Mitigation Banks, Exchanges, and In-Lieu Payments

Caltrans has addressed vehicle miles traveled (VMT) as an environmental impact under the California Environmental Quality Act (CEQA) and aims to avoid or mitigate induced VMT that results from projects on the State Highway System. Where avoidance is not possible, mitigation to offset induced VMT is required. As VMT mitigation becomes increasingly complex and often requires coordination across regions, Caltrans and project sponsors are showing greater interest in flexible approaches. Promising approaches include mitigation banks, exchanges, and in-lieu payment programs. This Hot Topic provides an overview of these approaches and some key things to keep in mind when developing them.

Mitigation banks allow project sponsors to buy VMT reduction credits from a centralized bank of pre-identified VMT-reducing strategies to offset VMT induced by the project, usually by paying a contribution based on the cost per VMT credit reduced.  A VMT exchange functions slightly different from a mitigation bank. Rather than purchasing credits, a VMT exchange provides flexibility by allowing project sponsors to match mitigation obligations by selecting from a list of mitigation measures or contributing to a specific VMT reducing project or strategy. A third mechanism for VMT mitigation is in-lieu payment programs. These are often used to offset impacts from various land use development projects to comply with the Mitigation Fee Act. An in-lieu payment program would allow project sponsors to meet their mitigation obligations by paying a one-time impact fee based on the anticipated VMT impact of the development. In-lieu fees may not have pre-identified strategies but can be used as CEQA mitigation if it can be demonstrated that the resultant VMT-reducing capital improvement program or project would be fully funded and implemented.

Some examples of mitigation program pre-identified VMT-reducing strategies could include commitment towards operational support and funding of micro-mobility programs or vanpooling, funding mobility wallets, providing incentives for mode shift, implementing active transportation improvements, and making financial contributions towards high density housing. Further mitigation strategies can be found at Chapter 3 of the CAPCOA Handbook, or in the Caltrans Mitigation Playbook.
Several key factors should be considered in implementing these approaches. Mitigation must be quantifiable, enforceable, and address additionality.  Further discussion on addressing additionality can be found on Section 5.7 for Additionality in the Transportation Analysis Under CEQA (TAC). A designated entity such as a Congestion Management Agency (CMA), Metropolitan Planning Organization (MPO), government organization, or nonprofit manages program administration. This includes managing fund allocation, selecting projects eligible to be used as mitigation, and overseeing monitoring and reporting. The effectiveness of the mitigation should also align with the lifecycle of the VMT-inducing project, which could range 50 years or longer, particularly when operational support is involved. Additional VMT program development considerations are discussed in the report “Design Considerations for Vehicle Miles Traveled Mitigation Bank and Exchange Programs” released by UC Berkeley’s Center for Law, Energy and the Environment.

Utilizing a VMT mitigation bank, exchange or fee offers a pathway to more deliverable, efficient, scalable, and impactful reductions in vehicle travel. By aligning with regional transportation and land use plans, and holding all participants accountable to measurable outcomes, these approaches consolidate red tape and help project teams fulfill mitigation obligations. These approaches also address the timing factor associated with project-specific VMT mitigation. An established mitigation bank or exchange would have the flexibility of containing multiple eligible mitigation projects or programs, and the project sponsor could choose projects that best match the timing of the proposed VMT-inducing project.

A statewide VMT Mitigation Bank, established by Assembly Bill 130 (2025), will provide applicants and lead agencies with an additional, streamlined approach to mitigate VMT impacts under CEQA. This VMT mitigation bank will allow projects to mitigate impacts by contributing to the Transit-Oriented Development (TOD) Implementation Fund to be administered by the California Department of Housing and Community Development (HCD). HCD will then aggregate and allocate those funds to support the development of mitigation projects, as will be described in forthcoming Governor’s Office of Land Use and Climate Innovation’s (LCI) program guidelines.
LCI published their informational flyer for the Statewide VMT Mitigation Bank in December 2025.

Examples of emerging approaches are included in the following table.  This is not an exhaustive list but rather provides current programs that have been implemented or are in progress.

Designated Entity	Approach	Region	Type of Strategy	Status (as of December 2025)
LCI	Bank	Statewide	Transit-Oriented Development	In progress / Planning stage
LA Metro	Mobility Wallet	Los Angeles County	Mode Shift	Pilot / Implementation
LA Metro	Bank/Credit based system	Los Angeles County	Mode Shift/Investment into VMT-reducing projects	In progress /  Planning stage
City of Riverside	In-lieu fee	City of Riverside	Exchange/Investment into VMT-reducing projects	In progress /  Planning stage
City of Fresno	Bank and in-lieu fee	City of Fresno	Exchange/Investment into VMT-reducing projects	In progress /  Planning stage
San Bernardino County Transportation Authority (SBCTA)	Mobility Wallet/Credit Based System	San Bernardino County	Mode Shift/ Exchange/Investment into VMT-reducing projects	In progress /  Planning stage
Western Riverside Council of Governments (WRCOG)	Credit Based System	Eligible entities within Riverside County	Exchange/Investment into VMT-reducing projects	Implementation
City of San Diego	In-lieu fee	City of San Diego	Mode Shift/Active Transportation investments	Implementation

*Note—
 Entities (for example, LA Metro) may establish multiple VMT mitigation banks or approaches to address different purposes, locations, or project needs, provided that each complies with applicable requirements and clearly defines its scope.