By on April 1, 2021

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.

From Reuters:

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]

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15 Comments on “Volkswagen Reportedly Buying Carbon Credits From Tesla China...”

  • avatar

    So much for Voltzwagen. Or this is also April fool’s day joke?

  • avatar
    SCE to AUX

    “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”

    Economies of scale in power generation always make EVs cleaner than ICEs. If that wasn’t so, you’d have a personal electric plant at every home.

    Nice editorial strawman.

    • 0 avatar

      Notice he’s saying “initial assembly process”. That’s a new one. I don’t see where there is more pollution during the assembly of an EV vs. an ICE. Those new casting furnaces run off of natural gas. Casting metal is involved in both ICE and EV making. They use the same paints and robots to assemble them. What is the difference between EVs and ICE cars? You have electric motors in ICE cars for starters, servos, and window motors, so they have to be manufactured for both. There are batteries in both. Of course, I suppose ICE cars use environmentally friendly lead-acid batteries. No doubt made from organic lead and ethically sourced acid.

      The Voltswagen thing was a prime example of blog reporting where you have non-journalists incapable of or too lazy to do basic research and just regurgitate whatever they happen to hear on the internet that fits their personal world view. Furthermore, every EV manufacturing negative impact allegation I’ve ever seen was based on raw material sourcing and never on the assembly process which is essentially the same between both types of vehicles.

      • 0 avatar

        “…blog reporting where you have non-journalists incapable of or too lazy to do basic research…”

        It wasn’t just the blogs who got taken in – lots of business-news outlets did too. It really did look like they were doing this…until they weren’t.

      • 0 avatar
        Matt Posky

        I understand and respect that you both (MCS and SCE to AUX) adore EVs and get annoyed whenever I bash them, but the regulatory processes surrounding them hardly seems fair or rational and we never seem to be able to have a serious conversation about them and pollution. The “initial assembly process” would include everything leading up to final assembly — sourcing raw materials (that aren’t dumped into the ocean), shipping, construction, etc. Nothing makes EVs more environmentally friendly until they’ve been in operation for a while and then it’s entirely dependent upon where you source the electricity. Guess where most people in the world don’t get theirs from? Renewable sources.

        As for the rest, I think a “non-journalist” would probably just praise EVs blindly and agree with you and just laugh off whatever nonsense a company like VW tried to pull last month. The good news is, you can go to most other automotive website to have your own opinions regurgitated back into your face. At least here you (MCS) actually get to think about things and are provided the opportunity to leave angry comments every five or six minutes.

  • avatar

    “Economies of scale in power generation always make EVs cleaner than ICEs.”

    It is hard to reconcile this with the reality that more than half the coal burned last year was burned in China. And they continue to build more coal fired power plants. They will gladly build one for other countries through their Belt and Road public works initiative. You can’t uncouple the power generation source from the vehicle whether it is under the hood of an ICE vehicle or at the end of an electrical transmission line.

    (You can find recent links on Chinese coal burning from multiple sources with a simple search.)

    • 0 avatar

      China also generates a much higher percentage of electricity from renewables than the U.S. does, so clearly they want cleaner electricity, but keep in mind their domestic electricity demand is growing rapidly, so for the time being, coal may be more practical for them.

      If you ask me, that’s a good reason for the U.S. to develop as much alt-energy tech as possible, and sell it overseas. It’s as much about jobs and profits as it is about saving Mother Gaia, in the end.

      • 0 avatar

        I live about 30 minutes from Babcock Ranch in SW FL. NextEra Energy has a 145MW solar installation there plus a 10MW-hr battery array. They claim this could power the planned 19000 homes being built there. I believe the installation dumps power to the grid and some of that energy returns locally. NEE owns the local utility, FPL, and my experience with them has been great. We’ll see how this installation does over the long term. Certainly, they have chosen a great location for solar. NEE has 17000 MW of installed solar and wind. Not a pure play, they also have gas/oil dual fuel capable and nuclear generation.

    • 0 avatar

      All coal-fired power plants are not created equal:

      TL;DR: Skip to Figure 1

      • 0 avatar

        As a counterpoint, try this:

        thanks to their bungling the Wuhan virus three years after the report you linked, the Chinese leadership has no credibility

  • avatar
    Master Baiter

    “As it turns out, selling internal combustion vehicles consumers actually want to purchase in large quantities has some kind of environmental cost.”

    By “some kind”, you mean negligible. Like when I walk ankle-deep in the Pacific, the sea level rises in Japan.

  • avatar
    Jeff S

    If you are really concerned about the environmental impact of manufacturing a vehicle then you would keep what you have for a longer period of time. Most people do not even think of the environmental impact of manufacturing a product.

    • 0 avatar

      @JeffS: Exactly. A cast-aluminum or heavy-duty stainless steel vehicle with (according to a published white paper) battery technology that will last hundreds of thousands of miles along with electric motors is going to last a lot longer than a steel-bodied ICE car that’s lucky to make it 200k miles.

  • avatar
    Jeff S

    @mcs–I haven’t gone to EVs yet but I keep my vehicles for over 10 years not because environmental reasons. There are consequences to the environment for making most things. I will at some point own an EV but for now I am happy with what I have. The ever increasing complexity of ICE vehicles with turbo 3s and 4s and CVTs and multi-geared automatics will give me more incentive to eventually buy an EV.

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