Diesel Retrofit Incentives

Oppose Diesel Equipment Retrofit or Replacement Mandates that Put Financial Burden on Contractors

Background:

• States and localities are facing new clean air challenges, as new air quality standards are implemented across the nation. Diesel retrofit, and the resulting reductions in emissions, can help states and localities achieve air quality goals, but the cost can be prohibitive to contractors without financial and technical assistance. On June 15, 2008, the California Air Resources Board (CARB) off-road diesel retrofit rule took effect, subject to federal approval. If the U.S. Environmental Protection Agency grants CARB’s request, most of California’s construction contractors would be required to retrofit or replace up to 90 percent of their off-road diesel equipment over a period of 10 years. The industry estimates that the cost of compliance will reach roughly $13 billion.

AGC Message:

• Oppose Requirements that Put Financial Burden Exclusively on Contractors. AGC opposes retroactive engine emissions limits (mandatory retrofits), and accelerated fleet turnover requirements that place the financial burden of purchasing emission reduction technologies for new equipment on contractors. AGC is also opposed to any government action that would devalue a company’s equipment or undermine the competitive bidding process and restrict competition by discriminating against contractors on the basis of their existing equipment (contract preferences or bid specifications). Such mandates would have a significant negative economic impact on industry, particularly small businesses. The federal Clean Air Act generally forbids the states to set emission standards for off-road diesel equipment. The statute, however, makes an exception for the state of California, and if California’s new standards meet with federal approval, other states would be free to adopt an identical rule.
• Incentivize Construction Equipment Owners and Operators to Install Emissions Control Technologies on their Diesel Engines by Providing a Financial Tax Incentive. The cost for retrofitting equipment can cost thousands of dollars per unit and is not simple. The costs increase for older equipment and few firms can do it without financial aid and some devices are still unproven. New technology has been slow to arrive, and, in addition, available technology has come into conflict with existing safety standards.
• Allow Equipment Owners to Expense the Cost of Emissions-Reduction Equipment. Amending the federal income tax code to allow for the immediate expensing (write-off) of the costs associated with retrofitting off-road diesel construction equipment would encourage equipment owners to make voluntary air-quality improvements and emissions-control manufacturers to offer more retrofit devices.
• Fund Federal Retrofitting Programs. Fully funding federal programs (e.g., grants, low-interest loans, tax breaks) would aid contractors with the expense of retrofitting and assist communities in meeting national air quality standards.