Volkswagen Clean Air Act Partial Settlements

VW Settlements and Iowa’s Allocation

As a result of two related Volkswagen settlements, the state of Iowa is expected to receive approximately $21 million in environmental mitigation trust funds over the next ten years for projects that reduce emissions of nitrogen oxides (NOx). We are currently seeking public input about how the settlement money should be spent on eligible mitigation actions. This information will be used to help Iowa draft the state’s Beneficiary Mitigation Plan.

Background

In 2016, the Environmental Protection Agency (EPA) filed a complaint alleging VW violated the Clean Air Act by the sale of approximately 580,000 motor vehicles containing 2.0 or 3.0 turbocharged direct injection (TDI) liter diesel engines equipped with "defeat devices" between model years 2009 and 2016. The subject vehicles are equipped with devices in the form of computer software designed to perform differently during normal vehicle operation than during emissions tests. It is alleged that during normal use, the subject vehicles emit levels of NOx in excess of the EPA compliant levels and are a serious health concern.

Three separate partial settlements

Volkswagen has agreed to settle some of the allegations that it violated the Clean Air Act. The first of three separate partial settlements was approved on October 25, 2016.

Click on the boxes below to view more information on each partial settlement.

1. First partial settlement – lodged June 28, 2016 and approved Oct. 25, 2016

2.0 liter diesel engines

  • Buy back/Emissions modification ($10 billion): Volkswagen must remove from commerce in the United States or perform an approved emissions modification on at least 85 percent of the affected 2.0 liter vehicles by June 2019. If they fail to reach the recall rate, Volkswagen must pay additional funds into the national mitigation trust in an amount equal to $85 million for each percentage point by which it fell short of the national target (California’s settlement differs from this).
  • Volkswagen must offer owners and lessees the opportunity to have their vehicles bought back at a fair replacement value of the vehicle as of Sept. 17, 2015, or to have their leases terminated at no cost. This option will be available for two years.
  • If an emissions modification is approved, Volkswagen must provide consumers with an emissions modification disclosure that the modified vehicle will also be covered by an extended warranty covering the emissions control system. On Jan. 6, 2017, the Environmental Protection Agency and the California Air Resources Board approved an emissions modification system proposed by Volkswagen that will reduce the excess nitrogen oxides emissions from the generation 3 diesel 2.0 liter vehicles.
  • Get more information
  • Zero-Emission Vehicle (ZEV) Investment Commitment ($2 billion): Volkswagen is required to spend $2 billion in investments over a 10-year period to support ZEV infrastructure, access to ZEVs, and ZEV education in the United States. California will receive $800,000. The remaining $1.2 billion will be part of a national plan in which Volkswagen is required to spend $300 million every 30 months. Find more information on the ZEV commitment.
  • Environmental Mitigation Trust ($2.7 billion): Volkswagen is required to pay a total of $2.7 billion to fund defined eligible mitigation actions that will reduce nitrogen oxides emissions "where the 2.0 liter subject vehicles were, are, or will be operated." This plan, along with the eligible mitigation actions, is described in more detail.
2. Second partial settlement – lodged Dec. 20, 2016

3.0 liter diesel engines

  • Buy back/Emission modification ($10 billion): Volkswagen must remove from commerce in the United States or perform an approved emissions modification on at least 85 percent of the affected generation 1 3.0 liter vehicles by Nov. 30, 2019, and generation 2 vehicles by May 31, 2020. If they fail to reach the recall rate for the generation 1 vehicles, Volkswagen must pay additional funds into the national mitigation trust in an amount equal to $5.5 million for each percentage point by which it fell short of the national target. If the recall rate is not reached for generation 2 vehicles, Volkswagen will need to pay $21 million for each percentage point by which it fell short (California’s settlement differs from this).
  • Volkswagen must offer to either buy back or terminate the leases of the generation 1 vehicles. This buy back option will be available for two years. If an emissions modification is approved, Volkswagen must provide consumers with an emissions modification disclosure that the modified vehicle will also be covered by an extended warranty covering the emissions control system.
  • Volkswagen must recall and modify the generation 2 vehicles so that they meet the certified emissions standards. If no acceptable emissions modification is accepted, Volkswagen will need to provide a buyback and lease termination offer.
  • Environmental Mitigation Trust ($225 million): Volkswagen must contribute an additional $225 million to the Mitigation Trust Fund no later than 30 days after the effective date. You can read more information regarding the Trust.
3. Third partial settlement – lodged on Jan. 11, 2017

Civil penalties and injunctive relief

  • Volkswagen will be required to pay a civil penalty of $1.45 billion with interest within 30 days after the effective date.
  • The settlement requires Volkswagen to create a separate Certification Group that is responsible for testing and monitoring for purposes of vehicle certification under the Clean Air Act. This group must be organizationally separate from product development. Volkswagen must also create Group Steering Committees for monitoring and complying with current and future U.S. laws regarding vehicle certifications and vehicle emissions. In addition, Volkswagen shall retain an independent third-party emissions tester and they shall develop and comply with a "Golden Rules" handbook, establishing the requirements for reports and audits.
  • All of the requirements listed above will help to ensure Volkswagen does not continue to make false claims about the emissions of their vehicles and will help to reduce the pollutants produced by their vehicles.

For more information on the settlements, visit EPA’s website.

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