Fiat Chrysler to pay Tesla for CO2 emissions credits

Elon Musk, co-founder and chief executive officer of Tesla Inc., arrives in a modified Tesla Model X electric vehicle during an unveiling event for the Boring Company Hawthorne tunnel in Hawthorne, California, USA, 18 December 2018. [EPA-EFE/ROBYN BECK / POOL]

Fiat Chrysler (FCA) confirmed Sunday (7 April) that it is to pay hundreds of millions of dollars to Tesla, the zero-emissions electric carmakers, to avoid getting hit by European Commission fines.

The statement from the California-based firm confirmed a report in the Financial Times that FCA was paying Tesla, whose electric cars have no CO2 emissions.

The European Union imposes limits to the levels of carbon dioxide emissions cars can produce. But companies can pool CO2 credits between them to avoid fines from the European Commission.

FCA formed an open pool with Tesla on 25 February, the FT said, citing a declaration with the European Commission.

In a statement, Fiat Chrysler did not directly address the amount that it would pay but added it would “optimise the options for compliance that the regulations offer.”

“FCA is committed to reducing the emissions of all our products…The purchase pool provides flexibility to deliver products our customers are willing to buy while managing compliance with the lowest cost approach,” FCA added in its statement.

“The whole point of a CO2 credit market is to leverage the most cost-effective ways to reduce overall GHG (Greenhouse Gas) emissions in the market,” the FCA statement said.

In June 2018, Fiat Chrysler announced a €9 billion investment in moving its vehicles towards electric power to adapt to European norms.

EU agrees on 37.5% CO2 reduction for cars by 2030

EU negotiators on Monday evening (17 December) agreed on CO2 emission rules for cars and vans, as the Austrian presidency of the EU defied expectations and brokered a compromise.

Tesla has made over $1 billion in the last three years by selling emissions credits in the United States, according to its annual report to the US Securities and Exchange Commission. Regulations allow a manufacturer of zero-emission vehicles to earn credits and sell excess credits to other manufacturers.

The credits in the past have buoyed the Palo Alto, California company’s earnings, allowing it to post quarterly profits when otherwise it would have posted a loss.

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