Talking TERP– The Texas Approach to Clean Air (Part 2)

Photo courtesy of: Texas House of Representatives

Photo courtesy of: Texas House of Representatives

(In Part 1 of our series on the Texas Emissions Reduction Plan, we provided an overview to the unique approach that Texas has taken to incentivize clean air under a voluntary program that “pays” participants to modernize their older engines and equipment. Today, in Part 2, we’ll consider whether the program has been a good investment in clean air for the state.)

What would you do with $2.4 billion dollars?

In Texas, we dedicated those funds to a program that would reduce emissions – the Texas Emissions Reduction Plan (TERP). That’s a serious investment in clean air by the Lone Star State (consider, for example, the cost of the Dallas Cowboys football stadium that came in at a mere $1.2 billion).

This year marks the program’s fifteen year anniversary, so it seems timely to take a look at whether TERP has returned a good investment for the State of Texas.

What makes an investment “good”? A standard answer is that a good investment is one that achieves your goals, whether they are financial, health-related, or some other goal. TERP was created with five statutory objectives, summarized in the Texas Health and Safety Code:

  1. Achieving maximum reductions in oxides of nitrogen (NOx) to demonstrate compliance with the state implementation plan
  2. Preventing areas of the state from being in violation of national ambient air quality standards
  3. Achieving cost-saving and multiple benefits by reducing emissions of other pollutants
  4. Achieving reductions of emissions of diesel exhaust from school buses
  5. Advancing new technologies that reduce oxides of nitrogen and other emissions from facilities and other stationary sources

By analyzing how the program has performed in each of these objectives, we can evaluate the performance of our TERP investment for Texas and consider what we have accomplished with the funds dedicated to the program.

Before we get to the numbers, however, it’s important to first understand two things:

  • How TERP funding is collected from Texans (“inflows” to TERP)
  • How TERP then funds projects supporting the objectives listed above (“outflows” for TERP projects).

The easiest way to think about TERP as it currently operates is by considering the following table (the data is from the Texas State Comptroller’s Office and the Texas Legislative Budget Board).

TERP Inflows
Revenue Sources for TERP
TERP Outflows
Grants & Other Programs
  • Motor Vehicle Sales & Use Fee: 1.0-2.5%
  • Certificate of Title Fee: $15-$20 per transfer
  • Commercial Motor Vehicle Registration Fee: 10% surcharge
  • Commercial Motor Vehicle Inspection Fee: $10 surcharge
  • Diesel Equipment Surcharge: 1.5% on cost of equipment
  • Diesel Emissions Reduction Incentive (DERI) Program
  • Texas Clean Fleet Program (TCFP)
  • Texas Natural Gas Vehicle Grant Program (TNGVGP)
  • Drayage Truck Incentive Program (DTIP)
  • Clean Transportation Triangle (CTT) Grant Program
  • Alternative Fueling Facilities (AFFP) Program
  • Texas Clean School Bus Program (TCSB)
  • Light-Duty Motor Vehicle Purchase or Lease Incentive (LDPLI) Program
  • New Technology Implementation Grants (NTIG) Program
  • Energy Efficiency Programs
  • Regional Air Monitoring Program
  • Health Effects Study
  • Air Quality Research Support Program
Total TERP Inflows (2001-2016):
~$2.4 billion
Total TERP Outflows (2001-2016):
~$1.2 billion
Unspent TERP Funding:
~ $1.2 billion

TERP Scorecard

The Texas Commission on Environmental Quality (TCEQ) administers the TERP program and provides periodic reports on progress on their website.

We have used these reports, as well as information provided by the Texas State Comptroller’s Office, to compile a performance evaluation of TERP.

Statutory ObjectiveGradeNotes
Achieving cost-saving and multiple benefits by reducing emissions of other pollutantsATERP includes several programs that target replacing or repowering old diesel equipment. This approach provides emission reductions from other pollutants harmful to health. In fact, the EPA estimates that each $1 invested in diesel emission reduction projects generates up to $13 in public health benefits, suggesting TERP’s DERI programs have resulted in more than $13 billion in public health benefits.
Advancing new technologies that reduce oxides of nitrogen and other emissions from facilities and other stationary sourcesAUnder TERP, the NTIG program has awarded nearly $10 million in funding to support development of four electricity storage and two emissions control technology projects.
Achieving reductions of emissions of diesel exhaust from school busesBTERP has helped support the retrofit (and replacement) of school buses to improve air quality both inside and outside of school buses. EDF released a report on Texas’ efforts that showed significant progress had been made.
Achieving maximum reductions in oxides of nitrogen (NOx) to demonstrate compliance with the state implementation planCTERP has been highly successful at reducing emissions of nitrogen oxides (NOx) – nearly 172,000 tons at an average cost per ton of only $5,893 for its most cost-effective grants focused on reducing diesel emissions.
However, “maximum” reductions are not being achieved because Texas Lawmakers have not released over a billion dollars’ worth of the funding to TCEQ for projects that could achieve maximum emission reductions.
Preventing areas of the state from being in violation of national ambient air quality standardsFAgain, if the Texas legislature would release the funds needed for diesel emission reduction projects, then many of the cities around Texas would be much closer to achieving air quality goals. We’ve now reached the point where as much money has been held back in the TERP fund as has been spent; we would all be breathing a lot easier if we could clean up another 17,000 engines and vehicles (like what has been accomplished in the cost-effective DERI programs). As a consequence, several Texas areas remain in violation of air quality standards, including Houston, Dallas-Fort Worth, and El Paso. San Antonio is expected join this unfortunate list in the coming year.

The Final Report: Good Progress, but Still Needs Work

The good news is that Texas has made significant air quality progress, and many of our efforts have targeted some of the dirtiest, most-polluting equipment with older, heavy-duty diesel engines. We have seen the number of poor air quality days decrease in both Houston and Dallas-Fort Worth, demonstrating the improvements in air quality in those areas.

The bad news is that Texas lawmakers have been using the funding that was collected for clean air projects to balance the budget in spite of the fact that several areas remain in violation of federal health-based air quality standards.

Unhealthy air causes serious health issues, including asthma attacks. In 2014, asthma affected roughly 1 in 13 adults (1.4 million Texans) and 1 in 11 children (617,000 children). In addition, there are economic costs – lost work days, healthcare costs, and many additional costs for businesses, from difficulties attracting workers to areas with air quality concerns, to challenges associated with expanding operations in areas violating air quality standards.

We can remedy these deficiencies with TERP, however, to ensure that the program provides an even greater return on investment for the state of Texas. The table below suggests recommended first steps toward better addressing the objectives of TERP.

Area of Poor PerformanceRecommendations
Achieving maximum reductions in oxides of nitrogen (NOx) to demonstrate compliance with the state implementation planBecause the Texas Legislature has used TERP funds for balancing the budget, instead of using them for their intended purpose, we are now at the point where unspent TERP revenue exceeds the funding that has been granted for clean air projects. This is not only dishonest to all Texans, it has cost the citizens of the State of Texas public health benefits through missed opportunities for clean air projects. Texas lawmakers should match TERP appropriations to revenues, plus include additional appropriations for clean air projects that will help spend down the TERP fund balance.
Preventing areas of the state from being in violation of national ambient air quality standardsWith input from clean air stakeholders, Texas lawmakers could develop a plan to spend down the TERP fund balance on priority projects to help areas meet federal clean air standards.

EDF has been a strong supporter of TERP for many years, and we recognize that the program has worked very well In Texas to reduce emissions. Our work is not anywhere near done, though, and we urge Texas lawmakers to fulfill their obligation to Texans in the upcoming legislative session by committing clean air funds to projects that meet the goals of TERP.

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  • About the author

    Manager, Air Quality, Port and Freight Facilities Chris' current role with EDF includes developing environmental performance strategies for the port and freight sectors, as well as working to identify innovative partnerships for clean air projects in transportation and goods movement.

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