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Investing for Maximum Impact: VW Mitigation Funds in Transit and School Bus Fleets

Jennifer Wallace-Brodeur, Director, Transportation Efficiency, VEIC -

When Volkswagen (VW) admitted to cheating on its emissions standards, they also agreed to pay $14.7 billion in damages. Most of this money will be used to replace or repair vehicles with faulty emissions equipment, but there is another pot of money – over $2.7 billion – that will be distributed to states, tribes and U.S. territories. States may be tempted to invest these funds in clean diesel projects, perpetuating the use of carbon-intensive fossil fuels for at least another decade, and funding vehicle replacements that will happen anyway. Instead, the VW Settlement should be viewed as a rare and timely opportunity to accelerate the electrification of public and school transportation.

Public and school transportation are an essential part of our community; they take our kids to school, bring people to work, and provide rides for people who are unable to drive or access a private vehicle. Yet nearly all school transportation and a significant portion of public transportation is provided with diesel vehicles that have poor fuel economy, are expensive to maintain and have negative health impacts. A solution exists in zero emission electric school and transit buses. They are cheaper to operate and better for air quality, but they have a big barrier to adoption – electric buses are expensive to buy. VW Settlement funds can be used to replace dirty diesel buses with cleaner electric vehicles. Investing in this technology can accelerate the market for electric buses and bring innovation to the vehicles that some of the most vulnerable members of our society use on a daily basis. 

Every state will receive some VW Settlement funding. The baseline allocation is $7.5 million, increasing to $209 million for the largest states. California, as a litigant with the US Environmental Protection Agency, will receive the largest allocation at $423 million. State settlement money needs to be spent on projects that reduce nitrogen oxide (NOx), the primary pollutant associated with the faulty emissions equipment on VW vehicles. With this constraint there is also flexibility among project types and fuels. This gives States the ability to structure programs that can achieve multiple benefits such as reducing transportation sector greenhouse gas emissions and improving health.

Most states are planning to spread their VW Settlement allocation across a variety of transportation vehicle types and equipment upgrades. Nearly all states are planning to offer some money to on-road heavy duty vehicle fleets, like buses.  One of the emerging public policy questions in many states is whether VW funds should go to schools or transit agencies. The answer is both, but with investments structured differently so that they are tailored to each fleet’s needs and designed to maximize opportunities. Here’s why.

Advancing School Bus Technology

Using VW Settlement funds to invest in school transportation yields benefits for everyone. School districts are almost entirely funded with local resources, such as property taxes. They are also among the most financially strapped institutions in our communities.  School transportation is a secondary part of our education system, so while buses are maintained for safety, funding for new buses often loses out over more pressing primary function activities. Yet we know diesel school buses pose a health threat to our children through exposure to pollution caused by diesel exhaust and internal combustion engines.

While there are some clean fuel options for school buses, such as compressed natural gas and propane, the newest and cleanest technology, battery electric, has only been deployed in a handful of pilot programs, mostly in California and Massachusetts. We estimate that out of a national fleet of 400,000 school buses, less than 50 are electric. Electric school buses are expensive and early data suggests that the industry needs more testing. More pilot programs are needed to prove the value and applicability of the technology. VW funds are a great way to pay for electric school bus pilot programs. Using VW funds in this way helps reduce the risk of early adoption for school districts, reward innovation in the transportation sector, and encourage competition among electric school bus manufacturers. A few years of demonstration projects across the U.S. would help to accelerate technology development and lower costs, giving our schools reliable, affordable options for vehicles that are clean, environmentally friendly, and healthy for our kids and communities.

Advancing Transit Bus Technology

Transit buses are also an excellent investment for VW Settlement funds. Public transit is one of the best solutions to many of our societies pressing challenges – providing equitable access to education, jobs, and services; and reducing congestion and greenhouse gases. Transit buses get a lot of travel time – some upwards of 50,000 miles in a single year. These buses are designed to last a long time, carry a lot of passengers, and travel on all kinds of roads. These conditions result in most of them – even well-maintained buses -- having low fuel economy. The combination of high mileage and low efficiency means the potential impact from replacing old transit vehicles is huge. Most transit agencies would love to buy new buses and many are even interested in electric options, but they are strapped for cash.

There has been innovation in the transit industry. About half of all transit buses in the United States use some sort of alternative fuel technology. The cleanest buses – battery electric – are growing, but many transit agencies do not have the access to funding necessary to invest in electric buses. Electric buses are more expensive to purchase, but they save money over time with lower fuel and vehicle maintenance costs.

The use of VW funds for electric transit bus investment is a no brainer, but the strategy needs to be slightly different than the approach with schools. Transit agencies can use VW funds to reduce or eliminate the premium associated with electric buses. If the cost of electric buses were equal to diesel, we’d see more electric buses in use in the short term. The beneficial impacts of this transition would be extensive – cleaner air for riders and pedestrians, lower operating costs for publically funded institutions, and reduced harmful emissions for our environment. Small grants designed to augment but not replace traditional funding sources would help states leverage resources to buy more electric buses.

A transformation in the school and public transportation sector is overdue. As clean, electric technologies advance, our communities must take action and embrace them. The VW funds provide the opportunity that we’ve been waiting for. Now we just need to put the wheels in motion. Many states have released draft VW Settlement plans and are asking for public comment. To learn more and to advocate for VW Settlement funds to be used towards electrifying public and school transportation visit the Sierra Club’s EV guide for State Beneficiary Mitigation Plans.
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