Tesla Inc (NASDAQ:TSLA) drivers — not to mention its legions of investors — probably think they’re helping reduce carbon emissions by supporting the electric carmaker.
But a new Morgan Stanley study leaves Tesla off its list of “climate-change impact stocks,” which it defines as generating at least half their revenue “from the provision of solutions to climate change.”
Why? Because the large amount of electricity needed to power its vehicles is typically generated by burning fossil fuels in its key markets.
MarketWatch has more details on the eye-opening report:
“Whilst the electric vehicles and lithium batteries manufactured by these two companies do indeed help to reduce direct CO2 emissions from vehicles, electricity is needed to power them,” Morgan Stanley wrote. “And with their primary markets still largely weighted towards fossil-fuel power (72% in the U.S. and 75% in China) the CO2 emissions from this electricity generation are still material.”
In other words, “the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions.”
Of course, this isn’t really Tesla’s fault. The company is also a leader in solar power generation, and aims to generate 100% of the energy needed to power its factories via renewable sources. It’s doing its part, but the reality of the situation is, most power generated in the U.S. and China — which is then used to charge its electric vehicles — comes from burning fossil fuels.
That will change over time, as we slowly but surely convert our power sources over to more eco-friendly means. But for now, driving a Tesla probably isn’t any better for the environment than a gas-powered car that gets good mileage.
Talk about an inconvenient truth.
Tesla Inc shares rose $2.08 (+0.59%) in premarket trading Friday. Year-to-date, TSLA has gained 65.66%, versus a 9.91% rise in the benchmark S&P 500 index during the same period.