CO2 credits: The ultimate rebate?

Sun, 19 May 2013

Time For Buyers To Have Some Skin In The EV Game

Politicians know that $8- or $9-a-gallon gas like in Europe would end their careers.

The back-and-forth between those writing the fuel economy rules and auto manufacturers is designed to see how far the CO2 regulations can be pushed without inconveniencing the general public.

Rather than taxing fuel like they do in Europe to encourage buyers to opt for the most fuel-efficient vehicles, in America it's up to the manufacturers to develop a fleet that averages some magic number, in this case 54.5 mpg by 2025. That's because most politicians know that $8- or $9-a-gallon gas like in Europe would end their careers.

Matt DeLorenzo is the former editor-in-chief of Road & Track and has covered the auto industry for 35 years, including stints at Automotive News and AutoWeek. He has authored books including VW's New Beetle, Chrysler's Modern Concept Cars, and Corvette Dynasty.

There is no fundamental change in overall buying preferences.

On the other side of the coin, the manufacturers will work the system using whatever credits or loopholes they can carve out until it becomes apparent that they will no longer be able to build V-8 engines or large pickups. In fact, CAFE is precisely why fullsize rear-wheel-drive sedans and station wagons have largely been replaced as the family vehicle of choice by fullsize SUVs because of the two-tier fuel economy regulations that gave trucks a break.

This approach is what I call trying to solve a retail problem at the wholesale level. By making the manufacturers do all the heavy lifting, the public does benefit with cleaner, more fuel-efficient cars. On the one hand, we are getting cars that are good for us, on the other, the changes are so subtle, we really don't notice it. Naturally, interest in small, fuel-efficient cars increases when gas spikes up, but then dissipates as prices fall. There is no fundamental change in overall buying preferences.

And by not having any skin in the game, it's hard for anyone to get truly excited about new technologies like clean diesels, hybrids and EVs.

Elon Musk could offer the Model S for much less than the fake $500 per month lease rate.

So, if government lacks the courage to pass high fuel taxes that would encourage the use of hybrids, diesels or EVs, why don't they open the doors up to incentives instead? I read with interest in the Los Angeles Times that Tesla has been able to sell CO2 emission credits that amount to as much as $45,000 per car for each Model S it sells and that the company expects to reap a cool $250 million in the process.

Why not require manufacturers to pass those credits along to the customers who will actually be driving the cars and making a difference in air quality? If it's true that Tesla stands to make 45 grand on emission credits per car, then Elon Musk can pass that along and offer the car for much less than the fake $500 per month lease rate he initially calculated by factoring in your time saved at the pump.

Keep the sticker prices where they are, and let the consumer decide what to do with the credits.

Better yet, keep the sticker prices where they are, and let the consumer decide what to do with the credits. In fact, if the emission credits are part of the package, it might allow makers to sell EVs closer to their true cost rather than at some subsidized rate.

If buyers get the CO2 credits, they can opt to sell them immediately back to the manufacturer to lower their cash outlay, peddle them to another higher-bidding manufacturer or hang onto them in the hopes that their value will climb over time as government standards tighten. Or, if they are truly altruistic, never cash in on them. If they do so, they will be making a real difference in lowering CO2 because those credits would give someone else the ability to offset excess emissions.

Best of all, it takes behind-the-scenes-maneuvering and makes it a public topic, thereby making both the costs and benefits of high fuel economy standards much more transparent.

By Matt DeLorenzo