Report: Grants best incentive for diesel engine retrofits

Construction equipment owners and air quality agencies say monetary grants are the best incentive for retrofitting diesel engines with devices that will reduce harmful emissions, according to a report a technology and policy consulting firm prepared for the U.S. EPA.

Decreasing emissions from off-road equipment requires investments that don’t pay for themselves in operating cost savings, the study notes. ICF Consulting produced the report for the EPA’s Construction Sector Working Group, which will use it to provide guidance and recommendations to the agency on how to expand the practice of retrofitting.

“Marine shipping and construction are both highly competitive industries, and few entities are able to shoulder the additional expense of emission reduction technologies without some compensation,” the report states. “Most grant programs provide equipment owners with the flexibility they need to make their own decisions about how to reduce emissions in a cost-effective, practical manner.”

The study says two statewide grant programs, Moyer in California and TERP in Texas, have been successful in achieving off-road diesel emission reductions and deserve replication elsewhere.

Government contracts also provide an enforceable means for state and local agencies to reduce off-road diesel emissions and supply grants. Contract specifications requiring emission reduction technology are growing in popularity. Massachusetts’ Big Dig and Connecticut’s Q Bridge projects are two high-profile examples. The nation’s most extensive effort to use contract specifications for diesel retrofits is occurring in New York City, where a law will soon require the use of ultra-low-sulfur fuel and “best available technology” for emission control in all equipment used for city construction projects.

But the ICF study cautions that using contract specifications without grants or monetary allowances could hurt small construction companies that might not be able to afford equipment upgrades necessary to win jobs. If implemented widely in a particular region, contract specifications could shrink the market for a construction company with a fleet of older diesel equipment, which would devalue the firm’s assets. Contractors are also concerned contract specifications could adversely affect their financial statements, limiting their ability to borrow money and secure bonding.

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Steven Sandherr, chief executive of the Associated General Contractors of America, said his organization is pleased the report recognized the harm in government actions that would discriminate against contractors based on their existing equipment.

Grants and contract allowances, however, can level the playing field for small contractors, the study found. Contract allowances are payments made to the contractor to fully or partially offset the cost of emission-reduction technology. They can be structured as a contract specification paired with a grant to the winning bidder.

Because EPA’s emissions standards for off-road engines won’t fully take effect for at least a decade and existing equipment can last 30 years or longer, emissions from off-road diesel engines will be a source of air pollution for a number of years. Many government and public interest groups want contractors to retrofit their old fleets even though operating the engines as they are is legal.