VW Settlement

The Illinois Environmental Protection Agency (Illinois EPA) has been designated as the lead agency to administer funds allocated to Illinois from the Volkswagen Environmental Mitigation Trust (Trust). The Trust was established by Appendix D of the VW Settlement (Settlement). Illinois’ initial allocation of funds is approximately $108 million to be used to fund mobile source diesel emission reduction projects. The funds are to be used for projects that reduce emissions of nitrogen oxides in Illinois. As directed by the Trust Agreement, the Illinois EPA must develop a Beneficiary Mitigation Plan which addresses Illinois’ planned use of the funds.

Volkswagen AG and certain of its North American subsidiaries (collectively "VW") have entered into a multi-billion dollar settlement with the federal government for violations of the Clean Air Act. VW publicly admitted to installing "defeat devices" in certain diesel vehicles. The "defeat devices" were software installed which caused the vehicles to operate differently during emission testing compared to normal operation, circumventing federal vehicle emissions standards. Around 580,000 vehicles of model years between 2009 and 2016 containing 2.0 or 3.0-liter diesel engines were affected. A First Partial Consent Decree and a Second Partial Consent Decree describe the details of the settlement (collectively the “VW Settlement” or the “Settlement”). Settlement funds are to be used as a remedy to mitigate the environmental impacts from VW's actions. The remedy consists of three programs:

1. A vehicle recall and repair program - $10 billion to buy back or repair at least 85 percent of the unlawful vehicles.
2. Zero Emission Vehicle (ZEV) Investment Commitment - $2 billion to support the use of zero emissions technology such as battery electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles and charging infrastructure over the next 10 years.
3. An Environmental Mitigation Trust Fund – $422 million to California and $2.44 billion to be dispersed to the other states and tribes to fund projects to reduce nitrogen oxide (NO_x) emissions as mitigation for the unlawful emissions.

Under the Settlement, Volkswagen was required to remove from commerce in the United States or perform an approved emissions modification on at least 85 percent of the affected 2.0 liter and 3.0 liter vehicles covered by the Settlement. In order to achieve the 85 percent recall rate, Volkswagen offered owners and lessees of the vehicles the opportunity to have their vehicles bought back by Volkswagen at a fair replacement value of the vehicle as of September 17, 2015, or to have their leases terminated at no cost. This buyback or lease termination option had a limited time availability.

Further information on the details of the recall for specific models and years can be found at www.VWCourtSettlement.com

Zero Emission Vehicle Investment

Appendix C of the Settlement requires Volkswagen to invest $1.2 billion in zero emission vehicle (ZEV) charging infrastructure and in the promotion of ZEVs in areas of the country outside of California. Volkswagen Group of America has created a wholly owned subsidiary, Electrify America LLC, to fulfill its Appendix C commitments. Appendix C commits Volkswagen to separately invest $800 million in California on ZEV infrastructure and promotion.

Electrify America is investing the $1.2 billion in 4 cycles over 10 years. More information regarding the plans may be found on the Electrify America website. Existing charging station locations may be found at the U.S. Department of Energy’s Alternative Fuels Data Center.

Environmental Mitigation Trust Fund

The Settlement establishes an Environmental Mitigation Trust Fund, Appendix D of the Settlement. The Trust is established to provide funding for mobile source projects that reduce emissions of nitrogen oxides as mitigation for the excess nitrogen oxides emitted from the VW vehicles with emission defeat software. Wilmington Trust has been chosen as the Trustee to administer the Trust. Illinois is a listed beneficiary and the Illinois EPA is the lead agency to develop Illinois’ Beneficiary Mitigation Plan (BMP) and administer the subsequent program in Illinois. Illinois’ initial allocation from the Fund is $108 million. Eighty percent of the funds must be obligated within ten years.

Prior to requesting money from the Fund, beneficiaries must submit a Beneficiary Mitigation Plan (BMP) to the Trustee. The BMP lays out the beneficiary’s goals and priorities for project funding. The BMP is not binding and may be modified by the beneficiary as needed.

In developing the BMP, the Settlement directs beneficiaries to summarize their plans for use of the mitigation funds, addressing

1. The Beneficiary’s overall goal for the use of the funds;
2. The categories of Eligible Mitigation Actions the Beneficiary anticipates will be appropriate to achieve the stated goals and the preliminary assessment of the percentages of funds anticipated to be used for each type of Eligible Mitigation Action;
3. A description of how the Beneficiary will consider the potential beneficial impact of the selected Eligible Mitigation Actions on air quality in areas that bear a disproportionate share of the air pollution burden within its jurisdiction;
4. A general description of the expected ranges of emission benefits the Beneficiary estimates would be realized by implementation of the Eligible Mitigation Actions identified in the Beneficiary Mitigation Plan; and
5. The process by which the Beneficiary shall seek and consider public input on its BMP.

In revising the Beneficiary Mitigation Plan and establishing goals, priorities and expected benefits, the Illinois EPA looked at several categories of metrics and data as required by the Settlement.

VW Vehicles

The goal of the Settlement is to mitigate excess emissions from the vehicles with defeat devices installed and improve air quality in the beneficiary State. Illinois identified the location of the affected vehicles. The largest concentration of affected cars, more than 69 percent, were located in the six-county metropolitan Chicago area, with almost 32 percent of the cars in Cook County. Almost 4.9 percent of the affected cars are in the metro-east St. Louis counties of Madison and St. Clair. There were seven counties each with 1% or more of the total affected VW vehicles: Champaign, DeKalb, LaSalle, McLean, Peoria, Sangamon and Winnebago Counties.

Air Quality in Illinois

USEPA has a primary National Ambient Air Quality Standard (NAAQS) for ozone, which is revised periodically by the USEPA. Nitrogen oxides contribute to the formation of ozone. An area whose air quality is worse than the NAAQS is called nonattainment. Portions of the Chicago area and the Metro-East St. Louis area are nonattainment for ozone.

Environmental Justice

Illinois EPA is committed to protecting the health of the citizens of Illinois and its environment, and to promoting environmental equity in the administration of its programs to the extent it may do so legally and practicably. The Illinois EPA supports the objectives of achieving environmental equity for all of the citizens of Illinois.

Environmental Justice (EJ) is based on the principle that all people should be protected from environmental pollution and have the right to a clean and healthy environment. Illinois EPA has defined an area of EJ concern as a community with an income below poverty and/or minority population greater than twice the statewide average. Illinois EPA has developed the EJ Start tool to identify areas of the state, at the census block group level, that meet this definition of an area of EJ concern.

Approximately 79 percent of census block groups that meet the Illinois EPA definition for an area of EJ concern are located in the five county Chicago metropolitan area with almost 70 percent of the block groups in the state that meet the definition located in Cook County. Approximately 4.1 percent of census block groups that meet the Illinois EPA definition for an area of EJ concern are located in the three county Metro-East St. Louis area.

The Settlement provides that the BMP may be revised. Illinois EPA submitted its initial BMP to the Trustee in August 2018. On April 27, 2022, the Illinois EPA submitted a revised BMP to the Trustee with revised goals and allocations to align with Governor Pritzker’s priorities for a cleaner transportation sector in Illinois.

Goals, Priorities and Expected Benefits

Goals: Illinois’ revised BMP establishes revised goals for use of the Trust funds.

1. Reduce NOx emissions in areas where the affected Volkswagen vehicles were registered while taking into consideration areas that are nonattainment for ozone or bear a disproportionate share of the air pollution burden, including environmental justice areas.
2. Decarbonize Illinois’ transportation sector.
3. Align funding with state priorities to establish a reliable network of charging infrastructure to promote transition to an electrified transportation sector to support business and consumer needs.
4. Support public transportation needs of Illinois residents, including school children.

Priority Areas: The Illinois EPA has not made revision to the priority areas in the existing BMP.  Priority areas were based on the following considerations: 

• Counties having the greatest number of subject Volkswagen vehicle registrations.
• Counties designated nonattainment for ozone; and
• Areas that bear a disproportionate share of the air pollution burden, including environmental justice areas.

Categories and Percentages: Illinois has revised the categorizes of eligible mitigation actions (EMAs) that it will consider funding and the funding allocations in those categories.

Light Duty ZEV Supply Equipment Projects: Up to 15 percent
Illinois expects to request up to 15 percent of the Volkswagen Trust funds for light duty ZEV supply equipment projects.

All-Electric Public Transit Projects: Up to 32 percent
Illinois expects to request up to 32 percent of the remaining Volkswagen Trust funds for all-electric public transportation projects, including new Class 4-8 all-electric transit bus replacements and public passenger/commuter line haul locomotive projects.  Illinois also proposes to fund charging infrastructure within this group of projects where charging infrastructure is needed.

All-Electric School Bus Projects: Up to 32 percent
Illinois expects to request up to 32 percent of the remaining Volkswagen Trust funds to replace older diesel school buses with new, all-electric school buses. Illinois also proposes to fund charging infrastructure within this group of projects where charging infrastructure is needed.

Class 4-8 local freight trucks: Up to 19 percent
Illinois expects to request up to 19 percent of the remaining Volkswagen Trust funds to replace Class 4-8 local freight trucks, including municipal trucks, refuse trucks, dump trucks, concrete mixer trucks, delivery vehicles, and Class 8 port drayage trucks with new all-electric Class 4-8 trucks. Illinois also proposes to fund charging infrastructure within this group of projects where charging infrastructure is needed.

Administrative Expenditures: Up to 2 percent
While beneficiaries may request up to 15 percent of their Volkswagen Trust allocation for administrative expenditures, as authorized in Appendix D-2 of the Trust Agreement, Illinois expects to request up to 2 percent of its allocation. Administrative expenditures may include personnel costs, fringe benefit costs, supply costs, contractual costs, and other eligible costs.

Illinois anticipates funding both government and non-government projects.  Illinois will require the following cost shares:  For non-government applicant all-electric vehicle projects, Illinois will require a cost share of at least 50 percent (or a higher cost share where specified by DERA where the DERA option is utilized).  For government applicant all-electric vehicle projects, Illinois will require a cost share of up to 25 percent (or a higher cost share where specified by DERA where the DERA option is utilized).  A privately-owned school bus under contract with a public-school district will be treated as a government-owned bus for purposes of the required cost share as allowed by the Trust Agreement.  Therefore, funding for a privately-owned school bus under contract with a public-school district will require a cost share up to 25 percent.  For light duty ZEV supply equipment projects, Illinois will require cost shares consistent with the Trust Agreement.

Expected Benefits: The expected range of benefits varies by type of project. For All-Electric School Bus projects, the annual NOx emissions reduced per bus could range from 0.05 to 0.10 tons. For Class 4-8 public transit buses, the annual NOx emissions reduced per bus could range from 0.5 to 1.0 ton. For passenger/commuter locomotive projects, the annual NOx emissions reduced per train could range from 30 - 40 tons. For Class 4-8 local freight trucks and Class 8 port drayage trucks, the annual NOx emissions reduced per truck could range from 0.2 to 0.5 tons. Given the assumptions necessary and complexity of linking NOx emission reductions to light duty ZEV supply equipment usage, this BMP will not quantify such emission reductions.  

Illinois EPA prepared a draft BMP for public review, and on April 29, 2021, initiated a public comment period soliciting comments on the draft BMP.  Illinois EPA accepted comments through June 21, 2021. Numerous comments were received during the comment period. Most comments were favorable to the revisions being proposed. Comments were also received requesting that the Illinois EPA include medium and heavy-duty truck replacement with all-electric trucks. The Illinois EPA has made a change to the BMP as submitted to include an all-electric medium and heavy-duty truck category. 

Contact

Questions about the VW Settlement may be sent to  EPA.VWSettlement@illinois.gov.

Revised Beneficiary Mitigation Plan
Driving a Cleaner Illinois webpage