Tesla to Earn More Carbon Credit Revenue from Legacy Automakers Failing to Meet EU Carbon Standards

by Eva Fox September 14, 2020

Tesla to Earn More Carbon Credit Revenue from Legacy Automakers Failing to Meet EU Carbon Standards

Featured image: u/TactfulRanger | Reddit

High carbon dioxide emissions from the vehicle fleet of internal combustion engine car manufacturers are substandard. Therefore, companies strive to compensate for this with zero Tesla emissions so that their average is in line with the norm. Otherwise, automakers will face multi-billion dollar fines.

Automakers around the world face the risk of $17.2 billion in fines from the European Union for not meeting stringent new emissions standards. The fear of this is leading them to apply for carbon credits via Tesla, according to Nikkei Asia Review.

In Q2 2020, Tesla sold $428 million in loans, which is four times more than the same period last year and brought 7% of the company's revenue. Most of the sales come from a similar system in California, but major automakers increasingly seek to buy EU credits.

Source: Tesla

The EU's updated corporate average fuel economy (CAFE) standards take full effect in 2021. According to them, each automaker will have to reduce average emissions for the entire fleet to 95 grams of carbon dioxide per kilometer. Failure to comply with this requirement will result in a fine of €95 per vehicle for every gram above the threshold. The new CAFE standards call for a reduction in carbon dioxide emissions of about 30% compared to the previous targets set for 2015.

Still, 20 major car brands selling in the EU exceeded updated limits last year, according to British researcher JATO Dynamics. Another British data firm, PA Consulting, announced that 13 carmakers must pay a total of €14.5 billion in fines in 2021.

Volkswagen is the main offender, with an average of 109.3 grams of carbon dioxide emissions per kilometer in 2021. This will result in a fine of approximately €4.5 billion, which is equal to a quarter of the German company's operating profit last year.

The Nissan Motor Alliance, which includes French partner Renault and Japanese manufacturer Mitsubishi Motors, faces fines of around $1.22 billion.


Due to the fact that the automakers can buy credits from other companies that outperform the requirements, some companies have found a workaround for their deficiency in meeting carbon reduction requirements. Fiat Chrysler Automobiles and General Motors have signed deals to buy emissions credits from Tesla. Fiat Chrysler, which faces a €2.5 billion fine next year, intends to acquire €1.8 billion in loans between 2020 and 2023.

H/T @jpr007/Twitter

© 2020, Eva Fox. All rights reserved.


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Article edited by @SmokeyShorts, you can follow him on Twitter

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