things you probably didn't know, but will probably find interesting about car makers buying and selling credits

California manages the ZEV mandate using its own version of Monopoly money known as ZEV credits. Automakers earn different types of credits for the different types of automobiles they sell in the state, including ZEVs, plug-ins, hybrids, and low-emission internal-combustion cars. Through 2017, the largest automakers—Fiat Chrysler, Ford, General Motors, Honda, Nissan, and Toyota—must earn ZEV credits equal to 3 percent of their Cali­fornia sales,

ZEV credits become real money when CARB starts its annual accounting of credits and manufacturer obligations. To make up for a shortfall or to cash in on an abundance of credits, carmakers can buy or sell them from and to each other. If they fail to come up with the necessary credits, they face a $5000 penalty for every one they’re short. So far, no company has paid a penalty.

By law, California is the only state in the union permitted to create its own emissions regulations that supersede federal requirements. Other states, however, are allowed to adopt the rules California creates. To date, the ZEV mandate has been co-opted by Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, and Vermont.

Selling BEVs and FCVs is a game of strategy centered on maximizing credits while minimizing cost. Automakers must reconcile massive research-and-development expenses with meager sales for at least the first generation of alternative-fuel cars. They end up subsidizing the purchase of thousands of vehicles to the tune of thousands of dollars per sale, and they must ­balance their costs against consumer demand and ZEV-credit requirements. Which is why, at present, no carmaker (other than Tesla) wants to sell one more electric than it absolutely has to.

the Mitsubishi i-MiEV, the Nissan Leaf, and electric variants of the Chevrolet Spark, the Fiat 500, the Ford Focus, and the Honda Fit—earn their manufacturers three credits per vehicle sold.

Tesla’s Model S, with its longer range, qualifies for four credits in both 85-kWh guise and with the lower-capacity 60-kWh battery pack. But in 2012 and 2013, Tesla earned additional credits for every Model S sold through a loophole that rewarded the “capability” to perform a battery swap. Never mind that owners have never had the opportunity to exchange batteries other than at a dealership. Even before Tesla hosted a highly publicized battery-swapping soiree last summer in Hawthorne, California, CARB staff observed a Model S battery swap done within the required 15 minutes entirely by manual labor. Under the laws it wrote, CARB had to grant Tesla the credits, and high-capacity 85-kWh models were bumped to seven credits while Tesla’s 60-kWh cars earned five.

Since Tesla only builds ZEVs, it has no need for the ZEV credits it earns. Instead, it sells them to other automakers that are either out of compliance or hedging against stricter regulations coming in the future. In 2013, Tesla reported revenue of $129.8 million from its sale of ZEV credits. Without that money, the company wouldn’t have turned a profit.

http://blog.caranddriver.com/what-replaces-gasoline-hydrogen-may-be-winning-the-zero-emissions-battle/

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