SACRAMENTO -  California Air Resources Board Chair Mary D. Nichols and Attorney General Kamala D. Harris announced today that German automaker Volkswagen AG and related entities have agreed to funding or investments totaling more than one billion dollars in California to fully remedy the environmental harm caused by using illegal “defeat devices” to cheat emissions tests in 71,000 2.0-liter diesel cars sold in California between 2009-2015. 

The money for California includes approximately $380 million for projects to reduce smog-producing pollution by incentivizing clean heavy-duty vehicles and equipment in disadvantaged communities, and $800 million in investments to advance California’s nation-leading zero-emissions vehicle programs.  VW will make these payments and investments in installments over several years.  California’s share represents one-quarter of the total $4.7 billion mitigation fund and ZEV investment obligations.  

The mitigation funding and ZEV investments are part of a settlement requiring Volkswagen to offer consumers a buyback and lease termination for all 500,000 model year 2009-2015 2.0-liter diesel vehicles sold or leased nationwide, and spend up to $10 billion to compensate consumers under the program.

In addition to the buyback option, Volkswagen may also propose an emissions modification plan to U.S. EPA and CARB, and if approved, VW will offer owners and lessees the option of having their vehicles modified to substantially reduce emissions in lieu of having the car bought back by VW.   

By virtue of its discovery of VW’s deceit and CARB’s longstanding role in setting and enforcing tough vehicle standards, California played a major role in leading, shaping and structuring the settlement to achieve two basic principles: 1) ensure that emissions in California due to VW’s cheating are fully mitigated, and 2) provide consumers with attractive options including significant inducements that VW must pay.

“This is a good deal for California’s environment and for California consumers. It will bring over a billion dollars of projects to California to supercharge our expanding zero-emission vehicle market, and fully mitigate the environmental harm  to our air as a result of VW’s cheating,” said CARB Chair Mary D. Nichols. 

“The Consent Decree also recognizes the crucial contribution the dogged engineers in CARB’s testing lab played in exposing the illegal device in the first place – and the exceptionally costly and difficult challenges we face in our fight for cleaner air in a state where tens of millions breathe the most heavily polluted air in the nation.”

“Our state and national environmental protection laws exist to protect public health and to preserve our planet for future generations.  Volkswagen undermined these objectives by deceiving California consumers and flagrantly violating California environmental and consumer protection laws by manipulating its diesel vehicles to produce false results when undergoing emissions testing,” said Attorney General Kamala Harris. “This landmark agreement not only ensures that consumers who were deceived are fairly compensated, but also requires Volkswagen to make unprecedented investments in protecting our environment and advancing zero emission technology.”

In California, VW’s cheating was particularly harmful, because our air quality is worse than anywhere else in the nation, with 23 million people living within the nation’s only severe nonattainment areas for ozone pollution, and 12 million living in areas with nation-leading levels of fine particle pollution. These pollutants cause lung disease, heart disease, and premature death, especially among our most vulnerable populations. To put California on track to ensure healthy air for all, California has adopted the most stringent air quality regulatory and enforcement program in the United States.

“The purpose of California’s rigorous certification and enforcement program is to catch cheaters like Volkswagen, to take actions to mitigate the harm they have done and to penalize them to send the clearest possible signal that cheating doesn’t pay,” said CARB’s Executive Officer Richard W. Corey. “Volkswagen’s actions were deeply unfair to Californians who breathe unhealthy air every day, and offensive to California businesses that invest their time and money to meet California’s stringent regulatory requirements. It was also a violation of the trust that consumers put in Volkswagens’ marketing claims that it was producing clean vehicles.  We hope that VW now understands that if you cheat you are going to get caught -- and when you do, it will be costly.”

In September 2015, CARB and U.S. EPA announced that VW had admitted installing certain software in all 2.0-liter diesel passenger cars, model years 2009 through 2015. This software was specifically designed to detect when the car was being tested in the laboratory and operate to meet the rigorous certification standards for emissions. But the software also detected when the car was outside the laboratory and on the open road, and then effectively bypassed emissions control equipment. As a result, the software fulfilled the definition of an illegal ”defeat device” and emissions of nitrogen oxide (or NOx, a smog-producing pollutant) in normal, everyday driving reached levels up to 40 times the legal standard.  

California’s Share of the National Mitigation Fund:
 

To address all past and future excess emissions of NOx from the 2.0-liter cars sold in California, under the terms of the Consent Decree VW must pay $380 million over a three-year period into a trust for projects to replace older and dirtier heavy duty diesel vehicles and equipment with advanced zero- or near-zero technologies. This provides an opportunity to focus reductions of emissions in disadvantaged communities.  Californians will have the opportunity for public input on potential projects to be funded with this money.  California’s share of the $2.7 billion mitigation fund is proportional to its share of the total number of affected diesel cars. $900 million is payable in the first year and other states will apply for their share through the trust.

California’s 10-year ZEV Infrastructure and Access Fund:
 

The Consent Decree also requires Volkswagen to invest $800 million dollars in ZEV infrastructure and access over a 10-year period in California. Volkswagen will be installing zero-emission vehicle fueling infrastructure (for both electric and hydrogen-powered cars), funding consumer awareness campaigns to increase the zero-emission vehicle market, and investing in projects such as car-sharing programs that will increase access to zero-emission vehicles for all consumers in California. These brand-neutral projects will support the next generation of zero-emission vehicles that will be sold in California, helping to grow the state’s burgeoning ZEV program, and will help lay the zero-emissions foundation for achieving the State’s air quality and climate goals.

Under the terms of the settlement, Volkswagen will submit ZEV investment plans every 30 months, covering $200 million dollars in investments in each plan, until the full funding level is expended.  ARB will provide comments and approve each plan after those comments are addressed. Under the broader national settlement, Volkswagen will be investing an additional $1.2 billion under the settlement’s National ZEV investment requirement through the other states for similar projects that support the transition to zero-emission vehicles in areas of the U.S. outside California.  

The Consent Decree does not resolve pending claims for civil penalties or any claims concerning 3.0-liter diesel vehicles, and does not address any potential criminal liability.

The proposed Consent Decree is now subject to a 30-day public comment period under provisions of the federal Clean Air Act.

The proposed Consent Decree is available here.

The federal press release is available here.

The California Attorney General’s press release is available here.

An FAQ on California’s portion of the settlement is available here.

Details for car owners and lessees is available here.