Tesla is a huge beneficiary of an improper “no legal basis” Biden-sponsored subsidy. This is a massive scandal reminiscent of the diesel-emissions cheating that rocked Germany.
Carbon Tax Credits
The Biden administration and the Department of Energy colluded to rig estimated gas mileage from EVs.
For example, a Tesla that gets the equivalent of 65 MPG, receives tax credits as if the Tesla gets 430 MPG.
Electric-Vehicle Cheating Scandal
The Wall Street Journal comments on The Electric-Vehicle Cheating Scandal
It’s hard to think of a worse environmental scandal in recent years than Volkswagen’s 2015 diesel-emissions cheating. The German automaker was rightly pursued by regulators, enforcement agencies and class-action lawyers.
The scandal ended up costing Volkswagen an estimated $33 billion in fines and financial settlements—and revealed that diesel-emissions cheating was endemic.
When it comes to electric cars, the government has a cheating scandal of its own. Under an Energy Department rule, carmakers can arbitrarily multiply the efficiency of electric cars by 6.67. This means that although a 2022 Tesla Model Y tests at the equivalent of about 65 miles per gallon in a laboratory (roughly the same as a hybrid), it is counted as having an absurdly high compliance value of 430 mpg. That number has no basis in reality or law.
Until recently, this subsidy was a Washington secret. Carmakers and regulators liked it that way. Regulators could announce what sounded like stringent targets, and carmakers would nod along, knowing they could comply by making electric cars with arbitrarily boosted compliance values. Consumers would unknowingly foot the bill.
The secret is out. After environmental groups pointed out the illegality of this charade, the Energy Department proposed eliminating the 6.67 multiplier for electric cars, recognizing that the number “lacks legal support” and has “no basis.” [Let’s not mince words, how about … illegal subsidy]
Carmakers have panicked and asked the Biden administration to delay any return to legal or engineering reality. That is understandable. Without the multiplier, the Transportation Department’s proposed rules are completely unattainable. But workable rules don’t require government-created cheat codes. Carmakers should confront that problem head on.
Illegal Credits
The Journal noted this scandal is buried deep in the Federal Register—on page 36,987 of volume 65.
Since the tax credits “lack legal support” and have “no basis”, all the beneficiaries should have to return their illegal gains.
How much is that?
Tesla’s Record Carbon Credit Sales Up 94% Year-Over-Year
On October 23, 2023, Carbon Credits reported Tesla’s Record Carbon Credit Sales Up 94% Year-Over-Year
While Tesla has missed this year’s third quarter on both earnings and revenue expectations since its Q2 2019 report, the EV leader reported record-breaking carbon credit sales, which the company referred to as regulatory credits.
For over 4 years, the EV maker has been drawing attention by reporting record-breaking income from selling carbon credits. The automaker reported a revenue of $554 million from the Q3 2023 sale of carbon credits, significantly contributing to its profits.
This record sales also represented a huge portion of Tesla’s net income in Q3 2023 ($1,878 million) – 29%. Most notably, its quarter three carbon credit revenue increased 94% year-over-year, marking the value of Tesla’s EV production.
Despite Elon Musk’s “paranoia” over the global economy’s instability due to ongoing wars, its soaring carbon credit income steadily contributes to its overall profits.
A 29% revenue-to-net income ratio is hard to ignore and speaks highly of the value of the credits for Tesla.
It’s not clear who exactly bought the credits and for how much, but most likely they’re sold to other car companies that miss out on emissions standards of the California Air Resources Board (CARB).
Will Tesla Have to Return Is Unwarranted Gains?
Ha! You know the answer.
However, the carbon credits it does receive are set to drop roughly 85 percent.
Now, about those Tesla profits. …. Anyone care to crunch some numbers assuming Biden is forced to hand out credits based on reality, not fiction?
Diesel Scandal
- Protecting the Cheaters: EU Regulators in Bed With German Auto Industry Regarding Diesel
- More Diesel Cheating: Germany Concocts New Ways, Audi Caught, Halts Production
Regulators in bed with the auto industry. Gee who coulda thunk? And It happened here too, only worse.
Biden Weighs Banning Natural Gas Exports to Save the Climate
In case you missed it, please see Biden Weighs Banning Natural Gas Exports to Save the Climate
If Biden does follow through with this nonsensical (and probably unconstitutional action), Russia will be the biggest beneficiary. Click on above link for details.
Tesla takes the funny money credit and builds a company on defrauding the taxpayer but it’s not their “fault.” Man you should be a DA in a deep blue city that gives armed robbers probation because it’s not their fault.
Homeowners, stock and bond holders,”investors”, “financiers” and all the rest of the leeching classes in this dystopian hellhole, live high off of “defrauding the taxpayer”, and off of nothing else, as well. While ambulance chasing garbage live nearly as high off of exactly the kind of “laws” which allow connected garbage to arbitrarily make up multipliers favoring their fellow, worthless, genuinely expendable untermensch.
It’s what’s left of The West. The only thing left of the once-was West: Just a pure kleptocracy. Without even one tiny sliver of any redeeming qualities whatsoever.
If Tesla had not taken the money that was legal, freely offered and equally given to Tesla’s competitors, then it would have been a dereliction of its fiduciary duty to the company’s shareholders. If Tesla had not accepted the money then they would have lawsuits from shareholders and Tesla would lose and the directors would be out.
Did you post in haste? Why the breathless backpedalling?
What am I backpedaling on.
I don’t blame Tesla and never did. They are not entitled to the credits. I never said otherwise.
An export ban on NG artificially lowers prices here, but robs exporters.
It also reduces demand for dollars. The USA must provide products that others want. Otherwise, no one will want to trade with dollars.
I’m genuinely impressed with the clarity and depth of your writing. You’ve covered the topic comprehensively. Well done!
BS headline here and WSJ
Typical conservative propaganda
Federal Register Volume 65 was in the year 2000
Biden had nothing to do with that
6.67x MPGe to encourage EV production/ Tesla was the main recipient and they will be hurt the most by a return to unadjusted MPGe for CAFE calculations. Perhaps the TSLA stock price is already reflecting reduced value of their carbon credits
If this subsidy is ended, Biden gets credit
The carbon credits for EVs was artificially overstated by 6.67x times the raw MPGe numbers
This subsidy was going to help the auto industry (other than Tesla) meet the strict 49mog CAFE requirement for 2026 models. To avoid CAFE fines. Now they will need a lot more EV sales to avoid CAFE fines that might be caused by high volume low mpg ICE pickup truck sales.
“It’s hard to think of a worse environmental scandal in recent years than Volkswagen’s 2015 diesel-emissions cheating.”
Hyperbole much, WSJ? British Petroleum’s Deepwater Horizon and TEPCO’s Fukushima occurred just a few years earlier and were much, much more damaging and are still ongoing!!!
Changing the standards achieved very little in the reduction of air pollution, but they effectively eliminated diesel engines from passenger cars in the U.S. marketplace. The Volkswagen TDI vehicles were circumventing the rules, but the rules did not genuinely benefit the environment when they lead to the scrapping thousands upon thousands of vehicles which were replaced with much less-efficient gasoline-powered vehicles. In the end, the rules are justified by theoretical research that doesn’t make much sense. How a city with fewer vehicles, at a relatively high latitude (lower sun angle), on a plain (ambient air movement isn’t constrained by nearby mountains) is quite a mystery, but renting the article for 2 days at $48 to try and understand the reasoning doesn’t seem worthwhile.
“We estimate the damages and expected deaths in the United States due to excess emissions of NOx from 2009 to 2015 Volkswagen diesel vehicles. Using data on vehicle registrations and a model of pollution transport and valuation, we estimate excess damages of $430 million and 46 excess expected deaths. Accounting for uncertainty about emissions gives a range for damages from $350 million to $500 million, and a range for excess expected deaths from 40 to 52. Our estimates incorporate significant local heterogeneity: for example, Minneapolis has the highest damages despite having fewer noncompliant vehicles than 13 other cities. Our estimated damages greatly exceed possible benefits from reduced CO2 emissions due to increased fuel economy.”
link to pubs.acs.org
“For example, a Tesla that gets the equivalent of 65 MPG, receives tax credits as if the Tesla gets 430 MPG.”
How is this equivalent efficiency calculated? Is it based on how much carbon is emitted by the electricity that’s used by the car?
Sounds BS to me. A typical Tesla Model 3 or Y gets 125+ MPGe (miles per gallon equivalent), not 65 MPGe. The factor of 6.7 sounds like a fiction and no accessible references are given. Also, no real explanation is given of how the number is used to award carbon credits. Do better. It’s an interesting topic.
Name one EV that gets the equivalent of 65MPG? There isn’t one. Somethings fishy. Gasoline is 33.7 kWh, a typical EV gets 4 miles per kWh….thats 135 not 65. Probably needs more digging!
Typical EV does NOT get 4 miles per kWh. Remember Tesla inflated their range (ie miles per kWh) via playing loose with the rules on determining such. They recently downgraded range of their model Y vehicles.
Any company in the tracking surveillance business is getting money shoveled in the back door by Big Brother.
Couple more global warming winters and the great EV barrier reef will be constructed. The 8th official Wonder of the Word by default. FYI if the government demands you do something DO NOT DO THAT THING. Don’t crush your car, swap your guns for cash, put solar panels on your house, inject yourself with something where they have to change the definition of vaccines and you will be fine. Ignore them.
Here’s how it helps Biden: GM and Ford get to buy cheap carbon tax credits to meet high mileage standards he sets to force manufacturing away from ICE.
Posturing, virtue signaling, instead of actually forcing those car makers away from ICE-d cars.
The Greens may be ecstatic if he outright banned the sale of cars and sale of petroleum products. What would our response be to that?!
Is there any end to Biden’s corruption ? DOJ as well. Whatever happen to classified docs next to his corvette? DOJ don’t care. Why care about carbon credits?
If you buy a carbon credit from someone who was never going to emit the carbon to begin with, you have achieved nothing.
Sounds really familiar with a lot of what the dems are trying to do nowadays.
Tesla didn’t cheat like Volkswagen did. They just took advantage of what the government was proposing as would any company or individual would do. I don’t know anyone who would refuse legal free money from the government. If the law was illegal then that is not Teslas’s fault.
Very true. As someone with a small real estate portfolio … I take advantage of every loophole the IRS gives me (they abuse me regularly and never send flowers, so it’s the least I can do). It’s a horrible scam, but the US Gov’t is putting it out there, the EV manufacturers are just using it.
I did not accuse Tesla of cheating and If I was Tesla I would take the money.
I accuse the Biden administration of cheating to support EVs
Your BDS is showing. This rule was established during the Clinton administration.
“If I don’t steal it, someone else will!” Great. People can participate in the looting of America and demolition of its living standards but it’s totally alright because they were just acting in their own self interest.
Every homeowner, as well as “owner” of ANYTHING else in America by now, owes effectively all he has, to nothing but “the looting of America and demolition of its living standards”. There is NOTHING particularly standout about this particular gaffe. Various permutations of exactly this, is all that America has been,since at least 1971. Literally ALL. No hyperbole.
I suppose Keynes could have been right with his “not one in a million…” quip regarding debasement/inflation. Such that it may, in fact, be slightly easier for the hopelessly well indoctrinated and not so bright to comprehend the theft baked into this particular handout than into all the more debasement mediated ones. But that’s just because the well indoctrinated and not so bright are,exactly, not so bright but instead rather slow. It has no bearing whatsoever on the crassness nor obviousness of the underlying theft. Which is just as much all there is to jerryrigged “home appreciation” and “investment returns” as it is to similarly jerryrigged eMPG idiocies.
But fat chance the negative-numeracy indoctrinati will catch on… Instead of just mindlessly cheering for whatever childish team they have arbitrarily been assigned to. Whether that be Team Green or Team Greed.
US is the largest carbon producer : NGL, LNG, NG…oil. US gov is attacking carbon to support Ilan’s ev. TSLA rolled lower to half of Nov 2021 high
Got data? I was under the opinion that China has that honor now.
This is a bit unprecedented. Normally when Biden steals from the taxpayers … it goes to the unions (directly or indirectly). Sometimes it goes to the millenials and Gen Z who borrowed 100K to get that gender studies degree. While this benefits the unions some … it is not nearly as effective a scam for getting money to the unions. Glad to see Joe is diversifying.
Since this was put in place in 2000 it clearly was not the work of Biden. Biden is the first President in 4, including the environment hating trump, to try to change this rule. Maybe it’s an attempt to screw Elon and his non union shop.
Being forced to change because it was brought to light is not the same as “first to try to change”.
True enough, it apparently went in under Bill Clinton (before Obama gave away or money to Solyndra … so electrics do well here). Glad that Biden’s subsidies focused on union shops put him back in his mainstay (paying off the unions with tax dollars). Hopefully this coming to light will cause him to take action and at least reduce the multiplier in a major way. Money talks, so I’m not holding my breath.
Here’s how it helps Biden: GM and Ford get to buy cheap carbon tax credits to meet high mileage standards he sets to force manufacturing away from ICE.
Robbing the poor, giving the money to billionaires. I remember the story of Prince John or Prince Joe… The IRS is perfect as Sheriff og Nottingham.
I think the 6.67 multiplier goes back to the original 1979 laws that assigned a multiplier to biofuels. Clinton then extended that to EV’s in 2000. Apparently your beef pre-dates Biden. The degree to which it lacks legal support seems to be a matter of opinion so far. I’ve not seen anything other than opinion pieces that say this part. Certainly possible – just haven’t seen the analysis, just claims, and I’m not an EPA lawyer (thank God).
Shoot, then aim.
VW was “rightly” pursued by regulators? Nothing like impartial reporting. The diesel emissions deltas were negligible and did pass emissions if you drive like a government test track. Now, rather than having efficient and clean diesels, we’ve got electric cars whose primary component (the battery) drives child labor in Africa and whose processing is not environmentally friendly in the least. Add to that an increase in smokestack emissions rather than tailpipe emissions, brown outs during electrical peak usage times, and a whole ‘nother level of toxicity when dealing with electric car fires and disposal (as has already Mish noted).
Ah well, it’s needed to save the Earth from global warming. Or is it cooling? Or maybe just weather altogether.
We should ask why Europeans like diesel cars. I suspect it is because diesel (intended for trucks moving goods) is taxed less than gasoline.
And worth recalling, being reminded again and again, that the green object is not to replace ICE vehicles with E. That is a bait and switch. Ultimately the greens want no one to have personal transportation of higher grade than a bicycle.
“..clean diesels..”
They’ve never been clean if measured as strictly as petrol cars. And never will be.
In Europe,they’re closer to petrol cars. Simply because people are OK with 0-60 in 20 seconds, since fuel is so expensive that people put up with that. Diesels can only even hope to appear “clean and efficient” when fairly heavily loaded: A 100 HP engine putting out 80… Gassers are much more flexible wrt running clean over a wider range of throttle openings and rpms.
The reason Europe went all in for diesel, is the same as why America went for BEVs: That’s the only niche they could anymore compete in. The petrol engined car market were simply too competitive.
In Germany, diesels make a lot of sense for a significant share of drivers: People driving far and fast. Diesels are twice as efficient at 150mph, compared to gassers. And places where 150 is possible, is away from dense urban areas, where particulate emissions are critical.
Hence: The German auto industry had(still has) a technical lead in efficient; comparatively wide band and low-NVH; hence passenger car appropriate, diesels. And hence: As they have been doing for the past 30+ years, German industry then went to Brussels and told the gravytrainers to mandate, or at least heavily favor, exactly such diesels. Which is easy, since German industry; up until 15 years ago; were ran by serious heavyweights: The poor halfwits in Brussels,as always, never had any hope even beginning to comprehend what the armies of Herr Doktors from Germany “demonstrated” for them. So they resorted to the only thing they’re capable of: Pretending to be “smart” enough to understand, by nodding their head. That’s been the story of EU regulations since the 90s. Enough so that it has managed to make German industry complacent and struggling to compete in less easily riggable markets.
Of course, the diesels still never made any sense, sitting there idling in bumper to bumper Rome, Paris and Barcelona. If they did, they would have been all the rage in 50mph Japan, including bumper to bumper 5mph Tokyo, as well. And then Germany would never have had the competitive edge producing them, in the first place.
But sell they did. Not because they made natural sense. But simply because the lightweights in Brussels, like they can always be relied on to do, will make up any arbitrary regulation favoring those with preferential access to them.
So all of Europe is now stuck with nasty soot- (even if less visible for the first few years)-emitting diesels. Which don’t even manage to match petrol hybrids for efficiency, in the kind driving most non-German Europeans do. Just like America, along with some other countries without much of an industry capable of competitively building real cars, are increasingly stuck with ultimately pointless battery cars. And hence millions of self righteous, screeching me-me-mes who will be demanding “the government” make their “investment” viable for years to come, cost to more productive members of society be damned.
If I understand this correctly, the multiplier was in place so traditional auto manufacturers could meet their fleet mpg legal requirements, which are impossible due to thermodynamics, by producing a handful of electric cars. That Tesla benefited enormously was an unintended consequence. This also explains why the traditional manufacturers have been willing to produce electric cars nobody wants at huge per unit loses.
If this is so, you can’t really blame Tesla for taking advantage of the rules. That said, the whole thing needs to be scrapped. And scrapping the EPA would be a benefit at this point too. Those guys are idiots. Either that or they must replace all the top brass with engineers.
Thank goodness AI is coming along. It’s the only thing that has a hope of reading all the laws at this point.
whose blaming Tesla? Tesla is not profitable without the carbon scam, the market buys its shares and supports a High PE ratio in spite of this.
Blame the shareholders
Per the article, the credits are 29% of Tesla’s profits, so they’re still very profitable without them.
True. But if you are a stockholder you have to be nervous because suddenly Tesla is looking at a 29% drop in profits which is going to negatively affect the stock price.
“… the credits are 29% of Tesla’s profits, so they’re still very profitable without them.”
As if these specific credits were the only arbitrary handouts they’ve been provided with….
It may not be quite as simple as that. What is the subsidy in terms of carbon emissions saved? Accepting that we have to do this for the survival of mankind, how much are we up for to make the transition? Amounts of 4 trillion per year have been mentioned. We are in a hell of a hurry to do this. Now, accepting that hydrogen is most likely the best way to go but that there is probably a place for batteries in some cases, the real question is how do we change the law so CEO’s and governments can deliberately and legally budget (on a world wide scale that is equatable for everybody) for losses over the next 25 years or so in the forlorn hope that profits will emerge around the target date of 2050? The problem can be seen in two ways. Either it can’t be done and we are all going to die, or it can be done and the business opportunity is here. Population reduction would have to be more expensive I should have thought.
“survival of mankind” ha ha, no you got it backwards…the road leads to> “destroy man to save the planet”
Yup, many of the strict environmentalists want an 85 to 95% reduction in population. Thus far, they’ve decided that they will be in the remaining 5 to 15% and won’t lead by example.
It is as simple as that. This is nonsense. Saving the planet has nothing to do with any of this.
“What is the subsidy in terms of carbon emissions saved?”
None.
No deposit of fossil fuel has magically disappeared as a result of any of this. Hence no carbon emissions will ultimately be “saved.”
Some self righteous lightweight preening around San Francisco in his Tesla may have powered it by destroying some fisherman’s Salmon carrying river, instead of by burning oil. But that just leaves a bit more oil available to fly sorties bombing Yemenis, or for African guerillas. No net global change to emissions.
UNCLE JOE INVOLVED IN ANOTHER SCANDAL
DID HUNTER SET UP SOME KIND OF A PAY OFF
IF SO THE BIG GUY WILL GET HIS USUAL 10%
BUT BECAUSE OF THE INFLATION HE CAUSED
HE TOLD HUNTER TO PUSH IT UP TO 12%
That rule was written and been in affect since June, 2000. But yeah it’s all Biden fault.
In those 23 years he was only out of government for four. Long term senators and representatives should know the workings of the government. There is budgeting in some detail that should pop some of this stuff to the surface. Of course that requires paying attention.
Musk sure does like to suckle from the sore chapped teet of the taxpayer doesn’t he?
The government put this in place and he took advantage of it. I’m in real estate and we get some silly deductions … i would be foolish not take them (they abuse me everywhere else and never send flowers). If the government is handing you cash … is it on Musk to say no?
I was simply stating that Musk sure likes government money that’s all. So do alot of people, but Musk seems to be one of the bigger sucklers.
He gets a lot of it … but I look at SpaceX. Delivered in about 1/8 the time NASA would have taken at about 1/8 the cost. So yes he got a buttload of taxpayer money, but the taxpayers are out a whole lot less than they would have been had NASA done it. If he wasn’t the world leader in electric cars … the subsidies to the big 3 would likely have been twice as high and we’d have gotten Solyndra-esque results. If gov’t wants to see something done … I am a big fan of private sector doing it … but I am also a big fan of gov’t doing a whole lot less than they currently do.
Exactly! Biggest corporate welfare queen around.
Politicians (And their Varmints) are either lying or incompetent. Most time both.
Duh!
And still: Less-than-logically-astute drones keep falling for the “But this guy,” the one that the Man on My Teeveeee says is the greatest this time, will be the one to make everything great again.
Instead of; like the US founders; recognize the utterly obvious-to-anyone-literate: They’re ALL trash. All scum. And all nothing but self righteous mediocrities. And hence that the one and only legitimate goal, is simply to reduce their influence to as close to absolute zero as possible. It never has been, never will be, some sort of battle between “good” and bad government: It’s all bad. Always and everywhere. The only question, is the size of bad. To which the, definitional, answer is: As small as possible.