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Chrysler, Ferrari & Mercedes Benz Buy Energy Credits to Meet Fuel Requirements

April 28, 2014
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Last week, the Environmental Protection Agency (EPA) revealed that Chrysler Group LLC, Ferrari and Mercedes-Benz purchased energy credits from other automakers in the model years 2010 to 2012 in order to meet fuel efficiency requirements.

While some automakers bought credits, others sold them. Some automakers which sold energy credits are Honda Motor Co., Nissan Motor Corp. and Tesla Motors Inc.

The EPA set stricter greenhouse gas emission rules and issued these in partnership with the corporate average fuel economy program of the National Highway Traffic Safety Administration (NHTSA). From the 2012 model year, auto manufacturers were prompted to boost the fuel efficiency of their fleet to an average of 54.5 mpg. This average is about twice the former requirements.

Starting in 2009, automakers were given something in exchange for meeting the 2012 requirements. The incentive came in the form of energy credits. Manufacturers which improved fuel efficiency, significantly cut emissions and developed more environment-friendly autos were awarded credits. The credits, which are measured in ‘megagrams,’ are given per vehicle.

For model year 2010, Honda sold credits (90,000) while Ferrari and Mercedes-Benz purchased credits (90,000 and 35,580, respectively). For 2011, Nissan sold 500,000 credits, the same number Chrysler purchased. In 2012, Mercedes-Benz bought a total of 477,713 credits. From that number, 250,000 were from Nissan while 177,941 were from Tesla.

Tesla, which is partly owned by Daimler, sold a total of 227,713 credits from 2010 to 2012.

The EPA was pleased about the compliance of automakers. According to the agency, 20 carmakers complied with the 2012 requirements. Early figures from the 2013 and 2014 model years also suggest that auto manufacturers were doing well in meeting the more stringent requirements. Standards are expected to get tougher as the 14-year program—which started with the 2012 model year—proceeds.

The EPA’s 59-page report revealed details on each automaker’s fleet performance and the way they were awarded. Christopher Grundler, director of EPA’s Office of Transportation and Air Quality, said that the agency wants to be transparent and therefore made the report accessible to the public.

In the report, it was indicated that for the model year 2012, there were 2.1 million vehicles that could run on E85 ethanol which were awarded credits. Of this number, only 50,000 units were not manufactured by Detroit’s Big Three. General Motors was responsible for majority of the vehicles—GM built 1.03 million of the awarded units.

The EPA also said that while Aston Martin, McLaren and Lotus were exempted from the 2012 fuel requirements, these manufacturers may no longer be exempt in the future.

While Grundler thinks that the current credit trading program is effective, some think otherwise. Environmental groups are not convinced that the program is working; they believe that energy credits are a loophole and that automakers are taking advantage of these to meet requirements. They said that automakers would not be meeting the tougher requirements without using the awarded credits, insisting that the program is therefore not as effective in causing a reduction of greenhouse gas emissions.

“Automakers should deliver cars and trucks that meet the standards without relying on loopholes,” said Daniel Becker, director of Washington-based Safe Climate Campaign.

Photo credit: businessweek.com

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