One year into the current administration in Washington, the transit sector has only seen new federal funding for “low-emission” transit bus projects in 2025. Judging by 2025 federal funding awards, the Federal Transit Administration’s (FTA) recent policies have been “zero funding for zero emissions.”

In contrast, the State of California remains steadfastly committed to being a national leader in zero-emission transit. Governor Gavin Newsom’s administration views zero-emission transit as a core policy initiative and a point of resistance to recent federal rollbacks.

The resulting tug-of-war between national funding policies and state regulations leaves California transit operators in an awkward and uncomfortable position. From solar and wind farms to EV subsidies for private automobiles, federal funding for zero-emissions technology projects has evaporated in 2025-2026, leaving transit operators in California caught in the middle.

During the grant funding process throughout 2025, the FTA had encouraged transit agencies nationwide to reallocate “Low-No” (Low or No Emission) funds to purchase conventional diesel-electric hybrid or natural gas vehicles. In other cases, funding dried up.

For example, the ARCHES hydrogen program — a $1.2 billion federally funded hydrogen initiative — was “paused” last year by the FTA, which suspended new hydrogen projects and removed critical operational subsidies. This could impact transit operators, who may see hydrogen fuel costs spike and face severe operational pressures to continue operating hydrogen buses.

History of California’s Role in Setting Emission Regulations

Since the 1960’s, California has played a central role in setting air quality standards in the US. In response to the growing smog crisis in the Los Angeles region, Congress passed the federal Air Quality Act (1967) and the Clean Air Act (1970), which granted California the unique authority to develop its own air quality standards.

Despite numerous challenges, including ongoing issues with the current administration, California’s regulatory authority and the California Air Resources Board (CARB) have withstood more than 50 years of legal challenges. Today, CARB remains the only regulatory agency in the US allowed to develop emission regulations ahead of the EPA. Because other states can adopt California’s regulations, CARB’s zero-emission bus regulations, known as the Innovative Clean Transit or “ICT” rule in the transit industry, have become the sole alternative to current federal EPA regulations. 

California Continues

Even amid shifts in federal funding, California continues to advance its zero-emission agenda, enforcing and funding its regulatory framework despite federal obstacles.

The state has recently committed to purchasing over 2,000 battery-electric and 100 hydrogen buses; California transit agencies collectively account for about 10% of the total US transit market.

Under CARB’s ICT rule, transit agencies are mandated by state law to purchase increasing numbers of zero-emission buses, with only limited, short-term exemptions. After 2029, CARB’s ICT rule prohibits the purchase of new non-zero-emissions buses.

The good news for California transit operators is that CARB and the state have been putting their money where their mouth is.

While the FTA was announcing its Low/No awards (aka “All Low and no No”), California’s governor’s office and legislature re-allocated over $360 million in funding to support zero-emissions programs at the state level. Although California received almost $250 million less in zero-emissions funding in the 2025 Low/No awards (compared to 2024), at least some state funding was reprogrammed to help offset California’s federal funding losses. 

LA Metro, the largest transit operator in California and second largest in the nation, remains committed to transitioning to zero-emission buses.

While the agency recently cancelled a zero-emissions bus solicitation, Amy Romero, LA Metro’s deputy executive officer for Zero-Emissions Bus Acquisition and Infrastructure Implementation, said she still expects to put new zero-emissions buses into service in accordance with the agency's Zero-Emission Bus Program Master Plan and has already released a new solicitation.

LA Metro adopted its own zero-emission plan in 2017, and the agency remains committed to a 100% transition to zero-emission buses. While the region’s early ambitions to reach 100% zero-emission operations for the 2028 Olympics are likely unachievable, the transit agency is already converting three of its largest operating divisions and several hundred buses to battery-electric operations ahead of the 2028 games.

The Current US Landscape

CARB staff have continually re-emphasized California’s determination to pursue zero-emission goals despite funding and regulatory challenges. The central issue remains: Will California’s resolve set a decisive example for zero-emission transit agencies nationwide? 

Securing funding remains the core challenge for zero-emission projects, which depend on competitive federal and state grants.

Doran Barnes, CEO of Foothill Transit in West Covina, California, likens this process to “funding projects with lottery tickets.” Most agencies only act to buy zero-emission buses if a grant is awarded — otherwise, they postpone projects until more funding becomes available. 

Federal funding cuts are making zero-emissions technology choices a high-stakes game.

Erin Rogers, CEO of Omnitrans in San Bernardino, California, shared that Omnitrans pays over $20 per kilogram of hydrogen gas, five times the cost of the fuel for its older compressed natural gas (CNG) buses. Additionally, their operations struggle to keep more than two of their four hydrogen buses in service simultaneously. 

In discussing the issues with zero-emissions bus funding, Rogers indicated that their primary challenge is preventing the zero-emissions program from affecting their core business of service delivery. Put another way, Omnitrans is trying to be pragmatic: not to overcommit to untenable zero-emissions projects, and to wait and see how/when zero-emissions technologies mature as reliable, cost-effective options for its fleet’s operations. 

Other agencies face similar struggles.

During a recent tour of a California transit fleet’s hydrogen fueling operation, agency staff acknowledged that their hydrogen fueling operation could lose up to 40% of the cryogenic hydrogen delivered to the site through evaporation and fueling process losses before it is dispensed onto a bus.

Given the range limitations of current battery-electric buses, ZEB technologies are still years away from providing a 1:1 replacement for conventionally powered transit buses. Not surprisingly, there are active discussions between California transit agencies and CARB about granting waivers to stringent ICT rule requirements and deadlines.

Other states — such as Washington, New York, and Massachusetts — are closely watching California’s moves.

Over the last five years, more than 15 states have followed California’s lead in adopting zero-emissions bus regulations. Some, like New York’s MTA, have reportedly been asked to consider redirecting federal funds toward conventional bus fleets. Others, such as the Massachusetts Bay Transportation Authority (MBTA), are temporarily pausing plans for zero-emissions buses and investing in a methane-based biofuel program.

Outside of metro and regional transit organizations, economic forces are driving adoption in industries where it makes practical sense. California remains the conspicuous holdout, requiring full transition plans from all state transit operators by 2040.

Pragmatism, Not Politics

The next two to three years are likely to continue under this policy environment, meaning agencies must navigate conflicting federal and state priorities.

California’s persistence could serve as a test case for how other states maintain long-term zero-emission commitments without federal alignment. Economic fundamentals — not mandates — will ultimately determine the pace of adoption.

Battery-electric bus technologies appear to remain on track to reach a cost tipping point in the mid-2030s, at which battery operation is at parity with conventional propulsion technologies. It remains to be seen whether hydrogen programs can be viable without federal subsidies.

What is the Future of Zero Emissions?

Transit fleets shouldn’t get caught off guard when the zero-emissions pendulum swings back the other way. Other transportation sectors, including school buses, demand response, utility vehicles, and last-mile delivery fleets (e.g., FedEx, Amazon), are increasingly embracing zero-emission technologies for cost and reliability reasons, not for political or subsidy-driven reasons.

As battery costs fall and zero-emissions technologies continue to mature, zero-emission fleets will reach a tipping point at which they become the most cost-effective solution. Initially, it will be used for short-range, high-frequency applications. In the long term, zero-emissions technologies should migrate into the long-haul and heavy-duty sectors. For each mobility sector, there will be a tipping point at which cost-effective zero-emission operations reach parity with fossil fuels. The question’s never been whether zero emissions will arrive, but when.

A Steady Path Through Uncertainty

The story of zero-emission transit is far from over. Despite funding shifts and policy turbulence, momentum continues to build, driven by technological improvements and long-term cost advantages.

Three key takeaways for the zero-emission market in 2026:

1. Federal funding will be limited at least for the next two years.
2. California, and potentially other states, remain committed to zero-emission transit.
3. Zero-emissions technologies will continue to mature, with further improvements in cost and reliability expected. 

Additionally, with transit agencies and city planners nationwide, the path forward is clear:

1. Plan for evolving regulatory conditions. 
2. Whenever grant funding is awarded, transit agencies should move quickly to implement the program and secure funding commitments.
3. Engage trusted partners with deep expertise in navigating the intersection of technology, policy, and infrastructure.