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National Clean Diesel Campaign (NCDC)

Working Together for Cleaner Air

State & Local Toolkit - Funding

Funding

Obtaining funding for a successful clean diesel program is a common challenge for new governmental programs especially in a time of tight budgets. Below are some useful resources and examples of funding sources used by state and local governments, school districts, and others.


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National Funding and Guidelines

National Clean Diesel Campaign (NCDC) provides funding assistance to help reduce harmful emissions from heavy-duty diesel engines, improve air quality and protect public health.

EPA's Environmental Financial Tools include links to sources of financing such as the Environmental Finance Program (EFP) and EPA Programs and Offices.

A Guidebook of Financial Tools, produced by the Environmental Financial Advisory Board (EFAB) and the Environmental Finance Center Network, provides an overview and analysis on how to pay for environmental programs. Topics covered include raising revenue through taxes, fees, special charges, fines and penalties, bonds, loans, and grants.

EFAB Report on Innovative Finance Programs for Air Pollution Reduction (PDF) (12 pp, 6K, November 2007) provides recommendations for financing programs that reduce emissions from mobile sources.

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State Funding Sources

This table lists examples of notable state and local programs that provide special sources of funding. With more than 1,000 clean diesel projects in place nationwide, all projects are not shown in the following table, but most funding mechanisms are represented.

State Funding Exit EPA Disclaimer
State Program Major Program Funding Source
California Carl Moyer Memorial Air Quality Standards Attainment Program Smog abatement fees, including motor vehicle registration fees and tire fees
California Lower Emissions School Bus Program Legislative appropriation of the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006
Colorado Clean Air Fleets (CAF) Federal Highway Administration (FHWA), EPA, Colorado Department of Public Health and Environment, and Colorado Department of Transportation
Connecticut Clean School Bus Retrofits State legislative appropriation of funds in Senate Bill 1500 (PDF) (147 pp, 1.06MB).
Illinois Illinois Clean School Bus Program Supplemental environmental project (SEP) directs fines, fees, and penalties for environmental violations toward environmentally beneficial projects.
Indiana DieselWise Indiana CMAQ and SEP Grants. SEP directs fines, fees, and penalties for environmental violations toward environmentally beneficial projects.
Minnesota Minnesota Small Business Environmental Improvement Loan Program Funds originated with a legislative appropriation, then were consolidated and augmented with an existing loan program.
Minnesota Project Green Fleet Public and private sponsorship
New Jersey Stop the Soot A portion of the state’s Corporate Business Tax, which was approved by voters through a constitutional amendment. About $14 million is generated annually.
New York New York City Refuge Collection Trucks (PDF) (124pp, 2.85MB) A portion of the state’s Corporate Business Tax, which was approved by voters through a constitutional amendment. About $14 million is generated annually.
New York New York Metropolitan Transportation Council (NYMTC) Congestion Mitigation and Air Quality (CMAQ) funds
North Carolina Mobile Source Emissions Reduction Grant Program State gasoline sales tax (1/64 of a cent per gallon of gasoline sold)
Ohio Cleveland Clean Air Century Campaign Uses foundation funding to augment state and federal grants.
Ohio Ohio Air Quality Development Authority- Clean Air Projects Bond financing and other authorities provided by Ohio Revised Code 3706.
Ohio Ohio EPA Clean Diesel School Bus Fund Grants are funded from civil penalties Ohio EPA collects from environmental violations. Ohio EPA recently received reauthorization from the Ohio General Assembly to continue the school bus retrofit grant program into 2008 - 2009.
Ohio Ohio Diesel Emissions Reduction Grant and Loan Congestion Mitigation and Air Quality (CMAQ) funds as allocated by Ohio House Bill 119 , section 512.35.
Pennsylvania Pittsburgh Healthy School Bus Fund Private foundation funding. The Heinz Endowment provided $500,000 in start-up funds.
Tennessee Biofuel Green Island Corridor Grant Project Congestion Mitigation and Air Quality Improvement (CMAQ) program funds
Tennessee Clean Transportation Innovations Incentives Fund Congestion Mitigation and Air Quality Improvement (CMAQ) program funds
Texas Texas Clean School Bus Program Texas House Bill 3469 authorizes $7.5 million in grants to be awarded for cleaner school buses every two years.
Texas Texas Emissions Reduction Plan (TERP) Vehicle title fee, surcharge on the sale, lease or rental of off-road equipment and certain on-road vehicles, surcharge on commercial motor vehicle registration and inspection
Virginia Small Business Environmental Compliance Assistance Fund (PDF) (1 pg, 150K, July 2005) Seed funds provided by Virginia’s Emergency Response fund, which is funded from fines and penalties.
Washington Washington State Clean School Bus Program Vehicle title transfer fees provided under the 2003 Washington State Engrossed Substitute Senate Bill 6072.
Washington Diesel Grant Money for Local Government Fleets Percentage tax on the wholesale price of fuel as provided under the 2005 Washington State Engrossed Substitute Senate Bill 6094, Section 325 and Washington Revised Code RCW 70.105D.070.
Washington Tax Incentives for Truck Drivers and Truck Stops (PDF) (2 pp, 27K) Tax exemptions provided by Washington State Senate Bill 6512 (PDF) (5 pp, 27K).

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Designing Financial Incentives

State and local governments or their partners have instituted a variety of incentive programs for reducing diesel emissions.

Each of these incentive programs has its place. The reports below review the incentive programs and make recommendations as to what works best in a particular situation.

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Grant Guidelines and Sample Request for Proposals (RFPs)

Grant programs can be structured and implemented many different ways. Some programs provide separate guidelines that define which projects are eligible and how to propose a project, while other programs put all the information necessary in the RFP. California’s Gateway Cities Clean Air Program Exit EPA Disclaimer relies heavily on participating dealer networks to implement a program, while other funding opportunities have applicants apply directly to the funding entity. Programs like the Texas Emissions Reduction Plan Exit EPA Disclaimer and the Carl Moyer Program Exit EPA Disclaimer expect applicants to calculate cost effectiveness as part of the application, while other grant programs require only basic information from applicants. The links below provide resources and RFP examples from diesel reduction efforts across the country.

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Grant Programs

Grant programs are the most common approach used to reduce diesel emissions. The nation’s largest grant programs are California’s Carl Moyer Program and the Texas Emissions Reduction Plan (TERP). Smaller programs have proved successful as well.

Grant Examples: Exit EPA Disclaimer
State Program Description
California Carl Moyer Program Incentive grants up to $140 million a year for cleaner-than-required engines, equipment, and other sources of pollution.
California CARB Lower Emissions School Bus Program Provides almost $200 million for cleaner school buses and retrofits.
Colorado Clean Air Fleets (CAF) A public-private initiative to educate and provide funding for reducing diesel emissions while saving money.
Georgia Georgia Adopt-a-School Bus Program Provides funding assistance in the Atlanta area for reducing emissions from school buses.
North Carolina Mobile Source Emissions Reduction Grant Program Provides funding for diesel emissions reductions along with other mobile source related projects. Funded through portions of the state’s gasoline sales tax.
North Carolina GRADE (Grants to Replace Aging Diesel Engines) Provides funding to owners of nonroad construction equipment who voluntarily replace aging equipment or engines with newer models or install auxiliary pollution control devices. Mecklenburg County Air Quality program funded by the state’s Mobile Source Emissions Reduction Grant Program and the Mecklenburg Board of County Commissioners.
Ohio Ohio Diesel Emissions Reduction Grant and Loan Programs will be funded in 2008-9 with almost $20 million in Congestion Mitigation and Air Quality funds.
Tennessee Clean Transportation Innovations Incentives Fund A Tennessee Department of Transportation program that employs Congestion Mitigation and Air Quality Improvement (CMAQ) program funds for reducing diesel emissions.
Tennessee Biofuel Green Island Corridor Grant Project A Tennessee Department of Transportation program that employs Congestion Mitigation and Air Quality Improvement (CMAQ) program funds for reducing diesel emissions.
Texas Texas Clean School Bus Program Program will award $7.5 million to help school districts and charter schools purchase and install emissions reduction technologies.
Texas Texas Emissions Reduction Plan (TERP) More than $500 million in grants awarded to more than 2,800 projects that reduce nitrogen oxides (NOx) from vehicles and equipment.
Washington Puget Sound Clean Air Agency's Diesel Solutions Program Cleans up fleets and equipment through voluntary partnerships with local transit agencies and school districts. As of 2007, the program has retrofitted almost 2,200 school buses and more than 1,000 other vehicles and equipment.

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Rebate Programs

Rebates are a specific type of grant program used to reduce the administrative burden and encourage small business participation. Rebates offer a defined set of funds for specific activities through a simplified application and funding process. Rebates reduce uncertainty for the applicant, because they are administered on a first-come, first-served basis for eligible projects.

Rebate Examples: Exit EPA Disclaimer
State Program Description
Pennsylvania Pittsburgh Healthy School Bus Fund Program provides rebates for diesel particulate filters and a closed crankcase ventilation system on school buses.
Texas TERP Rebate Program Simplified application process with predetermined reimbursement amounts for the repowering or replacement of nonroad and on-road vehicles and equipment. Applications are awarded on a first-come, first-served basis.

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Tax Incentives

Tax incentives include a tax credit, deduction, exemption, or accelerated depreciation and can reduce or eliminate the tax liability for activities that decrease diesel emissions. Incentives that reduce or eliminate excise taxes are a commonly employed mechanism for encouraging cleaner fuels.

Tax Incentives: Exit EPA Disclaimer
State Program Description
Nationwide Department of Energy's State and Federal Incentives & Laws Numerous examples of tax incentives for alternative fuels and biodiesel.
Connecticut Connecticut's Diesel Reduction Initiatives Program includes tax exemptions for air pollution control equipment under Policy Statement 99(2).
Oregon Oregon Clean Diesel Retrofit Tax Credit Credit pays for up to 35 percent of the cost of the retrofit. Basic information can be found on the tax credit fact sheet (PDF) (2 pp, 21K).

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Financing Programs

Capital can be an obstacle to implementing diesel emission reduction activities, especially for small businesses. Low interest loans are one option for providing the necessary capital for emission-reducing activities. They can be an especially attractive option for retrofits that have an economic benefit, such as fuel savings, reduced wear and tear, or reliability.

While seed money is necessary, there is minimal long-term financial impact to governments because the borrowers eventually repay the loans. Revolving loans can also stretch the amount of money available for clean projects by applying interest revenues from past projects toward new projects.

Financing Examples: Exit EPA Disclaimer
State Program Description
Arkansas Arkansas Department of Environmental Quality's Environmental Loans for Small Business Program Provides low-interest loans for financing fuel–saving technologies that reduce pollution from trucks.
Minnesota Minnesota Pollution Control Agency's Small Business Environmental Improvement Loan Program Provides financing for idle reduction technologies and other environmental projects.
Ohio Ohio Air Quality Development Authority Provides financing for air quality projects, including diesel reduction strategies, for all types of Ohio businesses, ranging from small, family-owned shops to multi-million-dollar manufacturing plants.
Oregon Oregon Department of Energy's Energy Loan Program Offers loans to public and private entities for energy conservation and renewable energy resource development.
Pennsylvania Small Business Pollution Prevention Assistance Account (PPAA) Provides low interest loans to small businesses undertaking projects that reduce waste, pollution, or energy use.
Virginia Small Business Environmental Compliance Assistance Fund (PDF) (1 pg, 150K, July 2005) Offers low interest revolving loans to small businesses for pollution prevention purchases, including emission control devices and auxiliary power units.

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Volume Purchases for Retrofit Technologies

State and local governments can simplify the procurement process and achieve a bulk discount in retrofit technologies through volume purchase agreements with technology vendors. Connecticut, Indiana, and New Jersey provide examples.

Connecticut

Connecticut Clean School Bus Program Exit EPA Disclaimer is developing procurement contracts for the purchase of verified emission control technologies (ECT) and closed crankcase ventilation (CCV) systems for school buses. Municipalities and school districts will purchase ECT and CCVs from the state procurement contracts that are best suited for their school bus fleet.

New Jersey

The State of New Jersey issued an award for Contract #T-2541: Diesel Retrofit Device and Installation Reimbursement Exit EPA Disclaimer to authorize closed crankcase ventilation systems and the best available retrofit technology.

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