Volkswagen Settlement: Opportunities for States. Karen El Mann Senior Vice President

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1 Volkswagen Settlement: Opportunities for States Karen El Mann Senior Vice President National Conference of State Legislatures Task Force on Energy Supply December 10, 2017

2 Overview of the Volkswagen Partial Consent Decree Buyback, Lease Termination, and Vehicle Modification Recall Program $10 billion Zero Emission Vehicle (ZEV) Investment Commitment $2 billion Environmental Mitigation Trust Agreement $2.7 billion (or more!) Covers buybacks, lease terminations, and/or emissions modifications to affected VW diesels Supports the increased use of ZEVs, including infrastructure, access, and education California to receive $200 million every 30 months and U.S. to receive $300 million every 30 months for 10 years California to receive $200 million every 30 months and U.S. to receive $300 million every 30 months for 10 years Funds NOx reduction projects across multiple sectors on-highway, marine, locomotive, and off-road Each state s Beneficiary is responsible for selecting the types of projects funded

3 EMT s Eligible Mitigation Actions Vehicle Type Classification Eligibility of Existing Vehicles Eligibility of New Vehicles Large Trucks Buses Medium Trucks Class 8 Local Freight Trucks and Port Drayage Trucks Class 4-8 School Bus, Shuttle Bus, or Transit Bus Class 4-7 Local Freight Trucks (extends to 2012 if the state already has relevant regulations) New vehicle or repowered engine must be the MY in which the action takes place or one engine MY prior Freight Switchers N/A Pre-Tier 4 switcher locomotives that operate 1000 or more hours per year Must meet EPA emissions standards for the MY in which the action takes place Ferries / Tugs N/A Unregulated, Tier 1, or Tier 2 marine engines Tier 3 or Tier 4 marine engines, or upgraded with an EPA-certified Remanufacture System or EPA-Verified Engine Upgrade Ocean Going Vessels Shorepower Systems that enable a vessel s main and auxiliary engines to remain off while at berth N/A Systems must comply with international shore power design standards and should be supplied with power from the local utility grid Airport Ground Support Equipment N/A Tier 0, Tier 1, or Tier 2 diesel equipment, or uncertified, or certified to 3 g/bhp-hr or higher emissions, spark ignition engine equipment Must be all-electric Forklifts N/A Greater than 8,000 pounds lift capacity Must be all-electric Light-Duty ZEV Supply Equipment DERA Option Each Beneficiary may use up to 15% of its allocation on the costs necessary for the acquisition, installation, operation and maintenance of new light-duty ZEV supply equipment. This includes Level 1, Level 2, and DC Fast Charging equipment as well as hydrogen fuel cell supply equipment. Each Beneficiary may use EMT funds for their non-federal voluntary match as well as over-match funds. EMT funds can not be used to meet the mandatory cost-share requirement of any DERA grant.

4 Public Participation in Beneficiary Mitigation Plan Development 16% 45% Comment deadline passed No action 31% Ongoing comments Open comment period 8%

5 Colorado Who Wants What Clean Diesel and Retrofits Opposed to NG Opposed to Clean Diesel Propane Open Competition Natural Gas ZEVs, including Electric and Hydrogen Source:

6 Allocation of Funding by Eligible Mitigation Action Admin, 4% Flex Funds, 3% DERA, 12% On-Road, 43% EVSE, 16% Non-Road, 12% Marine Vessels, 7% Locomotives, 2%

7 What Do the Beneficiary Mitigation Plans Look Like? State On-Road Rail Marine Vessels Non- Road EVSE DERA Admin Flex Funds Arkansas 85% 15% Colorado 54% 15% 7% 7% 18% Connecticut 30% 3% 7% 43% 15% 2% Delaware 21% 2% 13% 12% 15% Idaho 35% 10% 10% 15% 15% 15% Maine 20% 10% 10% 15% 20% 25% Michigan 14% 76% 10% Nevada 80% 15% 5% Ohio 50% 5% 10% 10% 15% 7% Oregon 15% Pennsylvania 30% 45% 7% 10% 7% Utah 84% 11% 5% Vermont 43% 6% 5% 16% 15% 15% Washington 0% 4% 38% 4% 13% 4%

8 Sample State Legislation Kentucky-funding allocations directed by General Assembly Oregon-at least 450 school buses California-35% of funds to benefit lowincome or disadvantaged communities Utah-replace model year 2006 and older school buses

9 State Supplementary Objectives? Consensus based on public input Supplement public budget Support existing state plans and/or regulations Transportation Fuel Diversity Economic development Emission reductions

10 Supplemental Benefits of Alternative Fuel Vehicles Energy diversity Reduced greenhouse gas emissions Reduced diesel particulate matter Improved operating costs Market acceleration decreased capex

11 The Near Zero Alternatives Current EPA NOx emission standard is 0.2 g/bhp-hr The cleanest heavy-duty diesel engine available today is certified at 0.2 g/bhp-hr Propane engines available today at 0.05 g/bhp-hr, 70% cleaner than the EPA NOx standard Cleanest natural gas engine is certified at 0.02 g/bhp-hr, 90% cleaner than the standard Considering Real World Emissions, the NZE Benefit is Even Greater

12 In-Use Emissions of Diesel Engines UC Riverside study shows that real-world, in-use emissions in heavy duty diesel engines are higher than their certification levels

13 Large Trucks & Buses Private-25% of AFV and 75% of EV Public-100% for AFV or EV

14 Annual Tons of NOx Reduced What Could $10M Buy? Electric Truck Public Fleet Private Fleet Near Zero Emission Truck Public Fleet Private Fleet Funding Per Unit $ 325,000 $ 243,750 Funding Per Unit $ 200,000 $ 50,000 NOx Reduced (annual tons) NOx Reduced (annual tons) Public Fleet Electric Public Fleet NZE Private Fleet Electric Private Fleet NZE

15 Locomotives New Tier 4 unit is approximately $3M Maximum funding is 25%-$750,000 Annual NOx reductions are 2.3 tons per locomotive $10M=30 tons on NOx Low admin burden

16 Cost Per Ton of NOx Reductions Less is More $35,000 $30,000 Analysis of $738M in California Grant Funding $25,000 $20,000 $15,000 $10,000 $5,000 $- On-road Locomotives Marine Vessels Shore Power Airport GSE

17 The Case For Corridors

18 Corridor Strategy For many states, heavy duty diesel trucks that are passing through the state have a big impact ARKANSAS TEXAS To, from, and within State freight truck movement.

19 VW Opportunity for Corridors Existing grant programs do not support long-haul Long-haul = high fuel use and great emission benefits Funding interstate trucks will spur private investment in infrastructure State VW funding portioned by operations Nationwide funding and electronic tracking make this a new and exciting prospect

20 For more details about incentives and VW funds, contact: Karen Mann Senior Vice President