The agreement provides for cash payments to owners of about 20,000 3.0-liter Volkswagen, Audi and Porsche diesel vehicles in Canada and is subject to court approval. The German automaker also agreed to pay a $2.5 million Canadian dollar civil penalty.
"This is an important milestone towards making things right for all of our customers with affected diesel vehicles in Canada," Daniel Weissland, president and chief executive officer of Volkswagen Group Canada, said in a statement.
Last year, in a similar settlement in the United States, VW agreed to spend at least $1.22 billion to fix or buy back nearly 80,000 vehicles with 3.0-liter engines. It also agreed to pay owners of vehicles who obtained fixes for excess emissions between $8,500 and $17,000.
In total, the German automaker has now agreed to spend more than $25 billion in North American to address claims from owners, environmental regulators, U.S. states and dealers and to make buyback offers. The company said in September it had set aside $30 billion to address the scandal.
In June 2016, Volkswagen agreed to spend up to $10 billion to buy back or fix 475,000 2.0-liter U.S. vehicles. Also in 2016, Volkswagen agreed to spend up to $2.1 billion Canadian dollars to buy back or fix 105,000 polluting 2.0-liter diesels and compensate owners in Canada.
Last month, the U.S. Environmental Protection Agency and the California Air Resources Board approved an emissions fix for 24,000 Audi 3.0-liter passenger cars. The approved fix entails removing defeat device software that reduced emission control effectiveness and replacing certain hardware components.
Previously, U.S. regulators approved a fix for 38,000 other 3.0-liter diesels.
VW, Europe's biggest automaker, admitted in September 2015 that it had used illegal software to cheat U.S. diesel emissions tests, sparking the biggest business crisis in its 80-year history. (Reporting by David Shepardson in Washington; Editing by Tom Brown)