EV Carbon Credits Scandal--Oh My

It seems the fix is in. LOL
While I have no problem with a government pushing toward limiting carbon emissions. But this smacks of unhanded corporate welfare toward favored industries. Government actions should be above board & open to the public not hidden.

For example, a Tesla that gets the equivalent of 65 MPG, receives tax credits as if the Tesla gets 430 MPG.


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.

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.

I have a real problem with articles like this (probably based on a recent Opinion column in the WSJ which I found but can’t read), that incorrectly lay the blame based on political motives.

I’m not going to argue that this credit is good. But the 6.67 multiplier has been in place since 2000. Four Presidential administrations since then haven’t addressed this. So to blame it on the current president simply smacks of political motives rather than motives based on science or justice or anything else.

Here’s a recent paper (October 2023) that talks about the history of this credit going all the way back to the 1970s oil embargo. The pertinent bits are on page 7 & 8, under the heading CAFE Standards.

Despite the law clearly excluding electric vehicles, DOE
issued a rulemaking in June 2000 to establish a petroleum
equivalency factor for EVs that applies the 6.67 multiplier
to EVs. That rule continues in place today, despite a statutory
requirement for DOE to update its estimate annually.
Thus, an EV manufacturer is given 6.67 MPG of credits for
every 1 MPG of actual fuel economy improvement.



Just to be clear, this is a lie.

If there was collusion, it was by the Clinton administration. And both the Bush Jr. and Trump administrations had the opportunity to address it, but failed to do so.

This is nothing more than a political hit piece based on a real problem in 23 year old federal regulations.

Unfortunately, I have come to expect the twisting of facts from Mish. He has fallen a long way since his founding of this board many years ago.



page 9 of

Policymakers should be aware that the 6.67 multiplier and other
favors given to EVs, such as the EPA’s preferential fuel economy testing, vastly exaggerate the benefits EVs provide in terms of fuel efficiency and emissions. The primary motivation for this paper is to persuade policymakers
to carefully consider whether the benefits of EVs are worth the billions in spending needed to achieve those benefits.

Of course the benefit to the environment will build as more and more EVs are sold and make more of the existing motor fleet.

And as I have previously stated:“While I have no problem with a government pushing toward limiting carbon emissions. But this smacks of unhanded corporate welfare toward favored industries. Government actions should be above board & open to the public not hidden.”
So why the 6.67 number? Distrust of the public in accepting the benefit of EVs? So a standard exaggerating the benefit is adopted. Or a corporate welfare toward industry favorites that favor an administration goal?

Should edit this to remove the political hit piece.

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It would pretty much have to be removed entirely to do that. :sweat_smile:

Which is exactly what tj did. Removed the Mish piece from his OP. So now my responses make a bit less sense.

I’m not convinced that the ability to edit posts is all that great an idea. But at least we have an audit trail to know what happened.

And I still can’t read the WSJ piece, although the headline has the “hit piece” vibe to it as well. Is this rule really a “scandal” when it’s been in place for over 20 years through multiple administrations of both parties?


On of the things that many don’t quite understand is that in a freely elected legislature, sometimes (always?) compromises are made that result in odd results. Recent examples that we’ve discussed here include:

  • States that have good clean vehicle subsidies yet also impose an extra registration fee on EVs to make up for not buying gasoline, and thus not paying for gasoline taxes that [partially] fund roadways.
  • Germany needing the green party to form a coalition leading to shutting down all their nuclear plants and using coal and other fossil fuels instead, at least temporarily until other forms of renewable energy get built and come on line.

You know how they say “politics makes for strange bedfellows”, well, politics also quite often results in things that may seem absurd in retrospect, but have good reasons (due to compromise at the time they were enacted) behind them.



a circumstance or action that offends propriety or established moral conceptions or disgraces those associated with it
The fuel efficiency and emissions benefits of an EV were grossly exaggerated.
A scandal? I expect YMMV in regard to that action. The length of time it has been effect should have no input as to the acceptance of the multiplier.
And I expect we will never know how that 6.67 multiplier was arrived at.

I dunno. Maybe not. Maybe it’s just this - from my previous PDF link, page 7

First came the Alternative Motor Fuels Act (S. 1518, 1988,
Sec. 8), which promoted the commercialization of alternative
motor fuel vehicles (fueled with ethanol, methanol,
natural gas) by giving a bonus multiplier of 6.67, or 667%,
to their actual fuel economy. Then, the Energy Policy
Act (H.R. 776, 1992, Sec. 403) expanded the definition of
“alternative fuels” to also include hydrogen, coal-derived
liquid fuels, other non-alcohol biofuels, and electricity.

So that dates back to 1992. But then, a couple of years later:

Subsequently, a July 1994 transportation
law specified the multiplier would only apply to
“liquid alternative fuel” (H.R. 1758, 1994, Sec. 32905).

which removed electricity from that 6.67 multiplier.


Despite the law clearly excluding electric vehicles, DOE
issued a rulemaking in June 2000 to establish a petroleum
equivalency factor for EVs that applies the 6.67 multiplier
to EVs. That rule continues in place today …

I’m not going to defend the current rule. But it certainly sounds like it was put in place in 2000, and has roots going back to 1988.

As to it happening in private - Nope. All of the parts of this rulemaking would be published in the Federal Register, which is publicly available, currently with daily updates. (Not sure how often things were published back in 2000, but I suspect it was still daily, just with a bit of lag for both paper and electronic versions.) Notices of meetings, draft regulations, requests for comment, and similar items are all published there for anyone to see.

I did try to search the Federal Register, but I’ve never been very good at such things. I never did a good job switching from paper to electronic. But I’m sure it’s there for someone with better search skills than I.

Like I said, I don’t see a scandal here. I don’t see something that “offends propriety or established moral conceptions”. Congress passed some laws. The proper Executive branch department made some rules on those laws, almost certainly following standard practices and procedures.

The report I found from the Texas Public Policy Foundation does suggest that the rule might be improper. But that foundation is a political think tank, which I always take with more than one grain of salt. And the rule has been around for a couple of decades for people to complain about. One would think that a rule created following standard procedures (yes, my assumption which can be rebutted with appropriate evidence) would have had plenty of time for people to make their complaints, and for various Congresses and Presidents to make a change. But they haven’t.

So I’m left with a tempest in a tea pot, and nothing more. If you don’t like the rule, work to change it. If you think the rule was improperly enacted, bring it to the attention of your Representative and Senators.


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We can all go lower. What is Zero Hedge saying?

Follow the money BOTH WAYS

To: EV makers
From: ICE makers

Why emphasize the “To” but omit the “From”?

The Captain


Sure buried on page 36,987 of volume 65 in the Federal Register.
Who even knows about the Federal Register let alone having the time to be perusing it. Open and transparent. Ha.
Brings to mind the term “Bury them in paperwork”.
Or “Its always been done this way”.
The second brings to mind “Get Out of Jail Free” cards issued by NYPD.
Woe to the police officer who does not honor the card.
Some are more equal than others–Animal Farm reference.

Actually it should be:
To:EV makers
From:Federal government

The federal government gives carbon credits to EV makers that they can sell & add the that amount to their bottom line. Tesla garnered “$554 million from the Q3 2023 sale of carbon credits, significantly contributing to its profits.” The quoted bit is in the original post.

Federal government welfare to favored corporate interest? I think so. YMMV

I could have sworn the federal government never pays for anything in the final analysis.

I don’t understand this thread. The Biden administration wants to eliminate the 6.67 multiplier. The ICE automakers are the ones supporting the multiplier.

It goes like this. CAFE standards keep rising forcing legacy car makers to keep increasing the average MPG of their products. Problem is that most of ICE-car maker profits come from gas guzzlers. To overcome this, the legacy car makers either make a few compliance electric/hydrogen COMPLIANCE cars (thereby taking advantage of that 6.67 multiplier) or buy carbon credits from EV companies like Tesla.

Eliminate the 6.67 multiplier and the US auto industry will have to make a lot more EVs to meet CAFE standards, essentially becoming 100% electric or hydrogen by the mid-2030s.

The 6.67 multiplier is corporate welfare, but for GM and Ford.

This allows Ford and GM to keep selling their low MPG but high profit SUVs and trucks. Ford and GM don’t need to buy carbon credits if they are willing to build and sell more electric vehicles. They would rather make a ton of money building trucks and big SUVs regardless of the impact to the environment.

Any one who cares about what’s going on in government knows. Every legislator with half a brain (which is certainly going to leave out a few of the current ones) has a staff member who watches the Federal Register. Every watchdog group knows about it. Lawyers certainly know about it. It’s basically a daily newspaper for the Executive Branch of government.

Just because you aren’t aware of it doesn’t mean it isn’t widely known. The whole point of the Federal Register is to keep an eye on what is going on in the current administration. The point is openness and transparency.


As I read this thread and find out about the 6,67 number and how Ford and GM prefer to sell gas guzzlers to make money, I have to wonder who the villains are.

Tesla for complying with saving the plant by building EVs or Ford and GM for killing the planet with gas guzzlers?

The Captain


I think the villain is gas-guzzling. Some of the original challenges to the rule were apparently filed by environmental groups, arguing that the 6.67x credit forestalls EV adoption in the U.S.

Their claim, IIUC, was that by giving EV’s super-high credits for which they weren’t eligible, it allowed the ICE automakers to continue business-as-usual for longer. A smaller number of EV’s could provide more credits. So it’s complicated. A larger multiplier means a larger number of credits relative to the actual avoided emissions - which means money for the EV-maker (good for encouraging EV’s), but a lower-cost mechanism for ICE makers to keep making ICE’s.

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While I certainly have not done the math it sounds like the higher number, 6,67, lets incumbents make fewer EVs and more trucks for an overall profit gain. That’s the incumbents’ math. On the EV side, they get more cash to make more EVs and they also, at least at Tesla, have higher profits.

Now the EV adoption math! Data shows that EVs are grabbing market share. By the volume of activity it seems quite clear that EV technology has Crossed the Chasm, it’s here to stay. If the credit mandate remains in place, the EV suppliers will have the lion’s share of the mass market. What then happens to the ICE truck makers when ICE is finally fazed out? It sounds like short term profits and long term suicide. Is this part of the Jack Welch legacy?

On a somewhat related note, consumer goods, even autos, become commoditized over time. That leads to Diminishing Returns in the mass market where the low cost producer is king. That’s how the Big Three lost market share to Toyota. If my thesis outlined above is correct, the Big Three will lose market share to the top EV makers, currently BYD & Tesla. But even they will be under the pressure of Diminishing Returns which is what makes Tesla’s vertical integration and specially their collateral ventures so important. Typically car companies have had P/E ratios around 15 which means profitable but no growth, Diminishing Returns?

The Captain