development in California, to be overseen by the State of California, and $1.2 billion over the same time period in the rest of the nation, to be overseen by EPA. This means VW will invest nearly $500 million dollars every 30 months.

The total market for U.S. electric charging infrastructure (including installation) has been estimated by industry to be up to $800 million over the next 30 months. VW has agreed to spend at a rate that would nearly double the size of this market.  The pace and scale of such investment would be of great interest to pre-existing market players who would stand either to benefit from an enlarged market or to suffer from public money that would crowd out competition.

VW will seemingly have sole discretion for how it will invest these sums in the billion-dollar national program overseen by EPA—creating potential opportunity for VW to gain an enormous competitive advantage.

Current Oversight Provisions

The $2 billion ZEV investment is intended to increase the use of zero emission vehicle technology in the United States, not promote or advertise Volkswagen’s cars. The purpose of the investments is to advance infrastructure for cleaner vehicles and protect clean air in the United States. Funds spent on public education and outreach are required to be brand neutral, i.e. not feature or favor Volkswagen’s vehicles or services.

Likewise, if Volkswagen chooses to invest funds under this settlement on charging infrastructure, it must ensure that charging units are accessible to all vehicles utilizing non-proprietary connectors. This may mean including both CHAdeMO and SAE J1772 Combo connectors at each DC Fast charging site, since such connectors (and protocols) are not standardized across electric vehicle manufacturers. Additionally, Volkswagen may not credit costs incurred in connection with ZEV charging infrastructure installed at or adjacent to its dealerships.

The ZEV Investments required by this partial settlement are intended to advance the use of zero emission vehicles in the United States beyond that which would already have occurred. Investments that were approved by the Board of Management of any Volkswagen Group defendant prior to September 18, 2015—the date EPA first issued the Notice of Violation—are not considered eligible investments under the CD. Likewise, Volkswagen may not credit any ZEV investments that are required by a contract entered into by Volkswagen before the CD was lodged on June 28, 2016, nor may Volkswagen credit investments necessary for compliance with any federal, state, or local laws.

Volkswagen is required to provide notice and opportunities for stakeholders to provide suggestions, observations, and offers of assistance or support for potential ZEV investments that it may make under its National ZEV Investment Plans (see National Outreach Plan description in section 2.3 of Appendix C). Volkswagen must provide reasonable notice of these opportunities on VW.com and VWCourtSettlement.com. Government agencies and tribes interested in learning about this process for stakeholder comment should visit these websites.

The $1.2 billion ZEV Investment described in Appendix C of the CD is structured as an investment by Volkswagen. It is not a government program and none of the funds will be given to, or expended by, EPA. Rather, Volkswagen will be solely responsible for every aspect of these investments. EPA will review and approve plans for funds spent outside of California to ensure that they meet the requirements set forth in the CD. The CD expressly provides that Volkswagen remains subject to all federal, state and local laws in making these investments, which includes competition and antitrust laws.

EPAs Role

EPA’s role is limited. EPA’s focus will be on ensuring that Volkswagen provides a robust opportunity for stakeholder input into the plans before Volkswagen spends any money, and that Volkswagen complies with the requirements of the CD. EPA’s approval role for Volkswagen’s plans will be limited to these essential elements, as is laid out in the CD. EPA strongly encourages all interested parties to share their views with VW through the required stakeholder input process. In any situation where EPA determines that Volkswagen has failed to comply with the requirements of the CD, EPA will work with the United States Department of Justice to address the matter.

Witnesses

Cynthia Giles
Assistant Administrator, Office of Enforcement and Compliance Assurance, U.S. Environmental Protection Agency

Janet McCabe
Acting Assistant Administrator, Office of Air and Radiation, U.S. Environmental Protection Agency

 

 

2 thoughts on “Volkswagen’s Emissions Cheating Settlement: ZEV Investments and EPA Role

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s