New briefing paper provides roadmap for unlocking $2 billion in Texas clean air funds

In advance of the 90th Texas Legislature, which convenes in January 2027, Environmental Defense Fund completed a detailed and thorough analysis of Texas Emissions Reduction Plan grants and nitrogen oxide emissions over the lifetime of the program. Using more than two decades worth of data provided by the Texas Commission on Environmental Quality, the newly released briefing paper  details how TERP has transformed in recent years and provides recommendations for how the Legislature can further maximize efficiencies and increase market-driven investments — all without raising any new taxes or fees. 

TERP provides financial incentives for projects that decrease emissions of NOx and other pollutants from mobile sources and non-road equipment and is administered by TCEQ. It includes 11 unique grant programs, including a number of advanced clean truck grants that provide significant funds for fleets to transition to cleaner trucks. In the most recent two-year budget cycle, TERP awarded over $412 million to fund 3,879 incentive grant projects that are estimated to result in the reduction of 6,137 tons of NOx emissions. Based on EDF analysis, this represents the second largest reduction of NOx emissions in the program’s history. TERP can do even more with more funding, and the additional funding is already available.
 
There is currently $2 billion in revenue collected for TERP prior to 2019 that is sitting untouched in a general revenue dedicated account. These funds were collected prior to TERP reforms five years ago and are used to help certify the state’s budget. For years, the conventional wisdom at the Texas Capitol was that the $2 billion in the general revenue dedicated GR-Dedicated TERP account was necessary to certify the state budget, and TERP can simply operate on new revenues collected each biennium. While that may have made sense years ago, it doesn’t made sense today — Texas has more than $26 billion in the Economic Stabilization Fund, better known as the “rainy day fund,” which is a state savings account that collects excess oil and gas revenues and makes them available for emergency appropriations. In fact, Texas’ economy has been so strong for so long that the Legislature has been able to create a number of new long-term infrastructure funds — including ones for water, transportation and broadband — while still maintaining record surpluses.

With Texas’ strong economic foundation, now is the time to use these dedicated TERP funds for their intended purpose.
 
For the 2028-29 budget, the Legislature should consider taking 20% of the balance, or $400 million, from the GR-Dedicated Account NO. 5071 and transferring it to the TERP Trust Fund No. 1201, to be used to supplement newly collected TERP revenue.
 
The funding increase can, and should, compliment ongoing reforms being considered for TERP. EDF has worked closely with the Legislature on a consolidation bill that would make it simpler for companies to apply for funds. For example, an entity seeking a newer regional haul truck and accompanying infrastructure would have to review application materials for as many as six different grant programs, each with their own specific requirements that open at different times of the year. For entities trying to align their budgets and timelines for vehicle and equipment replacement schedules, navigating the large number of grants can be a significant barrier to participation. A TERP consolidation bill will make it easier for companies to apply,  and free up considerable agency time. Additionally, the additional dollars that would come from increasing TERP funding by $400 million would also include, by law, a percentage of funds available for the administration of the TERP program. Those funds could help cover costs of any additional full-time employees required for the increased project activity. 
 
As elected officials and TCEQ prepare for the 90^th Texas Legislature next year, the policy opportunity for TERP is tremendous. Using revenue already collected for TERP and consolidating several grant programs can boost the program without increasing taxes, revenues or fees by a single dollar — doubling the economic opportunities for companies seeking clean transportation projects, as well as emissions reductions in key areas of the state.