Volkswagen may have a settlement with government agencies, but might be continuing to lose car buyers with environmental concerns.

The Sierra Club has just issued a statement attacking the proposed VW settlement. The environmental group took the U.S. Environmental Protection Agency and California Air Resources Board to task for giving VW an easy way out.

“For this settlement, nothing short of public health, consumer rights and the environment are at stake and currently, it does not go far enough,” said Kathryn Phillips, California director of the Sierra Club in a statement. “Without strict penalties, and without fixing or removing the polluting vehicles, people will continue to breathe dirtier air, consumers will lose faith in watchdog agencies and manufacturers will believe they can endanger our health without feeling the full consequence.”

VW agreed to a tentative plan with EPA and CARB to buy back or repair 500,000 diesel-powered cars sold in the U.S. Consumers now have the choice of whether to sell their vehicles back to Volkswagen or get repairs. Financial details of the offer were not disclosed as they are still being finalized, and U.S. District Judge Charles Breyer has issued a gag order to stop having information on the settlement leaked. Former FBI director Robert Mueller, who was appointed to pursue a settlement, had reached an agreement with all the affected parties, the judge said.

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The Sierra Club says it wants more action taken by the government. The final settlement needs to fix or remove all of the polluting cars still on the road, make whole the consumers who trusted the vehicles were lower polluting, and compensate for the pollution the faulty cars created, Phillips said in the statement.

The proposed settlement will address some of the environment concerns. VW will be required to invest funds to “promote green automotive” initiatives and establish an environmental remediation fund to offset the years of cars putting out nitrogen oxide emissions at harmful levels, the judge said.

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The Federal Trade Commission may also drop its lawsuit over what it considered to be highly deceptive ads in the “clean diesel” ad campaign. The FTC is expected to support the settlement, according to one Justice Department official.

VW would be wise to settle with government officials to improve its reputation, and to offset a walloping financial crisis, said Art Wheaton, an analyst with Cornell University School of Industrial and Labor Relations. Wheaton said VW needed the settlement to overcome the damage done to its reputation by the diesel scandal and to settle class-action lawsuits.

“Volkswagen could face a maximum of $46 billion in EPA emission fines for 580,000 vehicles. It is critical VW reaches a settlement and not pay full fines,” Wheaton said. “The company still faces as many as 50 attorney general fraud cases for false advertisement, claiming their vehicles are a clean alternative to hybrids. They also face lawsuits from dealerships and customers. The EPA settlement is the biggest and most difficult settlement.”

The Detroit Bureau