Tesla profits from selling carbon offset credits

"It's not often easy and not often kind
Did you ever have to make up your mind?"

John Sebastian, "Did you Ever Have to Make up Your Mind," The Lovin' Spoonful, 1965

"I've looked at clouds from both sides now. . . I really don't know clouds at all."

Joni Mitchell, "Both Sides Now," 1967

There is no shortage of material from the 1960s songbook on cognitive dissonance.

I feel it. Maybe Elon Musk feels it.

Environmental regulations that require car companies to reduce their carbon footprint are a major source of Tesla's profits. In the first nine months of 2024, 43 percent of Tesla's $4.8 billion in net income came from selling carbon offset credits to other carmakers. It has been going on for years. As Axios reported in an excellent article, since 2012, 34 percent of Tesla's total $32 billion in profits have come from those sales.

The ironies and cognitive dissonance arise because Elon Musk is a champion of ending regulations that burden businesses. A classic example of these would be the requirement that car companies meet overall fleet standards on carbon either by making cars with a smaller carbon footprint, or by making up for their carbon emissions by buying carbon credits from a rival manufacturer with carbon credits to spare. It is a prime example of regulations that Musk and Vivek Ramaswamy are tasked with finding. The carbon offset program is a Democratic Party/Green New Deal regulation, one expanded upon by Biden, intended to address climate change -- a problem that is denied and roundly condemned by Trump and most GOP politicians. Trump calls it a burdensome EV mandate. It is the kind of regulation that California and its politicians love. Musk moved Tesla's headquarters from California to Texas in protest of the California business climate.

Irony also flows from the other direction. Voters concerned about climate and who are positively oriented to regulations designed to reduce fossil fuel dependence, have been disappointed by Musk's hard turn toward Trump. Musk has added a subtext of "MAGA" to the Tesla brand. Tesla had a brand and vibe, an early-adopter, "cool," technology-positive, California Silicon Valley, environmentalist vibe. Now Musk and Trump have made those people and that brand an opposition target. Trump has condemned electric vehicles along with wind power and other green technologies. Democrats who no longer consider Musk an environmental visionary hero find themselves defending a carbon-offset program that is a major profit center for Tesla. Customers aren't making Tesla profitable. Environmental regulations are. And Musk gives hundreds of millions of dollars to elect Trump who opposes those very regulations.

So weird. So complicated.

Three thousand local car dealers (a major donor group to Trump and down-ballot GOP candidates) selling cars made by Tesla's competitors wrote a letter to Trump this week urging him to roll back Biden-era mandates that incentivize electric vehicles.

We can expect Trump to do something to reverse Biden's green-energy initiatives. This will be an important test of populist, pro-petroleum, anti-regulation MAGA impulse because it will run counter to the crony-capitalist impulse. Both are part of the Trump way of doing politics. Trump is noteworthy for governing on behalf of his partisans and friends rather than for a more generalized bipartisan public interest. In this case, the anti-EV-mandate sentiments that drew applause from crowds who drive Ford-150s and Dodge Rams would, if implemented, cost Tesla billions of dollars a year.

Trump will have to make up his mind.