Carmakers are planning to buy carbon credits from Tesla and electric carmaker Polestar to meet the EU’s 2025 emissions rules.
Auto industry giants Toyota, Stellantis, Ford and Mazda are facing tougher European Union (EU) emissions regulations in 2025. To avoid huge fines, the companies plan to buy carbon credits from electric car companies like Tesla and Polestar, according to EU filings released on January 7.
Those with lower EV sales could pool their emissions with those of the segment leaders, buying carbon credits from other manufacturers to reduce their averages, a move that could save hundreds of millions of euros in fines.
Accordingly, Stellantis, Toyota, Ford, Mazda and Subaru are planning to combine carbon emissions with American electric car manufacturer Tesla. While another group is forming around Mercedes, with Polestar, Volvo and Smart.
Carmakers like Tesla and Polestar, which sell 100% electric vehicles, can sell carbon credits to other manufacturers.
For Tesla, carbon credit sales accounted for nearly 3% of its $72 billion in revenue in the first nine months of last year.
A Polestar representative told Reuters that Polestar, Volvo and Smart will sell carbon credits to Mercedes.
Volvo declined to provide financial details of the combined deal it is entering, but said it expected a “significant” CO2 surplus this year and was on track to meet the EU’s 2025 emissions target.
“Our global emissions per vehicle have fallen by more than 40% since 2018,” Volvo said. Between January and September 2024, the sale of carbon credits will account for about 0.3% of Volvo’s total revenue.
The 2025 rule could cost European carmakers around 15 billion euros ($15.6 billion), according to Renault CEO Luca De Meo, who is also president of the European Automobile Manufacturers Association (ACEA).
The carbon emissions matching plans come as ACEA calls for the EU’s 2025 regulation to be eased. Several European governments, including Italy, have also called for the 2025 fines to be suspended.
The two groups are now open to other automakers. New applicants must apply by February 5 for the Tesla-led group and by February 7 for the Mercedes-led group.
The deal is based on 2025 sales. The filing did not provide details on how much credit the companies are buying.
Mercedes announced it was joining the group to “fill the remaining gap and reach the European CO2 emissions target for new cars in 2025”.
Carmakers must notify the EC of their cooperation agreements by 31 December each year. Group members cannot share data or exchange information beyond average CO2 emissions, specific emissions targets and total vehicle registrations.
