VW Settlement Brings $2 Billion To California

California will see more than two billion dollars from Volkswagen after the company designed engines in its diesel vehicles to evade emissions tests.

In a settlement with state and federal regulators announced Tuesday, VW will offer to buy back all 80,000 cars in California that contain the engines. On the road, the cars emit up to 40 times the federal nitrogen oxide limit, but software hides that during emissions tests.

"It is the largest settlement ever with an automaker," said California Attorney General Kamala Harris, who is also a candidate in the state's U.S. Senate race. "It is the largest settlement ever in the context of the Clean Air Act."

The settlement requires Volkswagen to offer to buy back the cars or find a way to fix them—which so far has eluded the company. California Air Resources Board chair Mary Nichols says not every owner will take the offer.

"We expect 85 percent of the cars to be bought back or fixed," Nichols said. We also expect the fix to bring the cars 85 to 90 percent of what they would have been in a perfect world."

To off-set emissions from cars that stay on the road, VW will spend another $1.2 billion to support zero-emission vehicles in the state and retrofits of trucks, buses and other heavy-duty vehicles.

Volkswagen has to recall at least 85 percent of the cars or it will pay larger mitigation fees. However, the company will keep any buyback money it does not spend, once it reaches that 85 percent mark.

The California payments and buybacks are part of a settlement that will require Volkswagen to pay at least $13.2 billion to buy back cars and mitigate environmental damage across the U.S.

The settlement does not cover possible criminal penalties Volkswagen might face, nor the company’s larger diesel engines, which also cheat emissions tests.