Car Industry

California may throw a wrench in the current emission-credits system

In the face of so many automakers skirting the rules by buying up these credits, the Golden State looks to make things a bit more difficult.

Alan Copson, © Alan Copson/robertharding/Corbis
tesla-model-3-1-of-12.jpg

Capping the number of sellable credits could put a big ol' dent in Tesla's coffers, especially on the eve of the Model 3 debut and a serious production ramp-up.

Tesla

The state of California has a unique approach to promoting zero-emissions vehicles (ZEVs) -- credits. Automakers buy and sell them to be compliant with the state's mandates. But now, California may change things up, making it harder for manufacturers to comply while skirting by without actually producing significant quantities of ZEVs.

As the program currently stands, you need a certain number of ZEV credits to sell cars in California. If an automaker produces more credits than it needs, it can sell those credits to other automakers, which may lack the production to achieve compliance on its own. Trouble is, this is allowing automakers to skirt ZEV regulations consistently -- some automakers have less than 10 percent ZEV penetrations in their fleets, Bloomberg reports.

Thus, California is considering ramping up its ZEV requirements in order to boost that penetration rate to 15.4 percent by 2025. It'll issue an evaluation of its system in the fourth quarter of this year.

While that might seem like a net positive, certain automakers aren't going to take this lying down -- namely, Tesla. The electric-car manufacturer produces only ZEV cars, so it sells a good deal of its credits. The company sold $168.7 million in regulatory credits last year, and setting a potential limit on the number of credits one can sell would hamstring a reliable source of cash for the growing company.

Higher ZEV targets, on the other hand, would be less onerous on Tesla, even though Bloomberg points out that some view the current system as a "Tesla subsidy program" already. But if it gets to a point where automakers can't just buy their way out of the situation, the increase of ZEV vehicles would benefit us all, even if some cars built for program compliance -- like the Ford Focus Electric and the Chevrolet Spark EV -- aren't available nationwide.

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