While not an earth-shattering amount, I'd rather see such grants/cost sharing go to tech that doesn't perpetuate dependence on fossil fuels. In the end, this tech only means we get to burn less, but not eliminate the emissions all together.
IMO the better combustion engines become, the more options for fuel we have. For example, ethanol compares poorly to gasoline in power & consumption, but with continued engine development, ethanol will be able to develop as much power & economy as gasoline does today.
It would be better for smaller applications to move to electric and produce energy by other means. This requires investment into better batteries/storage applications. I'd rather all the money go to that instead of combustion research.
There are still a lot of places where very high power to weight ratio of combustion engines is extremely important.
I'm talking cars, bikes and the like...
EDIT: Also, a 737 does not use the type of engine described here, unless you want them to move back to prop design.
But my apologies, I did miss the "small application" part.
It's definitely useful to burn less fuel, but still.