What are carbon emission credits?

[McBennett]

Carbon emission credits refer to the dual-credit policy in the automotive sector; it is a restriction imposed by the government on carbon emissions. Introduction to carbon emission credits: Currently, fuel-powered vehicles are required to pay carbon emission fees to the government. Each automaker has a carbon emission quota. When an automaker exceeds its carbon emission limit, it can purchase carbon emission credits from new energy vehicle manufacturers. Reasons for carbon emission credits: Because fuel-powered vehicles cause environmental pollution, the government has set a total carbon emission limit. Exceeding this limit requires purchasing additional credits, which can be bought from new energy vehicle manufacturers. This indirectly supports the production of new energy vehicles.

[DeBentley]

To put it bluntly, this thing is essentially the environmental report card for automakers. While researching automotive policies, I discovered that the government sets fuel consumption and new energy vehicle production targets for each manufacturer. Producing more new energy vehicles earns positive credits, while exceeding fuel consumption standards results in negative deductions. During annual settlements, companies with insufficient credits must either purchase surplus credits from peers or face hefty fines. Tesla alone earns tens of billions annually just by selling credits, while traditional automakers end up footing the bill. This mechanism forces all automakers to either develop energy-saving technologies or accelerate their transition to electrification. Credit prices even fluctuate—last year they were 3,000 yuan per point, spiking to 5,000 during peak demand, making it more volatile than stocks.

[OSienna]

Girls, listen to this fresh insight! Last week, I accompanied my husband to look at cars and finally understood carbon credits are like supermarket loyalty points. For automakers, selling fuel-powered cars is like buying high-calorie snacks that deduct points, while selling electric vehicles is like purchasing organic veggies that earn points. My neighbor works at an OEM and says their department crunches these numbers daily—last year they nearly got fined 200 million yuan for insufficient credits. That's why dealerships are aggressively pushing EVs now, as automakers need EV credits to offset the deficits from fuel vehicles. Big players like BYD in new energy can even sustain smaller factories just by selling their excess credits.

[DawsonLynn]

This mechanism is essentially a carbon trading tool for government market regulation. The Ministry of Ecology and Environment sets industry-average fuel consumption benchmarks, and for every 0.1L/100km below the benchmark, companies earn 1 positive credit. New energy credits are more straightforward - producing one pure electric vehicle with 350km range earns 5.6 credits. In 2023, China's new energy positive credits exceeded 30 million, while the negative credit gap still reached 6 million. Some automakers were forced to discontinue high-consumption models due to penalties. Now multinational automakers are signing credit purchase agreements with EV startups - NIO earned nearly 3 billion yuan last year from selling credits.