Tesla has pocketed $11 billion from the sale of regulatory credits to rival automakers needing help to hit tough emissions targets — easy money that could dry up if President-elect Trump rolls back Biden-era regulations.

Why it matters: Tesla's billionaire CEO, Elon Musk, is spearheading Trump's effort to cut government red tape.

• In this case, reversing Biden's environmental policy would significantly hurt his own company's bottom line.

Follow the money: In the nine months through September 2024, 43% of Tesla's $4.8 billion in net income came from selling regulatory credits to other carmakers.

• Since 2012, 34% of Tesla's total $32 billion in profits have come from such credit sales.

Where it stands: Absent a change in policy, that revenue stream is likely to soar in coming years as legacy carmakers scramble to buy emissions credits from Tesla, which generates such credits with every vehicle it produces.

• But if those credit revenues disappear, Tesla — facing falling vehicle sales — would see its profit margin lag that of GM.

The big picture: Transportation is the leading source of climate-changing carbon emissions. The Environmental Protection Agency under President Biden has enacted ever-stricter limits on tailpipe emissions.

• Starting with the 2023 model year, automakers' fleet-wide emissions must decrease an average of 8% a year through 2026, compared with a typical 2% annual improvement in the past.
• The rules get even more stringent starting with the 2027 model year. From that point on, fleet-wide emissions must fall by about 11% per year through 2032.

Between the lines: While selling hybrid vehicles and more efficient gas cars and trucks certainly helps, lots more EVs are essential to hitting such targets.

• The EPA estimates that compliance would mean 56 percent of new cars sold will be electric by 2032.

The other side: Trump claims Biden's policies are akin to an "EV mandate" and has said he'd relax EPA standards, as he did during his first term.

Friction point: In the meantime, EV sales aren't increasing as fast as expected, which means carmakers face substantial penalties for noncompliance.

• One way to avoid such fines is to purchase tradeable emissions credits from companies that have exceeded the standards by selling lots of electric cars, primarily Tesla.
• As long as EPA standards keep rising and EV sales lag, demand for credits will increase, driving up the costs of compliance for most automakers — and fattening Tesla's coffers.

State of play: It's already happening.

• In 2023, the first model year that Biden's higher standards went into effect, Tesla sold $1.8 billion worth of credits, including 34 million federal greenhouse gas credits, to other automakers.
• Through the first nine months of 2024, it's already taken in $2.1 billion in credit revenue, with year-end figures expected Jan. 29.
• Tesla said the 53% increase over the prior nine months was "driven by demand for credits in North America as other automobile manufacturers scale back on their battery electric vehicle plans."

Zoom in: Ford Motor is among the companies trying to scoop up emissions credits to ensure compliance while it reins in its EV plans in favor of more hybrids and plug-in hybrids.

• Ford disclosed in July that it had contracts to purchase about $3.8 billion of regulatory compliance credits for use in North America and Europe for current and future model years, including $100 million it spent during the second quarter of 2024.
• In October, Tesla said it has long-term contracts to sell $4.7 billion of credits, including $683 million in sales expected in the next 12 months.

Of note: Credits are also traded to comply with other state and federal regulations, including California's zero-emission vehicle program.

• In Europe, Tesla could collect more than $1 billion in compensation from Stellantis, Toyota, Ford, Subaru and Mazda, which are pooling emissions with Tesla to avoid big fines, according to UBS analysts.

The intrigue: No company wants to pay a competitor for help complying with the law, but for most automakers, purchasing regulatory credits — just like buying steel or rubber — is now a cost of doing business.

• There is no central marketplace. Instead, credit transactions are handled privately between firms, sometimes under long-term contracts.

How it works: The EPA sets an increasingly-stringent emissions standard, measured in grams of carbon dioxide per mile, for each manufacturer's car and truck fleet.

• The permitted level of emissions is a sales-weighted target based on the average "footprint" (the area between the four tires) of the vehicles each automaker produces. The larger the footprint, the greater the emissions any given vehicle is allowed to produce.

If a carmaker's fleet-wide performance comes in below the EPA limit, they earn credits for that model year. If it is above the limit, they generate a deficit.

• Manufacturers have lots of flexibility to comply, including banking credits from year to year or trading with other companies.

Between the lines: EVs, plug-in hybrids and other alternative-fuel vehicles are incentivized with credit "multipliers," which is why Tesla, a pure EV manufacturer, earns the most credits every year.

• Other EV makers, including Rivian and Lucid, as well as hybrid leaders such as Honda and Toyota, also earn extra credits but nowhere near as many as Tesla.
• The perennial biggest seller of credits is Tesla. The biggest buyer has often been Stellantis, maker of Ram pickups and Jeep SUVs, which is starting to add hybrid and electric powertrains.

The bottom line: Trading emissions credits is big money, and Tesla is the clear winner, as long as Trump doesn't pull the rug out from under his First Buddy.

The National Weather Service plans to issue a red flag warning of critical fire weather conditions including gusty winds and low relative humidity, effective Saturday evening through Sunday afternoon, for Los Angeles and Ventura counties, the agency's LA office stated Saturday morning.

The big picture: Historic California wildfires have severely impacted these areas, and the NWS expects offshore Santa Ana winds to pick back up, with another strong offshore event occurring early next week and no rain in sight.

• Wildfires have seared more than 30,000 acres in Los Angeles County this week, leaving at least 11 people dead, per an update Friday from the Los Angeles County Department of Medical Examiner.

Threat level: With no rain in the forecast, these winds will challenge firefighters battling the ongoing blazes and any new fire starts.

• Parts of Southern California are experiencing their driest start to the winter "rainy season" on record, after two wet winters encouraged plant growth that has led to ample dry vegetation for fires to burn.

What they're saying: "With continued dry conditions, Red Flag Warnings are likely. While a brief reprieve from the winds are expected Sunday Night, they will form again Monday through Wednesday, with a peak around Tuesday of gusts between 40 and 60 mph," the NWS said.

• "With humidities plummeting to 5 to 15 percent, there is a high risk for Red Flag Warnings."

More from Axios:

• L.A. fire losses will set records, but that's only the beginning
• No reprieve for California inferno, with high winds continuing into next week

• Maria Shriver opened up about a parenting trick she learned from her mother.
• She said she taught her children to stand up whenever she entered a room, something they still do to this day.
• Shriver said the women in her family were "big on manners," something she wanted to pass down.

Maria Shriver has opened up about the parenting tip she inherited from her late mother, Eunice Kennedy Shriver, and why she believes it instilled her children with good manners.

Appearing on a recent episode of the TODAY podcast "Making Space with Hoda Kotb," Shriver, 69, said that she taught her children to stand up "out of respect" whenever she entered a room — something she said they still do to this day.

"I make them stand up," Shriver said. "I used to make them. Now they just do stand up."

Shriver, who is the niece of former President John F. Kennedy, shares daughters Katherine, 35, and Christina, 33, and sons Patrick, 31, and Christopher, 27, with ex-husband Arnold Schwarzenegger.

Shriver said the rule didn't just apply when she entered a room.

"I wanted my kids to, when I walked in the room, or their dad walked in the room, or you would walk in the room, that they stand up out of respect," she said.

Shriver also encouraged her children's friends to do the same when they visited their home: "When their friends would come over, I'd be like, ahem."

She continued: "I didn't want to walk in the room, and they'd be sitting looking at a phone or watching the game. I'd be like, 'I'm here. Here we are, and here I am. And look me in the eye, say hello, thank me for coming, write me a thank you note if I take you somewhere.'"

"Even though my kids moaned and groaned about it, they now say it was a good thing," she added.

Shriver said the rule is something her mother — who died in 2009 — also enforced when she was growing up.

She added that both her mother and her grandmother, Rose Fitzgerald Kennedy, were "big on manners."

Another etiquette rule she learned from her elders was bringing interesting topics of conversation to the dinner table, she went on.

"When we went to the dinner table, everybody had to have something to bring to the table to talk about, to converse about. My mother would be like, 'What's your opinion of the gospel? What's your opinion of what the president said today?'" she said.

"You could be 10, 11, 19, 20, but you had to step up."

Shriver said that at the heart of her parenting style was the idea that her children were "four distinct individuals" who knew they were valued and "a priority in a public family."

She added that she wanted to "guard their privacy" and to "make sure they were not part of political pamphlets" or "used as props."

Shriver's approach to parenting and her emphasis on teaching her children manners aligns with the authoritative parenting style, which is typified by setting rules and high standards.

As Business Insider previously reported, experts say authoritative parenting can help children develop responsibility and emotional regulation.

"This style encourages children to take responsibility for their own actions and make decisions that are appropriate for their age and development," Kalley Hartman, a marriage and family therapist and clinical director of Ocean Recovery, told BI in 2023.

The United States military offers an expedited path to US citizenship for lawful residents who commit to service. In 2024, while filming the US Marine Corps boot camp in Camp Pendleton, California, chief video correspondent Graham Flanagan followed one recruit taking advantage of this opportunity.

Twenty-four-year-old Ralph Dahilig immigrated to the US from the Philippines during the COVID-19 pandemic. Although he holds a bachelor's degree in information systems, Dahilig struggled to find a job in the tech industry, which led him to pursue a career in the Marine Corps.

At 5 feet 4 inches tall, Dahilig is not what many might picture as the prototypical US Marine. He had to learn to think outside the box to make it to The Crucible, the 54-hour culminating event of the 13-week boot camp. All recruits must endure it before they receive the Eagle, Globe, and Anchor pendant, symbolizing their official transformation from recruit to US Marine.

• 23andMe faced major hurdles in 2024, including a $30 million settlement related to compromised data.
• 23andMe is now restructuring its business operations to reduce costs and streamline operations.
• A 23andMe spokesperson said the company is "consistently focused on maintaining the privacy of our customers."

23andMe CEO Anne Wojcicki sounded optimistic about the company's future during an earnings call in February last year.

She said the biotech company, which offers direct-to-consumer genetic testing, made strides with its new preventive care membership service, signed a $20 million research agreement with biopharma company GSK, and saw "repeated engagement" by its customers, among other triumphs.

Then the rest of the year happened.

Here's a breakdown of what went wrong for 23andMe.

CEO Anne Wojcicki proposed making 23andMe a private company but faced pushback

Despite operating for nearly two decades without profit, 23andMe went public in 2021 and reached a $6 billion valuation. The company's stocks were priced at $11.13 a share, but they've fallen significantly since then. The stock price has dropped 98% over the past several years. It stood at $3.84 on January 10.

Wojcicki proposed that 23andMe revert to a private company in a July 2024 SEC filing, saying she believed the company would "be best equipped to execute against this mission as a private entity, allowing us to remove certain public company costs and distractions."

However, a special committee formed by 23andMe's board of directors rejected the proposal five days later.

"We are disappointed with the proposal for multiple reasons, including because it provides no premium to the closing price per share on Wednesday, July 31st, it lacks committed financing, and it is conditional in nature," the special committee's letter to Wojcicki said. "Accordingly, we view your proposal as insufficient and not in the best interest of the non-affiliated shareholders."

The special committee said it would review a revised proposal, but a September letter indicated that members had not received a "fully financed, fully diligence, actionable proposal."

A 23andMe spokesperson told Business Insider that Wojcicki still intends to take the company private.

23andMe agreed to a $30 million settlement in a class-action lawsuit

Privacy concerns have dogged 23andMe for years, but in 2023, worry became a reality for users when their data was compromised. That October, hackers said they accessed certain users' names, birth details, ethnicities, and photos.

23andMe confirmed in December that data for almost 7 million users was accessed. A data breach notification filed in January 2024 said it took the company five months to realize hackers had accessed the data.

Affected users filed a class-action lawsuit against 23andMe this March, which led to the company agreeing to pay the $30 million settlement in September 2024.

The entirety of 23andMe's independent board of directors resigned in a letter

One week after the company agreed to settle the class-action lawsuit, all seven independent directors on 23andMe's board resigned in a letter addressed to Wojcicki.

"While we continue to wholeheartedly support the Company's mission and believe deeply in the value of the personalized health and wellness offering that you have articulated, it is also clear that we differ on the strategic direction for the Company going forward," the letter said.

The letter also referenced Wojcicki's revised proposal to take the 23andMe private, saying members of the special committee and board had "not seen any notable progress over the last 5 months."

"The Special Committee is therefore unwilling to consider further extensions, and the Board agrees with the Special Committee's determination," the letter said.

The sudden resignation spurred headlines in the media about 23andMe's unsteady footing. The company sought to address this imbalance by appointing three new independent directors to its board in October 2024.

"The new independent directors look forward to working closely with Anne Wojcicki and the Company's management team to best position 23andMe for the future," Jensen said in a press release.

23andMe's reputation with consumers stalled in late 2024 over 'third-party takeover proposals'

Some consumers grew concerned in September 2024 when an SEC filing said Wojcicki "would be open to considering third-party takeover proposals for the Company."

The remarks prompted consumers to reckon with the potential consequences, which The Atlantic reported could include the sale of their personal genetic data.

Wojcicki walked back her remark in a separate filing.

"Accordingly, in order to update my prior statement and avoid any confusion in the market, I am no longer open to considering third-party takeover proposals for the Issuer," she said in the filing.

A 23andMe spokesperson told BI that Wojcicki "has publicly shared she intends to take the company private, and is not open to considering third-party takeover proposals."

The statement added: "Anne has demonstrated an unwavering commitment to the company's mission and values, and to its customers, pledging to maintain 23andMe's strong security and privacy policies, including following the intended completion of the acquisition she is pursuing."

23andMe lays off 40% of its workforce and discontinues its therapeutics programs

23andMe made a decisive pivot in November 2024 as it continued to chase stable footing. The company reduced its staff by over 200 employees.

"The business restructuring is expected to substantially reduce operating expenses and result in annualized cost savings of more than $35 million," the company said in a press release.

23andMe also said it will discontinue its therapeutics programs and "wind down" ongoing clinical trials.

"In parallel with the discontinuation of its therapeutics division, the Company is actively exploring all strategic options for a limited time to maximize the value of its therapeutics programs, including licensing agreements, asset sales, or other transactions," the company said.

23andMe published its most recent second-quarter financial results in November. The company said it earned $44 million in total revenue, a 12% decrease from the $50 million recorded in the same period the previous year. Operating expenses reached $84 million, a 17% decrease from the $101 million recorded for the same period in 2023.

23andMe said it had 'substantial doubt' the company could survive without more funding

In a November 2024 SEC filing, 23andMe expressed concern over its longevity. The company said it would need additional liquidity to fund its financial commitments and expenditures.

"The Company has determined that, as of the filing date of this report, there is substantial doubt about the Company's ability to continue as a going concern," 23andMe said.

The filing also said that as of September 2024, the company "had an accumulated deficit of $2.3 billion and cash and cash equivalents of $126.6 million."

A 23andMe spokesperson said the company is committed to its consumers and enforcing ethical business practices

A spokesperson for 23andMe told Business Insider that it has privacy protections for its customers, and doesn't share data with third parties without consent. Customers can opt into its Research program, but it requires them to consent before joining.

"Roughly 80% of 23andMe customers consent to participate in our research program, which has generated more than 270 peer-reviewed publications uncovering hundreds of new genetic insights into disease," a statement said.

The spokesperson said 23andMe is subject to state and federal consumer privacy and genetic privacy laws similar to HIPAA. However, the company's protocols "offer a more appropriate framework to protect our data than privacy and security program requirements in HIPAA."

"We are committed to protecting customer data and are consistently focused on maintaining the privacy of our customers. That will not change," the statement said.