Tesla Benefitting from Green Credits

The concept of trading greenhouse gas credits is one that I really like. How it works is that companies by law have to have a certain amount of credits. They can either create credits by protecting the environment or they can buy credits from someone else who creates the credits.

This allows policy makers to determine how many credits are needed to create a sustainable environment and then the companies themselves work hard to create them. A company who is bad for the environment has a choice to buy these credits if they do not want to change their ways. It puts an economic value on the environment, which is not there naturally but should be.

The positive side effects of that system is given in this Bloomberg article titled GM and Fiat Unmasked as Tesla's Secret Source of Cash. Tesla has been selling these credits to other carmakers which in turn has helped fund their electric vehicle factories.

According to the article Tesla sold nearly $420 million worth of credits last year.



As I have often said, good things happen to good companies and this regulatory tailwind is huge for a company desperate for cash. The system also works because in the end it may allow a company to really succeed in going mainstream with electric vehicles.