EPA Opens $180 Million in 2026 DERA Funding

The U.S. Environmental Protection Agency (EPA) has opened the 2026 Diesel Emissions Reduction Act (DERA) National Grant Program, providing approximately $180 million to support projects that replace, retrofit, or upgrade older diesel-powered vehicles and equipment. Applications are due January 22, 2027, giving fleet operators and their public- and nonprofit-sector partners several months to identify eligible equipment and develop projects. NPGA will be working with its state and regional associations during this period to provide grants assistance to would-be applicants. 

DERA is designed to accelerate the turnover of older diesel engines and reduce emissions from the nation’s legacy diesel fleet. Eligible equipment encompasses a wide range of transportation and off-road applications, including school and transit buses, Class 5–8 trucks, locomotives, marine engines, and nonroad equipment used in construction, agriculture, mining, cargo handling, ports, airports, and energy production. Projects can include vehicle or engine replacements, verified exhaust retrofits, idle-reduction technologies, certified remanufacture systems, and other EPA-approved emissions-reduction technologies.

Eligible applicants include state, local, regional, and tribal agencies and port authorities with jurisdiction over transportation or air quality. Municipalities, counties, school districts, cities, and metropolitan planning organizations generally fall within these categories. Certain nonprofit organizations that represent diesel fleet owners or provide pollution-reduction, transportation, or air-quality services are also eligible. Private fleet operators can participate in projects through eligible public or nonprofit applicants.

 Alternative-Fuel Vehicles Eligible Under DERA

The 2026 competition provides an important opportunity for fleets considering alternative-fuel replacements. EPA has confirmed that eligible medium- and heavy-duty diesel trucks and buses may be replaced with vehicles fueled by propane, provided the replacement meets applicable engine-certification requirements. Critically, no funding will be extended to electric vehicle (EV) replacements, charging infrastructure, training, or contracting. This move by the Trump Administration and EPA Administrator Lee Zeldin removes large funding from the often foreign- and Chinese-sourced technologies critical to the production of EVs and puts that money back to use in the domestic economy, returning funds to the taxpayers while providing employment opportunities. 

DERA funding is intended to produce emissions reductions beyond those already required by federal law; Applicants should therefore begin by identifying older, operational diesel vehicles and equipment that meet EPA ownership, usage, and remaining-useful-life requirements. Applicants should also carefully evaluate matching-fund requirements and scrappage or disabling requirements before developing their projects.

Together, DERA and the forthcoming Clean School Bus competition represent significant opportunities for public fleets to replace aging diesel vehicles. With the DERA application deadline set for January 22, 2027, prospective applicants should begin identifying eligible vehicles, potential partners, replacement technologies, and required matching funds now. NPGA stands ready assist municipalities and industry leaders alike in developing applications. For more information, please contact NPGA’s Grants and Agency Engagement Manager, Nicholas Edward, at [email protected].