A previous version of this story said that Texas had not awarded any VW settlement funding to EVs. The state has made one award to electric school buses that was made in April 2020. We regret the error.

The coronavirus pandemic threw the global economy into a tailspin in early 2020 as supply chains have were disrupted, auto manufacturing was shut down, and demand for both products and services cratered. The impacts have been felt severely in the United States as domestic unemployment has risen to levels not seen in generations. Overall, automobile sales in North America dropped sharply in the first half of the year for all vehicle types, although EV sales fared comparatively better than their conventional counterparts.

First quarter EV sales in the United States were almost flat compared to 2019, while the auto industry overall saw a 12 percent drop. Across the pond, the European sector thrived throughout the early days of the pandemic, banking an 87 percent increase in sales as the conventional vehicle market shrunk by 26 percent. The EU and China remain committed to strong state support for transportation electrification, with both markets prioritizing EVs in their pandemic recovery plans. The United State, however, is moving in the opposite direction with the federal government finalizing rules to roll back passenger vehicle standards in April 2020 and resistance from Congress to prioritizing clean energy and transportation in stimulus plans.

For states throughout the country, the largest dedicated source of public funding for transportation electrification investment is protected from funding decisions in Washington and COVID-19 under the auspices of the Volkswagen Settlement. In 2016, Volkswagen was found guilty of violating the Clean Air Act by installing software in diesel passenger vehicles designed to cheat emissions tests. In 2017, the automaker was required to establish the Environmental Mitigation Trust Fund with nearly $3 billion. Every state as well as Puerto Rico and Washington D.C. were allocated funds from the settlement and a separate trust was established for Native American nations. Projects that are eligible to use funds from the mitigation trust include investment in clean on- and off-road vehicles designed to reduce nitrogen oxide (NOx) emissions from medium- and heavy-duty sources and light-duty electric vehicle charging infrastructure. The settlement also required Volkswagen to establish the independent subsidiary, Electrify America, with a separate $2 billion investment designed to accelerate the EV charging network, provide carsharing services, and increase EV awareness throughout the country.

Two years after the first award was made, 20 percent of the settlement money allocated to the 50 states and Washington D.C. has been spent. Through June 2020, $597 million out of the $2.8 billion total in state settlement funds had been awarded to specific projects. Almost half of this funding is going to support EVs and EV charging, spanning at least 35 states and amounting to $283 million in awarded funding. At least 42 states have made awards. The first award tracked by the EV Hub, $14 million for passenger vehicle charging stations in Virginia, was made during the second quarter of 2018. Since then, transportation electrification has managed to secure half of the total funds from awards.

The settlement has been a boon for the electric transit bus market which claims 24 percent of the total awards made so far, the highest of any single technology including conventional vehicles. Thanks to these awards and other public funding like the Federal Transit Administration’s Low Emission-No Emission grant program, U.S. electric transit bus deployment rose by 37 percent between 2018 and 2019. Settlement funding is also reaching other market segments, as electric school bus awards rose from only $3.4 million at the end of June 2019 to $48.2 million through of June 2020 with school districts in 16 states now moving to electrify fleets. Truck electrification is also on the rise with $7 million of the total $16.5 million in awards for electric trucks made in the final quarter of 2019. The chart below shows the breakdown of EV funding awards by technology.

This graph shows EV awards from the VW settlement by technology, which add up to $283 million through June 2020. Transit buses account for $134 million of this total, almost half of all awards supporting transportation electrification.

Source: Atlas EV Hub

State governments, particularly designated lead agencies of the trust, are responsible for setting spending priorities and determining how their settlement funds will be allocated. These priorities are outlined in each state’s Beneficiary Mitigation Plan, which have all been subject to extensive public review periods. Since the trust was established in 2017, at least 48 plans have incorporated feedback from the public and have been deemed finalized by the respective state agencies. However, all plans are subject to change and state have the ability to influence the way settlement money is spent at any stage in the process. The governors and agencies in states like New Jersey and Colorado have helped EVs hold on to the majority of funding awards made so far by issuing executive orders and implementing transportation electrification plans after the first awards were made.  Colorado has taken their policy leadership a step further, requiring that all transportation electrification programs be designed in a way that supports underserved communities. Governor Polis also mandated that all remaining VW Settlement funds be directed to support EVs through an executive order issued when he took office in January 2019.

The EV Hub tracks funding allocations for eligible actions by states as detailed in the state Beneficiary Mitigation Plans along with all funding awards, as detailed in the table below. For each funding award, those specifically allocated for transportation electrification are identified. Tracking these awards in this way makes it possible to calculate the proportion of awards made compared against the fixed total allocation for each state.

This tables provides a breakdown of the total spending and EV awards made by each state through the VW Settlement. Roughly 20 percent of the total allocation has been spent and almost 50 percent is going to EVs and EV charging.

* Indicates states that have adopted California’s Zero Emission Vehicle Program

^ New York is distributing VW funding for EVs through the New York Truck Voucher Incentive Program. Fleets must apply to the program to receive awards.

Source: Atlas EV Hub

The table above confirms the EV leadership of many states that follow California Zero Emission Vehicle (ZEV) program (denoted with an asterisk in the table) and highlights strong support for EVs in Utah and Virginia.  New York and New Jersey are leading the pack investing in emerging technologies. In New York, policymakers are using settlement funds to complement the New York Truck Voucher Incentive Program, which provides incentives based on the incremental cost of an EV above a conventional vehicle, to accelerate truck and transit bus electrification. New York and New Jersey together account for 78 percent of the $16.5 million awarded for electric trucks so far with New Jersey opting also to invest in electric off-road trucks operating within ports and freight terminals.

Despite strong showings from some states, others have been missed opportunities to advance electrification. Texas, the state receiving the second-largest allocation worth $209 million, has only made one award worth $1 million for EVs. While the Lone Star State appears hesitant to pull the trigger on electric truck and bus investments so far, they are allocating the maximum 15 percent of funds for light-duty charging infrastructure. Regional disparities in EV investment are also evident. EVs only account for three percent of awards made in the Gulf Coast region. States in the Midwest including Minnesota, Wisconsin, Ohio, and Illinois have demonstrated a preference for conventional vehicles, each awarding no more than a quarter of their awards to EVs and instead funding vehicles such as diesel transit buses, school buses, and freight trucks. The Central Atlantic region leads in EV investment with 87 percent of awards made going to support transportation electrification.

This map shows the percentage of VW Settlement awards made for EVs out of the total awards each state has made. States in the Rocky Mountain and Central Atlantic regions are leading with a high percentage of funds awarded to transportation electrification.

Source: Atlas EV Hub

Nationwide, up to 80 percent of settlement funds have not yet been awarded and all states still have the opportunity to make transformational investments in EVs. While some state plans have already allocated the majority of their funds to certain project areas, only six states have awarded more than half of their allotment and EVs are eligible for a large majority of the remaining funding. Florida, one of the last states to release a draft plan for how they would allocate their $166 million, could turn the tide for the Gulf Coast region if they choose to spend their money on EVs. Transportation electrification is gaining steam in the Sunshine State with Governor DeSantis recently enacting new legislation to develop a strategy for charging infrastructure deployment throughout the state’s highway corridors.

Florida is far from the only state with a large opportunity to invest in transportation electrification through the VW Settlement. The table below categorizes each individual state mitigation plan by mitigation action to determine the total funding allocated to each action (“Total Funds Allocated”) and the portion of these funds that could be awarded to EVs (“EV-Eligible Funds). In addition to this, some states have specified amounts of funding that will go to EVs (“dedicated EV funds”). These figures are compared with the information collected on awards made to show how much funding is left and how much EVs are eligible to claim.

The table above shows the amount of funding allocated for each mitigation action and the value of awards made for each category. There is at least $540 million in remaining VW settlement funds that are dedicated to EVs and EV charging.

*EV-eligible funds do not include dedicated EV funds

Source: Atlas EV Hub

With $283 million in awards for EVs and EV charging already solidified, there is at least $540 million remaining for dedicated transportation electrification projects. EVs are eligible for an additional $740 million, assuming that all $597 million in awards made so far have come out of the total pool of EV-eligible funds. California, the largest repository of VW Settlement funds, has yet to make any awards. The Golden State plans to commit at least $300 million from its settlement allocation to support transportation electrification, which could heavily swing the balance of VW Settlement funding in favor of EVs. While this is encouraging from the market perspective, significant opportunities exist for transit agencies, school districts, utilities, and others in all states to leverage this one-time opportunity to kickstart growth and establish institutional capacity for EV market development.

EV charging is one sector that is guaranteed to see a boost with so much dedicated funding left to be awarded. Only 20 percent of awards have been made so far to deploy EV charging out of the total $316 million committed in state plans. In addition to this, Electrify America, a subsidiary of Volkswagen of America, continues to roll out their charging stations throughout the country. Now the largest DC fast charging network in the United States, the company installed 318 charging stations in 2019. Surveys and studies have consistently shown that the lack of adequate public EV infrastructure at appropriate power levels is one of the biggest barriers to greater EV adoption which may delay the acceleration of the overall market. Accordingly, expanding public fast charging networks is an important market gap that needs to be addressed urgently by utilities, Electrify America, and other third-party DC fast charging providers in both metropolitan areas and along highway corridors.

In addition to charging access, high upfront cost compared to conventional vehicles is another primary barrier to EV adoption. While sales for passenger vehicles like the Tesla Model 3 and Chevy Bolt are selling relatively well despite losing the federal tax credit, the electric trucks and buses can cost up to four times as much as their conventional counterparts upfront before accounting for charging infrastructure costs, leaving both public and private fleet operators to rely on government support to encourage the conversion of fleets to EVs. This is where states can lean on other players for support. Utilities in nine states have already been approved to invest more than $737 million in programs targeting bus and truck electrification. These companies are also eligible grantees of the settlement and can work together with legislators in their service territories to implement programs. Dominion is working with the state of Virginia, which leads the nation in VW settlement awards for electric school buses, to roll out their electric school bus program. Although legislation that would have given the utility approval to move forward with commitments to deploy 1,000 buses by 2025 failed to pass the house this session, the first 50 buses are on track to be deployed in 2020.

This approach has also been taken in other states with utilities partnering with state agencies in their service territories to advance shared transportation electrification goals. In Michigan, DTE has been approved to invest $3.5 million in a program supporting school bus electrification and is one of several utilities in the state working with the Environment, Great Lakes, and Energy Department to provide charging infrastructure and support for seven school districts receiving electric school bus grants through the VW Settlement. Duke Energy is taking a similar approach with programs pending in both North and South Carolina and Indiana. The utility is proposing to invest $76 million in North Carolina that would support both school and transit buses as well as expand charging infrastructure and is a key stakeholder in the Plug-in NC initiative supported by the settlement.

Expanding partnerships between utilities and public agencies is just one example of a growing urgency around the electrification of trucks and buses throughout the nation. The impacts of COVID-19 have brought increased attention to the legacy of injustice experienced by communities of color who suffer disproportionately from both the virus and emissions associated with medium- and heavy-duty vehicles. Black and Brown people have been forced into neighborhoods with the dirtiest air through decades of discriminatory housing policies and systemic inequality that places them at a specific disadvantage in terms of both access to transportation and public health. These combined impacts make electrification of both port and freight vehicles as well as cleaner school and transit buses priority actions to address the disproportionate burden of pollution in these communities. With millions of award funds remaining to be allocated, states have an opportunity to maximize the one-time resources provided by the VW settlement to electrify these key segments of the transportation sector.

Acknowledgements: This work was shaped by input and support from the Alliance for Transportation Electrification (ATE). ATE also provided financial support that enabled completion of this work.