Making the VW Diesel Mitigation Fund Live Up to Its Promise

November 4, 2020

The Volkswagen (VW) Mitigation Trust was created in October 2017 as part of a negotiated settlement between the company and the federal government, resulting from intentional cheating on emissions tests. The settlement made nearly $3 billion available to states for grants to replace old diesel vehicles, based on the relative numbers of offending VW vehicles per state. A few states have allocated most of their funds, but most are still relatively early into their processes for awarding funding.

Most award their VW diesel replacement funds based on cost-effectiveness for reduction of nitrogen oxide (NOx) pollution – comparing emissions from new vehicles with those being replaced. However, due to a flawed modeling tool, many states are awarding funds for new diesel vehicles that emit pollution well above legal limits. Fortunately, states can use simple remedies to compensate for the flaws and better direct funds to projects based on their true potential to reduce pollution and improve health.

Many states are awarding funds for new diesel vehicles that emit pollution well above legal limits, due to a flawed modeling tool.

Accurately ranking applications based on NOx reduction cost-effectiveness requires tools or methods that accurately predict actual emissions of NOx from proposed new vehicles compared to old vehicles being replaced. The tool preferred by most states is the Diesel Emissions Quantifier (DEQ). The DEQ was developed by U.S. EPA nearly fifteen years ago to provide a simple, user-friendly means of quantifying NOx and other emissions based on type and model year. Over the years, many states decided to use the DEQ for similar programs of their own.

DEQ Outputs and MOVES Assumptions are Inaccurate

Unfortunately, the DEQ, by itself, is incapable of rendering accurate results on NOx pollution from new diesel vehicles operating in most driving conditions. The reason gets a little wonky. Essentially, the DEQ draws data and assumptions from a larger U.S. EPA model called the Motor Vehicle Emissions Simulator (MOVES). The latest update to MOVES for larger diesel vehicles occurred prior to onset of the latest 2010 on-road standard for NOx. It turned out that modelers were overly optimistic about the potential for these new diesels to control NOx at low engine speeds and loads, characteristic of the “urban” driving conditions of school and transit buses, and many other diesels that operate in our communities.

DEQ draws data and assumptions from MOVES, but the latest update occured prior to the 2010 on-road standard for NOx.

The MOVES assumptions and DEQ outputs are not just slightly off, but grossly inaccurate. This has been demonstrated by “in-use” or real-world testing results from the Center of Alternative Fuels Engines and Emissions (CAFEE) of West Virginia University (whose researchers also originally caught VW for cheating), and many others, including Gurdas Sandhu, over the past several years. In contrast, in-use tests demonstrate that cleaner fuel vehicles (natural gas and propane) emit below the standard at all driving conditions and as vehicles age.

These data demonstrate that new diesels emit four to seven times more than the legal NOx limit, depending on vehicle type, when operating at idle or low speed “urban” driving. DEQ and MOVES have never been updated to correct for underestimated NOx based on these real-world emissions tests.

These gross inaccuracies present a major problem when trying to rank funding applications based on NOx reduction cost-effectiveness. The DEQ inflates NOx reductions from diesel compared with those from cleaner fuels and technologies for similar vehicle types that operate in urban and suburban communities. Project applications competing against each other within the same categories, such as school or transit buses, are incorrectly ranked, with new diesels receiving preferential consideration over electric, natural gas and propane.

Projects can be incorrectly ranked, with new diesels receiving preferential consideration over electric, natural gas and propane.

U.S. EPA Plans an Update but Timeframe Unclear

The roots of the problem are the essential dirty nature of diesel fuel, the difficulty and expense of controlling emissions, and failure of current emissions control systems to reduce NOx, especially at low loads and speeds. An Advanced Notice of Proposed Rulemaking from U.S. EPA from January 2020 contains the remarkably candid admission that 2010 and newer heavy-duty diesel NOx controls are “not functional over a significant fraction of real-world operation…” The same document includes a discussion of additional controls that might function more effectively, but these controls would add even more expense and are not required today.

The irony is that a program, funded by a fine based on cheating to pretend diesel vehicles met federal NOx limits, is awarding grants for new diesels that exceed these limits. The problem is most pronounced for diesels operating in urban communities that already suffer disproportionately from unhealthy air quality. Over two years ago, the U.S. EPA announced its Cleaner Truck Initiative. As part of that, it plans an update to both the heavy-duty emissions standards and the MOVES model, but the timeframe remains unclear, and this does not help states that score and award VW funding today.

States have at least three options for making funding awards that are fairer and reduce more pollution.

Three Options for Fairer Funding Awards

Fortunately, in the near term, states have at least three options for making funding awards that are fairer and reduce more pollution:

  1. Prioritize awards to “inherently cleaner” vehicle technologies (electric, natural gas, propane) over diesel replacements within certain on-road fleet sectors, e.g. school buses, local freight trucks and so forth. This avoids the problem of a tool that renders biased results.
  2. Switch to a more accurate tool. Argonne National Laboratory has developed two tools, Alternative Fuel Life-Cycle Environmental and Economic Transportation (AFLEET) and Heavy-Duty Vehicle Emissions Calculator (HDVEC). Both factor in more estimations of NOx emissions from new diesels that take the peer-reviewed in-use emissions results into consideration. Project rankings based on these tools will better reflect cost-effectiveness of NOx emissions reductions between different fuel types.
  3. For those states that prefer to continue to use the DEQ tool, outputs can be adjusted to roughly account for real world emissions from new diesels. First, evaluators can multiply estimated NOx emissions from the DEQ for 2010 and newer diesel engines for urban or suburban locations by 4X. For projects involving mainly highway and limited urban driving, evaluators can multiply DEQ NOx emissions outputs by a factor of 1.5X.

In the long-run it’s best for funding agencies to stop using tax-payer dollars or funds from polluter fines to put more diesels on the road. Experience continues to suggest that diesel pollution is inherently difficult and expensive to control reliably. The proper and most impactful role of these funding programs is to leverage inherently cleaner technologies, such as electric, natural gas, propane, and hydrogen into the market more quickly. At the very least, in the near term, states possess the means to make VW awards based on fair assessment and greatest cost-effectiveness in reducing pollution.