How is Minnesota allocating its $47 million from the Volkswagen settlement?

A massive government settlement is surely every politician’s dream come true. You have millions of dollars to spend, without raising taxes. The latest such boon to greet Minnesota government is the Volkswagen settlement.

On the heels of a massive scandal in which the German carmaker was caught cheating on particulate emissions testing, Volkswagen agreed to a $2.9 billion settlement in 2016. As a result of the settlement, each state received a share of the funds proportional to its number of Volkswagens, money earmarked for reduction of air pollution caused by fossil fuels. 

The settlement has gotten people with opinions to come out of the woodwork, especially those who are trying to change the state’s fossil-fuel-heavy transportation system.

“There’s lots of excitement about the prospect of what the settlement can allow us to do,” said Mary Robinson, an information officer at the Minnesota Pollution Control Agency (MPCA), who is handling VW settlement engagement with the public. “[These are] public investments that probably wouldn’t happen otherwise, with funds that are not taxpayer dollars. It’s a really great way for us to invest in certain initiatives we wouldn’t be able to do otherwise.”

In Minnesota, distributing the VW funds is the purview of the MPCA, which has been calculating how best to spend $47 million in one-time dollars. The agency’s approach to the settlement money was crafted to be iterative and flexible. The agency is spending the money in three distinct phases, with a pause between each to allow the agency to collect data and evaluate how the grants and goals are working. Phase One, which is just wrapping up now, involved spending $11 million. Last week, the agency officially closed its public comment period to gather information from the public about Phase Two, which will involve $23 million over the next three years.

Systems change or cost-effective reduction?

Not everyone is thrilled with how the MPCA has approached the settlement money so far. A number of environmental groups would like to see more emphasis on electrification, rather than simply reducing particulate emissions with cleaner diesel engines.

“This is an incredible opportunity to jumpstart Minnesota’s transition to electrification in the transportation sector,” said Joshua Houdek, a program manager for the Northstar Chapter of the Sierra Club. “The biggest hurdle for doing this massive transition is the current up-front costs of capital, and what better way to utilize a significant one-time pot of funding than to use it to offset that up-front capital, which is the major significant barrier for fleets for individuals for school districts or transit providers?” 

Houdek and others would like to see fewer diesel engine grants in the next phase of the settlement allocation, and more investment in electric vehicle technology like electric buses, charging stations, or other well-used fleet vehicles.

“Replacing an old, dirty diesel with an electric vehicle not only provides larger emissions reductions over the life of that vehicle, it also gets the fleet manager experience with a new technology,” agreed Andrew Twite, who works on electric vehicle technology for the local nonprofit Fresh Energy. “[That] makes it more likely that they will purchase more electric vehicles in the future, [and so] the PCA should focus on those types of catalytic, market-transforming investments in Phase Two.”

The difference between focusing on electrification and the reduction of greenhouse gases and simply investing in cleaner diesel lies at the heart of one of the MPCA’s big five goals. When you look simply at cost effectiveness, the cleaner diesel program is a great investment. 

“With the [latest] feedback, we have gotten some discussion about what is most cost effective,” explained Mary Robinson. “In terms of getting emissions reductions, that is often to get heavy-duty off-road equipment to change those older diesel models for newer diesel models.”

Electric school buses

If there’s one groundbreaking idea that has emerged so far from the MPCA comment period, it’s the need for electric school buses. School buses are an often overlooked part of the transportation system, but have a big impact on air quality and greenhouse gases. This is especially true when you consider that so many children spend lots of time — a bit too much time, if you ask most kids — riding around on the big diesel vehicles.  

“Our Minnesota kids, they sit and wait while these buses idle,” explained Houdek, whose Sierra Club chapter launched an online campaign to generate pro-school bus comments during the MPCA engagement period.

Disparate impacts of freeway pollution

Finally, for other advocates, there’s another tradeoff between geographic balance and environmental justice, which are both goals in the MPCA approach to the settlement money. This forms a sometimes uneasy tension between making sure that all parts of the state get some of the money, and focusing attention on those populations that have been most impacted by transportation pollution in the first place.

“Our perspective we really wanted to emphasize originally is trying to maximize how the money is spent in a way that benefits the people most impacted by transportation,” said Jon Hunter, the Director of Clean Air at at the American Lung Association of Minnesota. 

“The air pollution impacts of our vehicle use are not equally distributed across all Minnesotans. They impact people living near busy roadways and other communities burdened by pollution those communities tend to be people of color or low-income families. Perhaps not coincidentally, those same groups tend to be more impacted by air pollution than average Minnesotans,” said Hunter.

That said, Hunter is impressed overall with the PCA’s approach to the Volkswagen money. 

“The agency put a lot of effort into developing the initial plan and soliciting feedback from the general public and key stakeholders, and it really seems the plan they developed was very well reflective of the input I saw,” said Hunter. “We do appreciate that the PCA has put a good focus on trying to ensure a portion of the funding is spent in a way that benefits the disproportionately impacted communities.”

Now that Phase Two feedback has been collected, the next step is for the MPCA to come up with a plan for the next round of money, about $23 million over the next three years. In about six months, the agency will release a detailed plan for how the next round of dollars will be divvied up.

Once approved, companies, school districts, and local governments can begin applying for the grants — free money from the government courtesy of corporate malfeasance. Nobody should get used to it, though, because a pot of dollars like this one does not last long.