The first electric school bus in the Midwest, shown here, at a Minnesota school district in 2017. Credit: Dakota Electric Association

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Michigan’s first priority in distributing settlement funds from the 2015 Volkswagen emissions scandal is to replace aging, polluting diesel school buses.

State officials released the “Volkswagen Settlement Beneficiary Mitigation Plan” this week, which will distribute $64.8 million over the next nine years to reduce air pollution from the transportation sector.

The spending plan, which takes place in four phases, targets the replacement of diesel vehicles across a variety of sectors, including local freight vehicles, Great Lakes ferries and airport ground support equipment. The plan also distributes $9.7 million electric vehicle charging stations.

The first phase directs nearly $13 million toward school buses, with up to $3 million specifically for electric buses and charging stations. While school districts have options for replacing them — including with newer diesel models — the state is incentivizing electric and alternative-fuel models by reimbursing more of the upfront costs. The plan will cover up to 70 percent of the cost of a new electric bus and charging station under contract with a public school district compared to 25 percent of the cost of a new diesel bus. Buses powered by propane or compressed natural gas are also eligible for funding.

“We’re funding all of them but incentivizing those with greater emissions reductions,” said Debbie Swartz, pollution prevention program analyst with the Michigan Department of Environmental Quality.

Clean energy advocates sought dedicated funding for electric school buses while the plan was developed over the past two years.

Susan Mudd, senior policy advocate for the Environmental Law and Policy Center that has tracked Volkswagen settlement spending across Midwest states, called Michigan’s plan “eminently reasonable.”

“One thing that stands out in a positive way for Michigan is the ($3 million) carve-out for electric school buses,” Mudd said. “School buses are lagging behind technologically and with funding” compared to other vehicle fleets.

Funding is available to government agencies, schools, transit authorities, private businesses, metropolitan planning organizations, nonprofits and tribes. Applications for funding are reviewed on a competitive basis and reimburse entities a percentage of the cost of a new vehicle. Applicants in 10 counties with higher levels of air pollution will also be prioritized.

Of the $64.8 million Michigan received from the $2.8 billion Volkswagen settlement:

  • $19.4 million (30 percent) is for local freight vehicles, shuttle buses and transit buses;
  • $16.2 million (25 percent) is for freight switchers, Great Lakes ferries and tug boats, shore power, port cargo handling equipment and forklifts and airport ground support equipment;
  • $13 million (20 percent) for school buses;
  • $9.7 million (15 percent) for light-duty zero-emissions vehicles supply equipment, or charging stations; and
  • $6.5 million (10 percent) for program administration.

Charles Griffith, director of the Ecology Center’s climate and energy program, said he is supportive of Michigan’s plan. While he had hoped for more dedicated funding specifically for zero-emissions vehicles, the incentives for electric models may help steer applicants in that direction.

The plan “at least acknowledges the fact that these technologies cost a little more upfront but provide fuel savings over the life of the vehicles,” Griffith said. “The easy thing to do if you have an old diesel piece of equipment is just buy a different one. It’s a little more of a jump to try out a new alternative fuel vehicle or EV, which falls outside folks’ normal or comfort zone.”

Michigan follows most other Midwest states in issuing Volkswagen settlement spending plans. Ohio, for example, recently issued its first round of grants from its $75 million in settlement funds, which include school districts, a waste-hauling company and Coca-Cola Bottling Co.

Swartz said each state has adopted unique plans “tailored to meet their needs.”

“There are varieties and different flavors in each plan,” Mudd said of the Midwest.

The ELPC and others will now closely follow how applicants are selected for Michigan funding.

“The next steps will be very important to watch as they implement the plan,” Griffith said. “Hopefully they will do it in a good way.”

Andy Balaskovitz

Andy compiles the Midwest Energy News digest and was a journalism fellow for Midwest Energy News from 2014-2020. He is managing editor of MiBiz in Grand Rapids, Michigan, and was formerly a reporter and editor at City Pulse, Lansing’s alternative newsweekly.