One of Volkswagen’s joint ventures in China has reportedly offered to purchase regulatory credits from Tesla in order to adhere to the regional environmental ascendancy. While VW may be doing everything in its power to swap over to an electric-vehicle manufacturer, it’s apparently falling short of government dictums.
FAW-Volkswagen — which shipped a little over 2 million automobiles in Asia last year — happened to be one of the biggest polluters of 2020 according to China’s Ministry of Industry and Information Technology. As it turns out, selling internal combustion vehicles consumers actually want to purchase in large quantities has some kind of environmental cost. Fortunately, it’s one regulators think can be solved by buying green credits from rivals who do all of their polluting during the initial assembly process and launder any future emissions through the national energy grid.
Reuters, which broke the story, stated that it’s currently unclear how many credits FAW-Volkswagen will need to purchase from Tesla. But the price was estimated to be around 3,000 yuan (about $450) per credit and is reportedly higher than previous years. While the per-credit estimate doesn’t make it sound like there’s much money in the practice, Tesla’s 2020 revenue just from selling regulatory credits totaled $1.58 billion and ensured that it turned a profit.
China, the world’s biggest auto market where over 25 million vehicles were sold last year, runs a credit system that encourages automakers to work towards a cleaner future by, for example, improving fuel efficiency or making more electric cars.
Manufacturers are awarded green credits that can be offset against negative credits for producing more polluting vehicles. They can also buy green credits to ensure compliance with overall targets, though trade is usually between affiliated companies that share a major stakeholder.
The irony of the situation wasn’t lost on us. Despite China having fairly rigid emission laws for automakers, the country itself has the sweetest deal imaginable in the Paris Climate Agreement. Unlike other nations of its size and level of development, China’s reduction targets don’t come into play until 2030 even though it’s typically producing more carbon dioxide than the United States and European Union combined. The U.S. has even managed to reduce its emissions rather dramatically over the last decade while China has been building more coal-fired powerplants to maintain its energy needs. But it’s also building more EVs and automakers believe they can avoid future penalties by transitioning toward becoming totally electric marquees, which is ultimately what China (and other nations) seems to want.
[Image: Volkswagen Group]