We have a great example in the state of California, which population-wise is very similar to Canada. They have a program called the Carl Moyer program. It sets aside, and this is just the state, $150 million a year. When a farmer brings in an older engine--tier 0, tier 1, or tier 2--and the engine needs a complete overhaul, California will pay for the brand new tier 3 engine to go in there, and soon the tier 4 engine that's coming very shortly. They will pay for the difference between the cost of the new engine and the cost of the overhaul. They've committed $150 million a year to do that, and there's been a lot of take-up.
What happens with the old engine, though, is that a hole is punched through the block and it becomes scrap metal. We have an issue with this green wave. Maybe our industry is a little bit behind the curve on that, but 95% of equipment transaction sales involve a trade-in. If all of a sudden one state deems that they no longer want tier 3 engines in California, what happens to the value of that farm equipment?
That state is becoming a model for the rest of the United States. Because of financial challenges at the state level, they're not going to create another California Air Resources Board; they're just going to adopt the California standards. The manufacturers are not going to make two engines for the North American market. We're going to get caught up in that. At the end of the day, it will mean increased costs to our farmer customers.
I'll give you one quick example. It's with regard to moving from tier 3 to tier 4 engines in tractors. We asked John Deere what that would mean in additional costs for the farmer. Similar to the housing concept, the air coming out of the tier 4 engines should be cleaner than the air going into the tier 4 engines. John Deere told us that on their largest horsepower four-wheel-drive tractor, that is going to cost an additional 20%. That's $50,000 to $60,000 extra that the farmer is going to have to pay to meet these environmental standards.