Environmental Programs, Green Vehicles Get $2.7 Billion of VW Diesel Money

September 17, 2018 by Susan Carpenter, @CarpenterWheels

Volkswagen’s diesel passenger vehicles were held responsible for creating tons of excess pollution when the automaker was caught using so-called emissions defeat devices in 2015.

But heavy-duty buses and trucks from other companies could carry the weight of the cleanup.

Three years after the California Air Resources Board announced that nearly 600,000 VW diesels in the U.S. were spewing up to 40 times the legal limit of nitrogen oxide, or NOx, the company is starting to pay.

Of the nearly $15 billion the company will pay in fines and penalties, $2.7 billion will go toward an environmental remediation fund that will incentivize the purchase of zero-emissions heavy-duty vehicles nationwide. All 50 states and 29 American Indian tribes are beneficiaries.

“The overall guiding purpose of this mitigation program is to make sure we fully offset the NOx impact from the VW vehicles,” said Peter Christensen, CARB’s manager of clean transportation incentives.

Volkswagen already paid $10 billion to buy back the offending cars and allocated $2 billion toward a fund to promote zero-emissions vehicles.

CARB first discovered VW’s use of emissions-cheating software in 2015 and was one of three agencies that negotiated the Volkswagen settlement, along with the U.S. Environmental Protection Agency and the Department of Justice, in June 2016.

California, which had the largest number of affected VW diesels, about 15 percent, is getting $423 million of the environmental remediation fund. The non-compliant California cars released an extra 10,000 tons of harmful diesel NOx into the atmosphere, CARB estimates.

NOx are a byproduct of diesel combustion that creates smog and leads to asthma, heart disease and early mortality, health officials say.

“Once we knew approximately how much NOx we were trying to mitigate, we had to look at what was the sector of the economy that was going to give us the quickest mitigation,” said Dave Clegern, a CARB spokesman.

“Heavy-duty vehicles were by far the quickest way to get that done, so much of the money has gone into incentives for large clean vehicles.”

California plans to spend its remediation funds on zero-emissions heavy-duty equipment in five different categories, including $130 million for zero emission transit, school and shuttle buses; $90 million for Class 8 freight and port drayage trucks; $70 million for freight and marine projects; and $60 million to replace internal combustion freight handling and marine equipment.

The investments will be distributed through California air quality management districts with the worst NOx and ozone pollution, including the San Joaquin Valley and the South Coast Air Quality Management District, which includes the Ports of Los Angeles and Long Beach.

The settlement money could buy as many as 540 zero-emission Class 8 trucks, 425 zero-emission buses and 800 emissions-free vehicles to replace internal combustion freight and marine equipment, according to CARB.

That will replace a small fraction of such vehicles currently in operation. California has 175,000 registered heavy trucks and 38,000 registered transit and school buses that run on fossil fuels. And replacing them with their zero-emission counterparts comes at a premium.

Tesla’s electric Semi with a 300-mile range is expected to start at $150,000, about $30,000 more than a similar long-haul diesel.

“Incentives are a factor in helping zero-emissions vehicles, including medium- and heavy-duty trucks, at least become viable alternatives,” said Antti Lindstrom, an analyst with IHS Markit.

“The big elephant in the room is what happens to the market after the financial incentives are gone,” Lindstrom said.

That might not be a problem for some.

“Many of our customers see electric vehicles as a way to save on operational costs and as a long-term option for the future and aren’t necessarily purchasing because of incentives,” said Giordano Sordoni, chief operating officer of electric truck maker Thor Trucks.

“However, most of the fleets we’re working with are taking advantage of these incentives while they exist.”

Thor is one of several manufacturers offering zero-emissions freight trucks. Other players include Tesla and Nikola Motor and established manufacturers such as Peterbilt, Volvo, Daimler and BYD.

Sordoni expects to see more orders for Thor Trucks as the VW settlement money becomes available to individual states.

Most of Thor’s current orders are in California, where there are multiple incentive programs for the purchase of electric heavy-duty vehicles, “Texas and New York have also been progressive,” Sordoni told Trucks.com.

“We are excited for this list to grow as VW settlement dollars come online in the next 12 months,” he said.

As of August, none of the VW environmental remediation money had been distributed, though Volkswagen has fully funded the $2.7 billion, according to a spokesman for Wilmington Trust, the organization tasked with managing the fund.

California expects orders for the new zero emissions buses and trucks to be placed by mid-2019, but the actual vehicles won’t be on the roads

Read Next: UPS Will Test Thor Medium-Duty Electric Truck in Los Angeles

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