You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
An interview with Ola Källenius on Mercedes-Benz’s road to electrification.
Back in 2019 Mercedes-Benz announced that it would go fully electric by 2030 where markets allow, and the brand is rapidly heading towards that goal. Every new platform and powertrain developed by Mercedes starting from 2025 will be electric, with the current set of gas engines designed to last through the next few product life cycles until being phased out.
Even more importantly, according to Mercedes-Benz’s chairman of the board and CEO Ola Källenius, Mercedes will be completely carbon-neutral by 2039, a plan it calls Ambition 2039. This was derived from the Paris Climate Agreement, which aims for the world to be net zero by 2050. I sat down with Källenius at a roundtable in Vienna during the first drive of the new E-Class – still an internal-combustion car, but one with electrified powertrains – to learn more about Mercedes’ decarbonization plans, EV strategy, and overall outlook on the future of the automotive industry.
“Mercedes-Benz is a brand that stands for the promise of a better future, and that better future is fundamentally a zero-emissions business,” says Källenius, adding that the decarbonization goal will happen in just three product life cycles. He also believes that Mercedes could actually hit its decarbonization goal a little early, closer to the start of the 2030s than the end.
It’s not just people inside the company that want this to happen, either. “There’s not a single long investor in Mercedes stock that doesn’t believe the company needs to decarbonize,” Källenius says. “Even if there weren’t regulatory will, we’re at the point where the financial market made up its mind that a sustainable business strategy is the one that is more economically safe.” He adds that even investors with fossil-based revenue streams are heavily investing in new verticals.
Källenius also thinks aggressively pursuing decarbonization will let Mercedes stay nimble. “We already have strategic clarity; we know what the journey and destination is, and it’s zero emissions,” he says. “But during this transformation, which is more than a decade long and it’s difficult to judge exactly when and what will happen, we need tactical flexibility and we have that.” This means that when the industry gets to the point where the new technology unseats the incumbent technology and there is exponential growth, Mercedes needs to be (and already is) in a position where it doesn’t fall behind. Källenius describes Mercedes as being its own venture capitalist, as it’s in control over financing for its transition to EVs.
All of Mercedes’ global assembly plants have already been made powertrain flexible, so a shift to more EV production will be easy, Källenius argues. Mercedes recently transformed its Alabama facility to produce the EQE and EQS SUVs for global consumption, for example.
Also important to decarbonization is the manufacturing process. “The defining challenge of our generation is to take care of the CO2 problem,” says Källenius, “and it has to be from A to Z, all the suppliers, all our operations, the car itself and the car in use. The twin of the CO2 problem is a circular economy. How do we reduce the use of primary materials in the production of goods? It’s an even bigger problem to solve technologically and economically.” For most current car manufacturers the secondary material content – materials that have been used or recycled – is between 20 to 30 percent. Mercedes is targeting 40 percent by 2030. “That might not sound ambitious, but believe me, engineering-wise it’s unbelievably ambitious,” Källenius says.
The idea is to decouple economic growth from resource usage growth, especially when it comes to EV batteries as they are made up of precious materials like lithium, manganese and cobalt. Mercedes is building its own experimental battery recycling and research factory along with some partners, and prototypes have already been developed that can get recycling quotes into “the deep 90 percent” range. It’s also working with German chemical companies to go through every polymer category and figure out recycling options category by category. Källenius says that one day batteries coming back from vehicles will be “the biggest virtual mine in the world.”
You might think it would be hard to get Mercedes’ suppliers and partners on board with the Ambition 2039 plan, but according to Källenius that wasn’t the case. “When we defined Ambition 2039 it only works if all our suppliers go CO2 neutral as well. If you’re not on board with the program, you’re not on board,” says Källenius. “If all things are equal from performance to quality and price, in a competitive bid if one company has a better plan for decarbonization than the other, that could be the kind of thing that tips the scale.”
Once a year Mercedes holds a conference where it invites 500 of its most important suppliers to go over the year’s results and plan for the future, and at the first one in 2019 after announcing Ambition 2039 the company told its suppliers that it expected each one to come up with an equivalent plan. “The reaction back then from some of the more progressive companies was ‘welcome to the club, you are preaching to the choir,’ and for many in the room it was ‘oh shit, these guys are serious,’” remembers Källenius. “Now I would say 90 percent of our suppliers have a plan.”
Some of Mercedes’ steel suppliers are already deep into carbon-free steel production, with the first results to be in production cars in less than two years. One of the companies, the Swedish firms H2GS, should be carbon-free by 2030 thanks to the use of hydroelectric power. As another example, Mercedes is working with an aluminum producer to reduce its carbon footprint by 70 percent. “Ten years ago, pretty much everyone around the table would’ve said ‘that’s not possible, it’s not gonna happen,’” says Källenius. “Now it’s happening.”
Källenius says the two core technologies driving the shift to EVs are the electric drivetrains and the software, and vertical integration is extremely important to both. For instance, Mercedes owns everything about its powertrains all the way down to the battery chemistry.
The vertical integration is tougher when it comes to the digital side of things. Traditionally electronic architectures in cars have been decentralized – when automakers buy an ECU they buy an entire software package along with it, and the car manufacturer then integrates the functionality. “We said we need to control the brain and central nervous system of the car,” says Källenius. Having this much centralized control over the software means updates and improvements can be made much quicker than before.
The new E-Class is the first Mercedes to have the updated MBUX operating system and cloud infrastructure, in which every single line of code has been programmed by Mercedes for the first time.
Like nearly every other carmaker, Mercedes recently announced that its future EVs will use the NACS charge port pioneered by Tesla. NACS will soon become an SAE standard, which Källenius says played into the decision to switch. “We always do what we think is best for the customer in terms of convenience, and the most likely scenario is NACS,” says Källenius. The first NACS-equipped Benzes won’t start coming out until around 2025, and in the meantime the brand will offer an adapter for existing EVs with the CCS charge port.
Automakers have never historically worked on gas station infrastructure, leaving that to energy companies, but in the electric era that is changing too. Accessible fast charging is potentially the largest pain point for EV customers, so more car companies are figuring out their own solutions to help aid the lagging infrastructure. Later this year Mercedes will open its first high-speed charging stations in the US, with 10,000 coming to America, China and Europe by the end of the decade as part of a multi-billion-dollar investment. The switch to NACS will help in the meantime, allowing Mercedes EV drivers to use Tesla’s expansive Supercharger network. “While we’re building our charging infrastructure, why not offer the Mercedes customer access to the 12,000 chargers built by another company,” Källenius says, “it will create more convenience and maybe take away a little bit of doubt for people that are thinking about buying an EV.”
When it comes to passenger cars Källenius says EVs are the clear way forward versus hydrogen or other synthetic fuels, but those solutions could have other uses. Shipping is one of the biggest issues when it comes to decarbonization; for mass-volume models it’s easy enough to build a local factory in China or the U.S., but for a low-volume model like the SL sports car it’s not economically feasible to have multiple production locations. Mercedes is maximizing its use of shipping by rail, especially in countries like Germany where it’s more feasible, and it’s experimenting with using hydrogen for semi trucks. Overseas and air shipping is even tougher to decarbonize, but synthetic fuels could help with that in the future too.
Källenius just celebrated his 30th anniversary at Mercedes, and he says right now is the most exciting time to be in the industry because everything is changing.
“We have to reinvent the original invention.,” he says. “We have got to be Gottlieb Daimler and Karl Benz again.”
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Investing in red states doesn’t make defying Trump any safer.
In the end, it was what the letters didn’t say.
For months — since well before the 2024 election — when asked about the future health and safety of the clean energy tax credits in the Inflation Reduction Act, advocates and industry folks would point to the 20 or so House Republicans (sometimes more, sometimes fewer) who would sign on to public statements urging their colleagues to preserve at least some of the law. Better not to pull out the rug from business investment, they argued. Especially not investment in their districts.
These letters were “reassuring to a lot of folks in clean energy and climate communities,” Chris Moyer, the founder of Echo Communications and a former staffer for longtime Senate Majority Leader Harry Reid, told me.
“I never felt reassured,” Moyer added.
Plenty of people did, though. The home solar company Sunrun, for instance, told investors in a presentation earlier this monththat a “growing number of Republicans in Congress — including 39 overall House members and four Senators — publicly support maintaining energy tax credits through various letters over the past few months.” The company added that “we expect a range of draft proposals to be issued, possibly including draconian scenarios, but we expect any extreme proposals will be moderated as they progress.”
Instead, the draft language got progressively worse for the residential solar industry, with the version that passed the House Thursday morning knocking billions of dollars off the sector, as tax credits were further squeezed to help make room for other priorities that truly posed an existential threat to the bill’s passage.
What Sunrun and others appear to have failed to notice — or at least publicly acknowledge — is that while these representatives wanted to see tax credits preserved, they never specified what they would do if their wishes were disregarded. Unlike the handful of Republicans who threatened to tank the bill over expanding the deduction for state and local taxes (each of whom signed one of the tax credit letters, at some point), or the Freedom Caucus, who tend to vote no on any major fiscal bill that doesn’t contain sizable spending cuts (so, until now, every budget bill), the tax credit Republicans never threatened to kill the bill entirely.
Ultimately, the only Republicans to outright oppose the bill did so because it didn’t cut the deficit enough. All of the House Republicans who signed letters or statements in support of clean energy tax credits voted yes on the legislation, with a single exception: New York’s Andrew Garbarino, who reportedly slept through the roll call. (He later said he would have voted for it had he been awake.)
“The coalition of interests effectively persuaded Republican members that tax credits were driving investment in their districts and states,” Pavan Venkatakrishnan, an infrastructure fellow at the Institute for Progress, told me in a text message. “Where advocates fell short was in convincing them that preserving energy tax credits — especially for mature technologies Republicans often view skeptically — should take precedence over preventing Medicaid cuts or addressing parochial concerns like SALT.”
The Inflation Reduction Act itself was, after all, advanced on a party-line basis, as was Biden’s 2021 American Rescue Plan. Combined, those two bills received a single Democratic no vote and no Republican yes votes.
In the end, Moyer said, Republican House members in the current Congress were under immense political pressure to support what is likely to be the sole major piece of legislation advanced this year by President Trump — one that contained a number of provisions, especially on SALT, that they agreed with.
“There are major consequences for individual house members who vote against the president’s agenda,” Moyer said. “They made a calculation. They knew they were going to take heat either way. They would rather take heat from clean energy folks and people affected by the projects.”
It wasn’t supposed to be this way.
White House officials and outside analysts frequently touted job creation linked to IRA investments in Republican House districts and states as a tangible benefit of the law that would make it politically impossible to overturn, even as Congress and the White House turned over.
“President’s Biden’s policies are leading to more than 330,000 new clean energy jobs already created, more than half of which are in Republican-held districts,” White House communications director Ben LaBolt told reporters last year, previewing a speech President Biden would give on climate change.
Even after Biden had been defeated, White House climate advisor Ali Zaidi told Bloomberg that “we have grown the political consensus around the Inflation Reduction Act through its execution,” citing one of the House Republican letters in support of the clean energy tax credits.
One former Biden White House climate official told me that having projects in Republican districts was thought by the IRA’s crafters to make the bill more politically sustainable — but only so much.
“A [freaking] battery factory is not going to save democracy,” the official told me, referencing more ambitious claims that the tax credits could lead to more Democratic electoral victories. (The official asked to remain anonymous in order not to jeopardize their current professional prospects.) Instead, “it was supposed to make it slightly harder for Republicans to overturn the subsidies.”
Congresspeople worried about jobs weren’t supposed to be the only things that would preserve the bill, either, the official added. Clean energy and energy-dependent sectors, they thought, should be able to effectively advocate for themselves.
To the extent that business interests were able to win a hearing with House Republicans, they were older, more traditionally conservative industries such as nuclear, manufacturing, agriculture, and oil and gas.The biofuels industry (i.e. liquid Big Agriculture) won an extension of its tax credit, 45Z. The oil and gas industry’s favored measure, the 45Q tax credit for carbon sequestration, was minimally fettered. Nuclear power was the one sector whose treatment notably improved between the initial draft from the House’s tax-writing committee and the version voted on Thursday. Advanced nuclear facilities can still claim tax credits if they start construction by 2029, while other clean energy projects have to start construction within 60 days of the bill’s passage and be in service by the end of 2028.
“I think these outcomes are unsurprising. In places where folks consistently engaged, things were protected,” a Republican lobbyist told me, referring to manufacturing, biofuels, and nuclear power, requesting anonymity because they weren’t authorized to speak publicly. “But assuming a project in a district would guarantee a no vote on a large package was always a mistake.”
“The relative success of nuclear is a testament to the importance of having strong champions — predictable but notable show of political might,” a second Republican lobbyist told me, who was also not allowed to speak publicly about the bill.
But all hope isn’t lost yet. The Senate still has to pass something that the House will agree with. Some senators had made noises about how nuclear, hydropower, and geothermal were treated in the initial language.
“Budget reconciliation is, first and foremost, a fiscal exercise,” Venkatakrishnan told me. “Energy tax credits offer a path of least resistance for hitting lawmakers’ fiscal targets. As the Senate takes up this bill, the case must be made that the marginal $100 billion to $200 billion in cuts seriously jeopardizes grid reliability and energy innovation.” Whether that will be enough to generate meaningful opposition in the Senate, however, is the $600 billion question.
A loophole created by the House Ways and Means text disappeared in the final bill.
Early this morning, the House of Representatives launched a full-frontal assault on the residential solar business model. The new language in the budget reconciliation bill to extend the Tax Cuts and Jobs Act passed Thursday included even tighter restrictions on the tech-neutral investment tax credits claimed by businesses like Sunrun when they lease solar systems to residential buyers.
While the earlier language from the Ways and Means committee eliminated the 25D tax credit for those who purchased home solar systems after the end of this year (it was originally supposed to run through 2034), the new language says that no credit “shall be allowed under this section for any investment during the taxable year” (emphasis mine) if the entity claiming the tax credit “rents or leases such property to a third party during such taxable year” and “the lessee would qualify for a credit under section 25D with respect to such property if the lessee owned such property.”
This is how you kill a business model in legislative text.
“Expect shares of solar companies to take a significant step back,” Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients Thursday morning, calling the exclusion “scathing.” Investors are “losing the now false sense of security that we had 'seen the worst' of it with the initial House draft.”
Joseph Osha, an analyst for Guggenheim, agrees. “Considering the fact that ~70% of the residential solar industry is now supported by third-party (e.g. lease or PPA) financing arrangements, the new language is disastrous for the residential solar industry,” he wrote in a note to clients. “We believe the near-term implications are very negative for Sunrun, Enphase, and SolarEdge.”
Shares of Sunrun are down 37.5% in mid-day trading, wiping off almost $1 billion worth of value for its shareholders. The company did not respond to a request for comment. Shares of fellow residential solar inverter and systems Enphase are down 20%, while residential solar technology company SolarEdge’s shares are down 24.5%.
“Families will lose the freedom to control their energy costs,” Abigail Ross Hopper, chief executive of the Solar Energy Industries Association, said in a statement, in reference to the last-minute alteration to the investment tax credit.
When the House Ways and Means Committee released the initial language getting rid of 25D by the end of this year but keeping a limited version of the investment tax credit, analysts noted that Sunrun was an unexpected winner from the bill. It typically markets its solar products as leases or power purchase agreements, not outright sales of the system.
The reversal, Dumoulin-Smith wrote, “comes as a surprise especially considering how favorable the initial markup was” to the Sunrun business model.
“Our core solar service offerings are provided through our lease and power purchase agreements,” the company said in its 2024 annual report. “While customers have the option to purchase a solar energy system outright from us, most of our customers choose to buy solar as a service from us through our Customer Agreements without the significant upfront investment of purchasing a solar energy system.”
The new bill, Dumoulin-Smith writes is “‘leveling the playing field’ by targeting all future residential solar originations, whether leased or owned.” The bill is “negative to Sunrun with intentional targeting of the sector.
Last year, Sunrun generated over $700 million from transferring investment tax credits from its solar and storage projects. The company said that it had $117 million of “incentives revenue” in 2024, which includes the tax credits, out of around $1.4 billion in total revenue.
But the tax credits play a far larger role in the business than just how they’re recognized on the company’s earnings statements. The company raises investment funds to help finance the projects, where investors get payments from customers as well as monetized tax credits. Fund investors “can receive attractive after-tax returns from our investment funds due to their ability to utilize Commercial ITCs,” the company said in its report. Conversely, the financing “enables us to offer attractive pricing to our customers for the energy generated by the solar energy system on their homes.”
Morgan Stanley analyst Andrew Perocco wrote to clients that “this is a noteworthy change for the residential solar industry, and Sunrun in particular, which dominates the residential solar [third-party owned] market and has recognized ITC credits under 48E.”
Current conditions: A late-season nor’easter could bring minor flooding to the Boston area• It’s clear and sunny today in Erbil, Iraq, where the country’s first entirely off-grid, solar-powered village is now operating • Thursday will finally bring a break from severe storms in the U.S., which has seen 280 tornadoes more than the historical average this year.
1. House GOP passes reconciliation bill after late-night tweaks to clean energy tax credits
The House passed the sweeping “big, beautiful” tax bill early Thursday morning in a 215-214 vote, mostly along party lines. Republican Representatives Thomas Massie of Kentucky and Warren Davidson of Ohio voted no, while House Freedom Caucus Chair Andy Harris of Maryland voted “present;” two additional Republicans didn’t vote.
The bill will effectively kill the Inflation Reduction Act, as my colleague Emily Pontecorvo has written — although the Wednesday night manager’s amendment included some tweaks to how, exactly, as well as a few concessions to moderates. Updates include:
The bill now heads to the Senate — where more negotiations will almost certainly follow — with Republicans aiming to have it on President Trump’s desk by July 4.
2. FEMA cancels 4-year strategic plan, axing focus on ‘climate resilience’
The combative new acting administrator of the Federal Emergency Management Agency, David Richardson, rescinded the organization’s four-year strategic plan on Wednesday, per Wired. Though the document, which was set to expire at the end of 2026, does not address specific procedures for given disasters, it does lay out goals and objectives for the agency, including “lead whole of community in climate resilience” and “install equality as a foundation of emergency management.” In axing the strategic plan, Richardson told staff that the document “contains goals and objectives that bear no connection to FEMA accomplishing its mission.”
A FEMA employee who spoke with Wired stressed that while rescinding the plan does not have immediate operational impacts, it can still have “big downstream effects.” Another characterized the move by the administration as symbolic: “There are very real changes that have been made that touch on [equity and climate change] that are more important than the document itself.”
3. Energy Department redirects Puerto Rican rooftop solar investment to upkeep of fossil fuel plants
The U.S. federal government is redirecting a $365 million investment in rooftop solar power in Puerto Rico to instead maintain the island’s fossil fuel-powered grid, the Department of Energy announced Wednesday. The award, which dates to the Biden administration, was intended to provide stable power to Puerto Ricans, who have become accustomed to blackouts due to damaged and outdated infrastructure. The Puerto Rico Electric Power Authority declared bankruptcy in 2017, and a barrage of major hurricanes — most notably 2017’s Hurricane Maria — have destabilized the island’s grid, Reuters reports.
In Energy Secretary Chris Wright’s statement, he said the funds will go toward “dispatching baseload generation units, supporting vegetation control to protect transmission lines, and upgrading aging infrastructure.” But Javier Rúa Jovet, a public policy director for Puerto Rico’s Solar and Energy Storage Association, added to The Associated Press that “There is nothing faster and better than solar batteries.”
4. EDF, Shell, and others to collaborate on hydrogen emission tracker
The Environmental Defense Fund announced Wednesday that it is launching an international research initiative to track hydrogen emissions from North American and European facilities, in partnership with Shell, TotalEnergies, Air Products, and Air Liquide, as well as other academic and technology partners. Hydrogen is an indirect greenhouse gas that, through chemical reactions, can affect the lifetime and abundances of planet-warming gases like methane and ozone. Despite being a “leak-prone gas,” hydrogen emissions have been poorly studied.
“As hydrogen becomes an increasingly important part of the energy system, developing a robust, data-driven understanding of its emissions is essential to supporting informed decisions and guiding future investments in the sector,” Steven Hamburg, the chief scientist and senior vice president of EDF, said in a statement. Notably, EDF took a similar approach to tracking methane over a decade ago and ultimately exposed that emissions were “a far greater threat” than official government estimates suggested.
5. The best-selling SUV in America will now be available only as a hybrid
Toyota
The bestselling SUV in America, the Toyota RAV4, will be available only as a hybrid beginning with the 2026 model, Car and Driver reports. The car will be available both as a conventional hybrid and as a plug-in that works with CCS-compatible DC fast chargers, meaning “owners can quickly fill up its battery during long road trips” to minimize their fossil fuel mileage, The Verge adds. The RAV4 will also beat the Prius for electric range, hitting up to 50 miles before its gas engine kicks in.
Toyota’s move might not come as a complete surprise given that the automaker already introduced a hybrid-only lineup for its Camry. But given the popularity of the RAV4, Car and Driver notes that “if you ever wondered whether or not hybrids have entered the mainstream yet, perhaps this could be a tipping point.”
Nathan Hurner/USFWS
The Fish Lake Valley tui chub, a small minnow threatened by farming and mining activity, could become the first species to be listed as endangered under the second Trump administration.