Volkswagen Group of America and certain related entities (collectively Volkswagen or VW) admitted to violating the federal Clean Air Act from 2009 to 2016 by selling nearly 590,000 2.0-liter and 3.0-liter diesel engine vehicles that utilized software designed to cheat on federal emissions tests by concealing excess nitrogen oxide (NOx) emissions.
Volkswagen entered various judicial consent decrees to partially settle its civil liability for the Clean Air Act violations. Specifically, judicial settlements approved on
October 25, 2016 (2.0-liter) and
May 17, 2017 (3.0-liter) require Volkswagen to pay more than $2.9 billion into an Environmental Mitigation Trust Fund (Trust). Wisconsin, as a certified Trust Beneficiary, may receive funds over a period of ten years to offset the excess NOx pollution emitted by affected Volkswagen vehicles.
The October 2016 partial consent decree established three forms of injunctive relief:
- Buyback, lease termination, and vehicle modification recall program. Volkswagen must remove from commerce or modify at least 85% of the subject vehicles registered as of September 17, 2015, by June 30, 2019. To meet this requirement, Volkswagen must offer every owner or lessee of a subject vehicle a buyback, lease termination, or an EPA and CARB approved emissions modification. If Volkswagen fails to meet its obligation, it must pay an additional $85 million for each one percent below the mandated 85% requirement into the Trust.
ZEV Investments. Volkswagen is required to make $2 billion of investments over a period of up to 10 years into actions that will support the increased use of zero emission vehicle (ZEV) technology. Of the $2 billion, $1.2 billion must be directed toward national ZEV investments and $0.8 billion must be directed toward ZEV investments in California.
- Establishment of the
Environmental Mitigation Trust. Volkswagen is required to pay $2.7 billion into the Trust to reduce NOx emissions of certain vehicles. The Trust funds are divided between administration costs, tribes, the 50 states, the District of Columbia, and Puerto Rico. Wisconsin's initial share from this decree total $63,554,019, or 2.35% of the total amount in the Trust. There are different Beneficiary Trust Agreements for the
States and the
Tribes. A Notice of Filing of Minor Modifications to the State Trust was filed on March 13, 2019 and
Minor Modifications to the State Trust took effect April 12, 2019.
This decree also requires a third-party trustee to administer the Trust.
Wilmington Trust, N.A. is the selected Trustee and has established a
website dedicated to the Trust.
The May 2017 decree provides additional injunctive relief. Volkswagen must deposit an additional $225 million into the Trust established under the October 2016 decree. Wisconsin's share is $3,523,438, or 1.57% of the total deposit. Wisconsin's total initial funding under the Trust is $67,077,458.
The partial consent decrees authorize Trust Beneficiaries (such as Wisconsin) to request up to one-third of the state’s allocation during the first year, and two-thirds of the state’s allocation during the first two years after Volkswagen makes the initial Trust deposit. Consistent with these terms,
2017 Wisconsin Act 59, appropriates $42 million of Wisconsin's share of the trust funds during the 2017-19 biennium.
Additionally, Trust Beneficiaries must expend (or obligate for approved expenditures) at least 80% of their Trust allocation within ten years of the trust effective date (TED), October 2, 2017. On the tenth anniversary of the TED, the total unspent Trust amount, less the estimated funding needed to cover remaining Trust administration costs, becomes the Trust's "remainder balance." The remainder Trust balance must be divided among the Beneficiaries that have reached the 80% expenditure threshold either 180 days after the 10th anniversary of the TED or as of the resolution of any Trustee accounting disputes, whichever is later. Beneficiaries that receive a portion of the remainder balance will have an additional five years to spend their share of that balance.
The consent decree establishes eligible mitigation actions and mitigation action expenditures that Beneficiaries may make from the Trust. In summary, Wisconsin could utilize Trust funding to scrap, and then repower or replace certain eligible vehicles and equipment, including:
- Class 8 Local Freight Trucks and Port Drayage Trucks (Eligible Large Trucks)
- Class 4-8 School Bus, Shuttle Bus, or Transit Bus (Eligible Buses)
- Railroad Freight Switchers
- Ocean Going Vessels (OGV) Shorepower
- Class 4-7 Local Freight Trucks (Eligible Medium Trucks)
- Airport Ground Support Equipment
- Forklifts and Port Cargo Handling Equipment
- Light Duty Zero Emission Vehicle Supply Equipment
- Diesel Emission Reduction Act (DERA) Option