Many US states are spending their VW settlement funds on more diesel engines

Cleaning up the mess, or otherwise, after Volkswagen’s diesel scam.
Cleaning up the mess, or otherwise, after Volkswagen’s diesel scam.
Image: Reuters/Lucy Nicholson
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Money from Volkswagen’s emissions-cheating settlement has delivered a windfall to US states to clean up the mess. While most of the $30.4 billion from the German automaker will be used to buy back or fix VW’s polluting diesel vehicles, $3 billion is earmarked for states to cut down on nitrogen oxides (NOx) pollution from diesel engines.

Only a few broad rules apply, however, and not every state is spending the money in the same way. Some are even using it to build diesel, natural gas, and propane infrastructure that will lock them into years or even decades of producing emissions exacerbating the climate crisis.

Under the rules, “eligible mitigation actions” must reduce NOx emissions, but they can be used for everything from updating old diesel trucks and supplying ships with electricity at ports to investing in “forward-thinking projects” outside the transportation sector. States must spend their cash within the next eight years.

So far, 22 states have published spending plans committing about $258 million, says Nick Nigro, founder of Atlas Public Policy, which aggregates publicly available information for businesses and policymakers. “This is a real serious opportunity to do investment that would not be able to do otherwise,” he says.

Follow the money

Atlas is tracking hundreds of billions of dollars flowing into electrification of transportation around the world. By analyzing every state’s settlement plans, it found an encouraging picture of aggressive expansion of electric vehicle (EV) fleets and charging infrastructure. Yet nearly as often, states opted to invest in diesel, natural gas, and propane infrastructure. Forty-two percent of the money spent so far has gone into such investments.

Here’s a breakdown of how US states are starting to use their funds.

Some states are using the funds to buy more (albeit cleaner) diesel engines. Missouri, for instance, will spend all $3,579,242 to buy diesel school buses, trucks, and other equipment. New Mexico, similarly, is investing in diesel and natural gas vehicles. Arizona is spending a whopping $27.8 million on diesel projects.

That’s shortsighted, says Nigro, who argues the settlement funds are best used to leverage future investment, not to replace aging equipment originally built into state budgets. “It shouldn’t be a band-aid on an existing problem,” he says. “You shouldn’t have to wait for a once-a-generation settlement to get new technology.”

A few states have (so far) poured all their windfall into electrification. New Jersey and Virginia, for example, are investing more than $25 million each in the electrification of heavy-duty garbage trucks, school buses, and port and airport vehicles, as well as in EV charging equipment.

Strategic investments, even small ones, may make the US a more attractive place to do business for the coming “electric economy.” Right now, the US is way behind. Of the $350 billion in private electrification investments Atlas is tracking, only 10% are slated for the US.

While US states’ $3 billion is minuscule in global terms, it may jump-start an anemic sector. For example, hardly any states had their own program for funding EV charging. Now, thanks to the settlement funds, almost all of them do. As governments, especially top recipients such as California ($422.6 million) and Texas ($209.3 million), publish their plans, we’ll know more about what worked.