1 VW Partial Consent Decree Overview July 21, 2016

2 VW “Clean Diesel” Consent Decree: The Basics Consent Decree between the U.S., California and VW et al. (Settling Defendants) re: VW 2.0L TDI settlement program June 28, 2016, filed with the Court by Dept. of Justice, on behalf of EPA and State of California July 6, 2016 Federal Register Notice set in motion 30 day comment period that ends August 5, parts: – $10 billion + (estimated) for VW customers; 2.0 L diesel vehicle buyback/lease termination – $2.7 Billion Environmental Mitigation Trust Fund – $2 Billion ZEV Investment Commitment

3 VW “Clean Diesel” Consent Decree: The Basics $2.7 Billion Environmental Mitigation Trust Fund – $900 Million to be deposited by VW et al. into Trust Account not later than 30 days after the effective date. – 2 additional $900 Million deposits by VW et al. into Trust Account, not later than the 1 st and 2 nd anniversaries of the initial deposit. – Allocated among states, Indian tribes and Puerto Rico on a % basis to fund actions that will reduce NOx emissions where the 2.0 L Subject Vehicles were, are or will be operated. $2 Billion ZEV Investment Commitment over 10 years – National ZEV Investment Plan Developed by VW et al.; approved by EPA, which has sole authority for making decisions. $1.2 Billion in four 30 month investment cycles for U.S., except California – California ZEV Investment Plan Developed by VW et al.; approved by CARB, which has sole authority for making decisions. $800 million in four 30 month investment cycles for California

4 $2.7 Billion Environmental Mitigation Trust Fund Goal: Achieve reductions of NOx emissions in the United States. – (GHG emissions not addressed.) Beneficiaries: States, Indian Tribes, D.C., Puerto Rico $2.7 Billion over 3 years for Eligible Mitigation Actions. – Eligible Vehicle Classes/Equipment: Class 8 Local Freight Trucks, Port Drayage Trucks Class 4-8 School, Shuttle or Transit Bus Freight Switchers Ferries/Tugboats (marine) Ocean Going Vessels Shorepower Class 4-7 Local Freight Trucks (Medium Trucks) Airport Ground Support Equipment Forklifts LD ZEV Supply Equipment – L1, L2 or fast charging equipment – LD hydrogen fuel cell vehicle supply equipment DERA Option – Beneficiaries may use Trust Funds for non-federal match. – Use of funds as match for other Federal funding opportunities is uncertain (not mentioned).

5 $2.7 Billion Environmental Mitigation Trust Fund Eligible Actions For HD and MD vehicles, freight switchers, ferries, tugboats Repower with: – New diesel engine, including costs of installing engine – New Alternate Fueled (CNG, propane, Hybrid) engine, including costs of installing engine – New All-Electric engine/motor, including costs of installing engine and charging infrastructure* Replace with: – New diesel vehicle – New Alternate Fueled (CNG, propane, Hybrid) vehicle – New All-Electric vehicle, including costs of charging infrastructure* Funding % for each action ranges from 25% - 100% and varies based on ownership (government or non-government owned) and type of action. Funding is allocated by State. See Table on page 207 of Appendix D-1 in the Partial Consent Decree *Infrastructure for other Alternative Fuels not eligible.

6 $2.7 Billion Environmental Mitigation Trust Fund Other Eligible Actions Ocean Going Vessel (OGV) Shorepower – Costs of shore-side system, including cables, cable management systems, shorepower coupler systems, distribution control systems and power distribution components Airport Ground Support Equipment – Repower or replace with all-electric engine/motor Forklifts – Repower or replace with all electric engine/motor Light Duty ZEV Supply Equipment – Beneficiary may use up to 15% of its allocation of Trust Funds for acquisition, installation, operation and maintenance of new LD ZEV supply equipment for specific public applications. L1, L2 or fast charging equipment in a public place, workplace or multi-unit dwelling

7 $2.7 Billion Environmental Mitigation Trust Fund – Eligible Expenditures Beneficiaries may use Trust Funds for actual administrative expenditures associated with implementing Eligible Mitigation Actions (not to exceed 10% of total cost of such Actions): –Personnel, including employee salaries and wages, but not consultants –Fringe benefits –Travel by program staff –Equipment with a useful life of > 1 year and acquisition cost >= $5,000 –Supplies purchased in support of the Mitigation Action, such as educational publications, office supplies, etc. –Contractual –Contracts for evaluation and consulting services and contracts with sub-recipient organizations are included. –Construction –Other costs, including insurance, professional services, printing and publication, training and accounting

8 $2.7 Billion Environmental Mitigation Trust Fund Beneficiaries – Each Governor’s Office or analogous Chief Executive must file a Certification Form with the Court to become a beneficiary and to receive funding, not later than 60 days after the Trust Effective Date. – Failure to file Certification Form will result in that state being an Excluded Entity, permanently enjoined from asserting any right to Trust Assets. – Each Beneficiary must notify any Federal agencies that control land within its jurisdiction (Interior, Agriculture, etc.) that they may request Eligible Mitigation Action funds for use on those lands. – Beneficiaries may submit request for 1/3 of allocated funds each year, for 3 years.

9 $2.7 Billion Environmental Mitigation Trust Fund Beneficiary Mitigation Plan must be submitted not later than 30 days after being deemed a Beneficiary, and must include : – Overall goal for use of funds – Categories of Eligible Mitigation Actions to be undertaken – Description of potential benefit of Eligible Mitigation Actions on air quality in areas that bear a disproportionate share of the air pollution burden within its jurisdiction – General description of expected ranges of emissions benefits (NOx) to be realized by implementation of Beneficiary Mitigation Plan – Plan must designate a lead agency that will have the delegated authority to act on behalf of Beneficiary. – Beneficiary must explain process by which it shall seek and consider public input on its Beneficiary Mitigation Plan. – DERA Option: A Beneficiary may use its Final Approved DERA Workplan as its Beneficiary Mitigation Plan, and may use Trust Funds for actions not specifically enumerated in the Consent Decree, but otherwise eligible under DERA.

10 $2.0 Billion ZEV Investment Commitment Zero Emission Vehicles include: – Battery electric vehicles (BEVs) and fuel cell vehicles (FEVs) – On-road plug-in hybrids (PHEVs) with zero emission range > 35 miles – On-road heavy duty vehicles with electric powered takeoff Not Included: – ZEV off-road equipment and vehicles – Zero emission light rail – Additions to transit bus fleets using existing catenary electric power – Vehicles not capable of being licensed for use on public roads

11 $2.0 Billion ZEV Investment Commitment ZEV Investment – Investment of money by VW et al. that promotes and advances the use and availability of ZEVs within the categories of actions set forth in consent decree ZEV Investments May Include: – Design/planning, construction/installation, operation and maintenance of ZEV infrastructure L2 charging at multi-unit dwellings, workplaces and public sites DC fast charging facilities accessible to all vehicles utilizing non- proprietary connectors New heavy-duty ZEV fueling infrastructure (in CA) Later generations of charging infrastructure ZEV fueling stations

12 $2.0 Billion ZEV Investment Commitment ZEV Investments May Also Include : – Brand-neutral education or public outreach that builds or increases public awareness of ZEVs – ZEV car sharing services, ZEV ride hailing services, including ZEV autonomous vehicles – California’s “Green City” initiative Includes operation of ZEV car sharing services, zero emission transit applications and zero emission freight transport projects. Selection of the city will be made by VW et al., in consultation with appropriate local authorities in CA. Public Comment: –Within 15 days after the Effective Date, VW et al. shall submit to EPA for review and approval a National ZEV Outreach Plan that includes a description of how they will provide States, municipal governments, Tribes and federal agencies with notice and opportunities to provide suggestions, observations and offers of assistance or support for actions they may take under the National ZEV Investment Plan.

13 VW “Clean Diesel” Consent Decree: Recap Timing and Next Steps 30-day public comment period on Consent Decree ends August 5, Governors’ Offices and Tribal Governments must do the following: File Certification Form to become Beneficiaries, no later than 60 days after the Trust Effective Date Submit a Beneficiary Mitigation Plan no later than 30 days after being deemed a Beneficiary Stakeholders, local government fleet operators and other interested parties should start working with Governor’s offices and relevant planning agencies as soon as possible, to discuss potential project ideas and partnering opportunities. Selection of Trustee for Environmental Mitigation Trust Fund ($2.7 Billion) Not later than 30 days after the Effective date, California, the States and Puerto Rico and Indian tribes must confer with each other and submit to the U.S. a list of 3-5 recommended trustee candidates. The U.S. may consider additional trustee candidates. The U.S. will file a motion with the Court requesting that the Court select and appoint a trustee from among the recommended candidates.

14 VW “Clean Diesel” Consent Decree For more information: Department of Justice Press Release: billion-settle-allegations-cheating-emissions-tests-and-deceivinghttps:// 147-billion-settle-allegations-cheating-emissions-tests-and-deceiving Federal Register Notice, including instructions for submitting comments by August 5, 2016: egister_notice.pdf egister_notice.pdf Partial Consent Decree, including Initial Allocation table by state in Appendix D-1, page 207: cd.pdf