On October 25, 2016 and May 17, 2017, the United States District Court for the Northern District of California approved Partial Consent Decrees (Consent Decrees) as part of the settlement agreements with Volkswagen (VW) for their use of illegal defeat devices in certain 2.0-liter and 3.0-liter diesel vehicles. Appendix D (the Environmental Mitigation Trust) enumerated in the first Consent Decree requires VW pay $2.7 billion, $423 million of which for the State of California, into an Environmental Mitigation Trust to fund projects to reduce emissions of NOx caused by the subject vehicles. In March 2017, the Court appointed Wilmington Trust, N.A. as Trustee. Past and future excess NOx emissions emitted from Volkswagen vehicles are intended to be mitigated by the actions prescribed in the Environmental Mitigation Trust.
The California Air Resources Board (CARB) has been designated as lead agency to act on the State’s behalf in implementing California’s allocation of the VW Environmental Mitigation Trust. As required by the Consent Decree, CARB developed a Beneficiary Mitigation Plan (Plan) through an extensive public process. The Plan was approved in May 2018, and CARB reported it to the Trustee, Wilmington Trust, N.A., on June 28, 2018. The Plan describes the eligible mitigation actions from the list specified in the Consent Decree that will be funded from the State’s allocation of the Trust.
The Plan allocates $360 million of California’s Trust to statewide funding opportunities in five project categories that are focused mostly on “scrap and replace” projects for the heavy-duty sector. The categories and allocation amounts were determined with public input and are based on technology availability, the market demand as demonstrated by other funding programs, and the ability of the project funding categories to fully mitigate the excess NOx caused by the subject VW diesel vehicles.
Implementation of the Plan is now underway; solicitations for the five project categories are being developed and expected to be available beginning fall 2019. The three largest air districts in the State: the Bay Area Air Quality Management District, the San Joaquin Valley Air Pollution Control District, and the South Coast Air Quality Management District will serve as Statewide administrators for the program.
The purpose of the VW Environmental Mitigation Trust is to fully mitigate the excess NOx emissions caused by VW’s actions. In California, that amounts to 10,000 tons of NOx that must be reduced. Implementing California’s Beneficiary Mitigation Plan will fully mitigate the excess NOx and additionally commits to long-term air quality and climate goals by investing in zero-emission technologies.