More Bad News for Tesla—This Time From the EPA

A rollback of fuel economy standards carries huge financial consequences for the all-electric vehicle manufacturer that makes over $300 million annually by selling credits to auto manufacturers unable to achieve current fuel economy standards.

3 minute read

April 4, 2018, 1:00 PM PDT

By Irvin Dawid


Jag_cz / Shutterstock

Spring hasn't been good for Tesla: A second fatal crash in Autopilot mode; the largest recall in its history; its bonds are in free fall; a credit-rating downgrade, and falling short of Model 3 production targets.

While the conventional auto industry was delighted with U.S. Environmental Protection Agency Administrator Scott Pruitt's announcement Monday that his agency, working with the National Highway Traffic Safety Administration (NHTSA), a division of the U.S. Department of Transportation, would initiate "rulemaking to set more appropriate greenhouse gas (GHG) emissions standards and corporate average fuel economy (CAFE) standards for cars and light trucks for model years 2022-2025," the news has the potential dire consequences for manufacturers of high fuel-economy vehicles.

"This was the right decision, and we support the Administration .... as it works to finalize future standards," states the April 2 news release from the Alliance of Automobile Manufacturers, the leading advocacy group for the auto industry.

Tesla, which sells only zero-emission vehicles, and not among the dozen auto manufacturers represented by the Alliance, saw Monday's rollback differently.

“Fuel economy standards should be strengthened, not weakened,” Tesla spokeswoman Gina Antonini told Vox's climate and energy reporter, Umair Irfan“This is overwhelmingly the opinion of the scientific community.”

It's not just science – it's business

The current GHG emissions and CAFE standards, 54.5 mpg by 2025, which translates to "36-38 mpg in real-world terms," enable auto manufacturers which aren't able to achieve the targets to buy credits from those companies who have exceeded them. Tesla is in a class of its own due to its all-electric lineup, though their dominance has created an unexpected challenge for California to meet its aggressive zero-emissions vehicle targets.

"Tesla stands to lose hundreds of millions of dollars annually in three types of lucrative emissions and efficiency credit sales," explains Irfan, if EPA gets its way, which will likely be determined in court due to threatened litigation by California and possibly other states.

According to Tesla’s latest 10-K filing with the Securities and Exchange Commission, the company has seen more and more money coming in from selling these credits. “Revenue from the sale of regulatory credits totaled $360.3 million, $302.3 million and $168.7 million for the years ended December 31, 2017, 2016 and 2015, respectively,” according to the filing. 

“They can leverage the same car in multiple categories,” said Benjamin Leard, a research fellow at Resources for the Future.

Weakened fuel efficiency rules "would let companies like Chrysler and GM, which scrape the bottom of average fuel economy rankings, [to] breathe easier," explains Irfan.

That means the weaker regulations will simultaneously help the dirtiest, hurt the cleanest, and derail years of tenuous progress in reducing environmental harm from a growing source of pollution.

The rollback fallout goes beyond Tesla as it will impact the entire electric vehicle industry. Conventional automakers are likely to reduce their investments in clean vehicles if the Trump administration succeeds in reducing emission standards.

Hat tip to Dino Grandoni of The Washington Post.

Tuesday, April 3, 2018 in Vox

Green rapid transit bus pulled into station in dedicated lane.

Indiana Once Again Considering Ban on Dedicated Transit Lanes

The proposed legislation would impact the construction of planned IndyGo Blue Line, the third phase of the city’s bus rapid transit system.

February 25, 2024 - Fox 59

Aerial view of New York City architecture with augmented reality visualization, blue digital holograms over buildings and skyscrapers

4 Ways to Use AI in Urban Planning and City Design

With the ability to predict trends, engage citizens, enhance resource allocation, and guide decision-making, artificial intelligence has the potential to serve as planners’ very own multi-tool.

February 20, 2024 - ArchDaily

View from shore of Sepulveda Basin water catchment basin with marsh plants along shore.

LA’s ‘Spongy’ Infrastructure Captured Almost 9 Billion Gallons of Water

The city is turning away from stormwater management practices that shuttle water to the ocean, building infrastructure that collects and directs it underground instead.

February 25, 2024 - Wired

View of 110 freeway with downtown Los Angeles buildings in background.

LA Freeway Ramp ‘Quietly Canceled’

A 2018 lawsuit forced Metro and Caltrans to do full environmental reviews of the project, leading to its cancellation.

February 29 - Streetsblog LA

Street view of 4th Avenue, a commercial street of shops and restaurants through the city center of downtown Seattle, Washington.

Study: Seattle Vision Zero Projects Not Bad for Business

An analysis of seven road safety project sites showed no negative economic impact on surrounding businesses.

February 29 - UW News

Black-and-white photo of street with old black model T and brick building on the corner.

The History of Racial Zoning and Housing Discrimination in the US

More than a century of discriminatory housing policy divided cities and contributed to the racial wealth gap and other social and economic inequities.

February 29 - Urban Land Magazine

Senior Planner

Heyer Gruel Associates

Regional Transportation Planner

Crater Planning District Commission

Senior Planner- Long range

Prince William County Planning Office

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Planning for Universal Design

Learn the tools for implementing Universal Design in planning regulations.