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Automotive
Forecasting & Planning
Sales Performance & Marketing
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Automotive
Associate Director, Automotive Global Regulatory Analysis, S&P Global Mobility
Research and Analysis Associate Director, S&P Global Mobility
Over the last decade, Tesla and other automotive manufacturers have successfully harnessed the opportunity to convert overperformance of existing CO2 emissions and fuel consumption regulatory standards to valuable revenue streams. Future opportunities to monetize overperformance to vehicle regulatory standards hinge both on emissions performance of the future vehicle fleet as well as the stringency of future standards. In late December 2021, the US Environmental Protection Agency (EPA) finalized tightening of the US greenhouse gas (GHG) standards for light-duty vehicles, representing a cumulative 28% increase in stringency over the 2023-26 model year period. These new standards in the United States, along with the July 2021 EU proposal for a 55% decrease in allowable passenger car CO2 emissions by 2030, have reshaped the outlook for regulatory credit trading over the next 5-10 years in these two markets. Meanwhile, mainland China is midway through its fifth phase of reducing allowable fuel consumption and the fifth year of mandatory growth in sales of so-called New Energy Vehicles (NEVs). The dynamic regulatory environments in these regions prompt a current look at where the credit market opportunities may be found.
This report examines the forecast of future standards and manufacturer compliance performance to identify where ongoing opportunities for revenue from regulatory credit trading will continue. The opportunities for existing manufacturers and EV-focused new entrants to generate revenue through credit trading or pooling vary by market because of their distinct regulatory standards.
Key implications
Mainland China emerges as the market with the most vibrant opportunity for regulatory credit trading in the next decade owing to the structure of its regulatory programs. The regulatory design and stringency create a relative balance between credit supply and demand, with a sustainable trading market in the foreseeable future. While the United States has been at the forefront of automotive regulatory credit trading, this market may have matured and is not expected to grow significantly.
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