Tesla’s Billion-Dollar Carbon Credit Side Hustle Sparks Debate
Tesla made $1.7 billion last year selling carbon credits, igniting a debate on social media over the fairness of the system. Critics call it a loophole that lets Tesla profit without real climate action, but environmental profile Anna Lerner Nesbitt argues it rewards the company for decarbonizing faster than its rivals.
A social media post about Tesla’s success on Linkedin, published this week, sparked hundreds of comments, with some praising the company’s strategy and others criticizing the carbon credit system.
One commenter observed, "Tesla competitors are actually funding Tesla's growth because they mocked Tesla instead of innovating." Another said, "Shows how perverse carbon credits are. One of the most deceitful tax tools ever invented."
However, Anna Lerner Nesbitt, CEO of Climate Collective and former Lead of Project17 at Meta, supports Tesla’s approach.
“If some companies are decarbonizing faster than required, it's fine they capitalize on those 'above and beyond' actions. Otherwise, the economic incentive to act disappears. The fact that Tesla can make money on these extra steps reinforces the presence of the necessary incentives,” she says.
The carbon credit system works like this: Tesla, which produces far fewer emissions than traditional automakers, earns credits for staying under government pollution limits. These credits, worthless to Tesla, are valuable to traditional carmakers like GM and Volkswagen, which need to buy them to meet regulatory standards. In effect, Tesla becomes a carbon credit dealer, selling to the highest bidder.
Rivian, founded in Palo Alto, is also capitalizing on carbon credits. In 2023, Rivian revenue from selling carbon credits was estimated to be around $300 million, helping the startup to offset the costs of producing electric vehicles and compete in the EV market.
Company
Revenue from Carbon Credits (2023)
Tesla
$1.7 billion
Rivian
$300 million (approx.)