Automakers are gearing up to tackle stricter EU emissions regulations set for 2025 by purchasing carbon credits from electric vehicle manufacturers like Tesla and Polestar, according to a filing from the EU on Tuesday.
Companies that aren't selling many EVs can "pool" their emissions with those that are leading the pack, allowing them to buy credits from other manufacturers to help balance their averages. This strategy could save them a ton of money—potentially hundreds of millions of euros in fines.
Stellantis, Toyota, Ford, Mazda, and Subaru are looking to team up with Tesla to manage their carbon emissions and comply with the upcoming EU rules.
Meanwhile, Mercedes is forming another group with Polestar, Volvo Cars, and Smart, as noted in the same document.
Tesla and Polestar, which exclusively sell electric vehicles, can offload their extra carbon credits to other companies in the pool.
A Polestar spokesperson mentioned to Reuters that they, along with Volvo Cars and Smart, plan to sell their surplus credits to Mercedes.
Volvo Cars, which is mostly owned by China's Geely, chose not to disclose financial specifics about the pooling deal but did mention they expect to have a "significant" surplus of CO2 credits this year and are on track to meet the EU's 2025 emissions targets. They noted that their global tailpipe emissions per vehicle have dropped by over 40% since 2018.
In the first three quarters of last year, carbon credit sales accounted for about 0.3% of Volvo Cars' total revenue.
FINES ON THE HORIZON
Renault CEO Luca De Meo, who previously led the European auto lobby ACEA until December, warned that the 2025 regulations could cost European car manufacturers around 15 billion euros (about $15.6 billion).
The automakers' strategy to pool emissions comes as ACEA is advocating for some leniency regarding the 2025 rules. Additionally, several European governments, including Italy, have requested a pause on the fines set for 2025.
The document mentioned that both pools are available for other car manufacturers. Any new entrants need to submit their applications by February 5 for the Tesla-led pool and by February 7 for the one led by Mercedes.
These agreements are tied to sales figures from 2025. The filing didn’t specify how many credits the companies are purchasing.
In a statement, Mercedes noted that they are joining a pool to "narrow the remaining gap and meet the European CO2 emission targets for our new vehicle lineup in 2025."
"Market conditions and our customers will determine the pace of our industry's transformation," it said.
A spokesman for Stellantis said on Tuesday the carmaker's participation in the pool would help it meet its EU targets for 2025 "while optimising our resources".
"At the same time, we continue to focus on developing the innovative electric and low-emission technologies that are at the heart of our strategy," the spokesman said.
Stellantis' Chief European Operating Officer, Jean-Philippe Imparato, recently stated the company's objective is to avoid incurring any EU fines in the current fiscal year.
According to EU regulations, Mr. Imparato indicated that the group's European electric vehicle sales must rise from the current 12% of total sales to 21%, with potential penalties of €300 million for each percentage point shortfall.