In a groundbreaking development, Tesla has been granted approval by South Korea’s Ministry of Environment to sell regulatory automotive emission credits, known as carbon credits, domestically. This milestone signifies a significant moment for the electric vehicle giant, opening up new revenue opportunities while showcasing a deeper integration of EVs into the South Korean market.
According to Korea Economy TV, Tesla currently holds approximately 4 million grams/km of carbon credits in South Korea. At the current penalty rates, these credits are estimated to be valued at up to 200 billion won (around $145 million). This approval allows the carmaker to sell these credits to its counterparts, commencing this year.
**Driving Towards Net Zero: South Korea’s Green Mobility Goals**
South Korea’s ambitious drive towards achieving net zero carbon emissions by 2050 relies on transitioning from internal combustion engines to eco-friendly vehicles. The nation aims to enhance its vehicle fleet with a total of 2.8 million eco-friendly vehicles by 2025, including battery-powered electric vehicles (BEVs), fuel-cell EVs, and hybrids. Looking ahead to 2030, the government targets a substantial expansion, aiming for 7.85 million eco-friendly vehicles. This would mean that 30% of all vehicles in Korea will be powered by electricity. Furthermore, a remarkable 83% of newly sold cars in 2030 would need to be eco-friendly models.
Such ambitious goals go beyond symbolism; the government anticipates a 24% reduction in greenhouse gas (GHG) emissions over the next decade. This reduction is crucial for the overarching goal of achieving net zero emissions by 2050. In South Korea, regulations mandate that automakers maintain average GHG emissions below a specified standard. Non-compliance incurs penalties of 50,000 won per g/km, or the option to purchase credits from other companies.
**The Ministry of Environment’s Role and Tesla’s Approval**
The Ministry of Environment oversees the implementation of emission regulations for engines and vehicles in South Korea, with the National Institute of Environmental Research providing advisory support. South Korea adopts emission standards from European or US sources based on the application: Light-duty gasoline vehicles adhere to US/California standards, light-duty diesel vehicles follow European standards, heavy-duty trucks and bus engines comply with European regulations, and mobile nonroad diesel engines adhere to US standards.
Tesla’s entry into South Korea’s carbon credit market adds a new dimension to the country’s efforts to combat automotive emissions. However, Tesla encountered obstacles in establishing itself in South Korea’s emission credit market due to regulatory limitations that initially restricted participation to automakers selling over 4,500 vehicles annually as of 2009. Through persistent advocacy, Tesla Korea successfully lobbied for regulatory amendments in 2021 to enable its participation. The final hurdle was obtaining approval from the Ministry of Environment, which was granted earlier this year, paving the way for Tesla to engage in carbon credit trading in South Korea.
**Tesla’s Carbon Credit Success and Market Impact**
In 2023 alone, Tesla generated $1.79 billion from the sale of carbon credits. Since 2009, Tesla has accrued nearly $9 billion in revenue from this source. In its first-quarter 2024 filings, Tesla reported a $442 million income from the sale of carbon credits. This figure represents a modest 2% increase from the previous quarter of Q4 2023, which stood at $433 million. Notably, this revenue from credits accounts for a substantial portion of the company’s Q1 2024 net income, totaling 38.6% of $1,144 million.
Beyond emission credits, Tesla’s success in South Korea extends to the popularity of the Model Y, propelling Tesla to become the country’s second-largest vehicle importer as of March 2024, surpassing established brands like Mercedes-Benz. With 6,025 vehicle registrations in March 2024, Tesla has firmly entrenched itself in the South Korean automotive market. Tesla’s entry into South Korea’s carbon credit market signifies a significant milestone in the company’s expansion and sustainability efforts. Overcoming regulatory hurdles and securing approval positions Tesla to play a pivotal role in shaping the future of automotive emissions in South Korea.
