Chinese electric-vehicle makers are finding a new way to monetize their lead in electrification: selling regulatory carbon credits to global automakers that need them to meet emissions rules. XPENG is the latest example.

The Chinese EV maker has signed carbon credit agreements with Porsche and other international automakers covering the European Union, the UK, and Australia, according to recent reports. The total transaction value is expected to exceed 1 billion yuan ($149 million), while XPENG expects to receive more than 500 million yuan ($74.5 million) from carbon-credit trading in 2026. An XPENG vice president confirmed the figures publicly.

The development points to a wider shift in the global auto industry. Chinese manufacturers are no longer only exporting electric cars. Their growing EV sales are also creating regulatory assets that other automakers can use to manage fleet emissions.

Europe’s Carbon Rules Put a Price on EV Advantage

The European Union’s CO₂ rules are the main driver behind this market. Under the current framework, new passenger cars registered in the EU face a fleet-wide target of 93.6 grams of CO₂ per kilometer for 2025–2029. The target falls to 49.5 g/km from 2030 to 2034, before reaching 0 g/km from 2035 under the existing regulation.

Automakers can form emissions pools. This allows manufacturers with lower fleet emissions to combine their results with manufacturers that have higher emissions. The system creates a financial value for automakers that sell large numbers of zero-emission vehicles.

The EU also applies an excess-emissions premium of €95 for each gram of CO₂ per kilometer above the applicable target for each new vehicle, subject to the rules governing the relevant compliance period. For manufacturers selling large numbers of higher-emission vehicles, surplus credits from EV-heavy manufacturers can therefore have significant financial value.

The system is already operating at scale. In 2025, several major automakers formed pools involving Tesla, while Mercedes established a pool involving Volvo Cars, Polestar and Smart. 

• SEE MORE: EU’s 2025 Emission Rules Led Tesla and Mercedes to Pool Carbon Credits to Avoid $15.6 Billion Fine
  

XPENG is now entering this market as a supplier of compliance capacity.

XPENG and Porsche Open a New China-Europe Link

The most notable agreement involves Porsche.

According to an official European Commission filing cited in recent reporting, Porsche withdrew from the Volkswagen Group’s internal emissions pool and established an independent, open pool for 2026 and 2027, with XPENG as a key partner. Financial terms have not been disclosed.

The structure is important because Porsche has a large portfolio of performance and premium vehicles, while XPENG’s fleet is centered on battery-electric vehicles.

• In a regulatory emissions pool, the calculation is straightforward: more zero-emission vehicles can lower the average emissions of the combined fleet.

XPENG therefore gains another source of revenue from its EV sales without needing to sell the credits as conventional voluntary carbon offsets. That distinction matters.

These are regulatory CO₂ compliance credits, created by vehicle-emissions rules. They are not the same as voluntary carbon credits generated by projects such as forests, methane capture, or direct air capture.

China’s EV Boom Is Creating the Credit Supply

XPENG’s ability to generate credits comes from the rapid expansion of its electric vehicle business. The International Energy Agency estimates that global electric car sales exceeded 20 million units in 2025, up 20% from 2024. One in four new cars sold worldwide was electric.

China remained the largest EV market, with more than 13 million electric cars sold in 2025. Nearly 55% of all new cars sold in China were electric. Chinese manufacturers also accounted for 60% of global electric car sales in 2025.

The production advantage is just as large. China produced about 16 million electric cars in 2025, nearly 75% of global EV output. Chinese electric car exports more than doubled to over 2.5 million units.

Europe is becoming an increasingly important destination.

Sales of Chinese-made electric cars in Europe increased by almost 50% in 2025 to about 940,000 units, according to the IEA. Chinese brands accounted for more than 70% of Chinese-made EV imports into the EU, up from 50% in 2023. This expanding overseas EV fleet is also expanding the potential pool of regulatory credits.

XPENG’s Global EV Expansion Adds Another Revenue Stream

XPENG’s overseas business is expanding rapidly. The company delivered 45,008 vehicles outside China in 2025, up 96% year over year, while total deliveries reached 429,445, up 126%. It was selling vehicles in 60 countries and regions by year-end.

In Q2 2026, overseas sales topped 20,000 vehicles for the first time, up 81% year over year. Overseas revenue accounted for more than 25% of first-half revenue, with an average selling price above €40,000.

XPENG has also expanded its partnership with Volkswagen, which acquired a 4.99% stake for about $700 million in 2023. Their first jointly developed model entered mass production in March 2026.

The growing overseas EV business can therefore support both vehicle sales and XPENG’s ability to generate compliance value in regulated markets.

Leapmotor Shows XPENG Is Not Alone

XPENG is not the first Chinese automaker to monetize surplus emissions performance. Leapmotor transferred EU carbon credits to Stellantis for European and UK sales, generating 1.11 billion yuan ($165 million) in 2025. Its 2026 credit trading cap was later raised to 2.8 billion yuan ($417 million).

Tesla has used the same model for years, reporting about $2 billion in regulatory credit revenue in 2025, down from $2.76 billion in 2024.

For EV makers, regulatory credits can provide additional revenue. For automakers with higher fleet emissions, they can offer another compliance tool. However, their value remains dependent on emissions rules, pooling arrangements, and future regulatory changes.

XPENG’s Carbon Strategy Extends Beyond Credit Sales

XPENG’s carbon strategy extends beyond regulatory credits. Its 2025 ESG report targets a 9% reduction in lifecycle carbon emissions per passenger vehicle by 2027 from 2023 levels, alongside a 38% reduction in operational carbon emissions intensity.

The company aims for carbon neutrality across its product lifecycle and corporate operations by 2050.

In 2025, XPENG reported a product carbon footprint of 169.7 grams of CO₂e per kilometer, down 18% from 2023. Operational carbon emissions intensity fell 29.9% to 205.8 tonnes of CO₂e per CNY 100 million.

It also recorded 73,000 MWh of clean energy consumption and 106,000 MWh of photovoltaic generation. XPENG estimates its 2025 vehicles will avoid more than 6 million tonnes of lifecycle greenhouse-gas emissions compared with conventional vehicles.

More EVs Mean a Bigger Compliance Credit Pool

The expanding EV market provides the underlying supply of these compliance assets. The IEA expects global electric-car sales to reach about 23 million vehicles in 2026, or roughly 28% of total car sales. EVs could account for about one-third of European sales and nearly 60% of China’s market.

• By 2035, the global EV fleet could exceed 450 million vehicles under the IEA’s Current Policies Scenario.

Europe’s fleet is also becoming cleaner. Average CO₂ emissions from new passenger cars fell 28% between 2019 and 2024, while zero-emission vehicles accounted for 14.5% of new registrations in 2024.

As EV adoption rises and emissions rules tighten, the market for regulatory carbon credit transfers could expand.

Chinese EV Makers Are Turning Electrification Into a New Asset Class

XPENG’s agreements with Porsche and other international automakers show how China’s EV advantage is creating a new source of commercial value. Chinese EV exports exceeded 2.5 million vehicles, and Europe imported about 940,000 Chinese-made EVs.

Against this backdrop, XPENG expects more than 500 million yuan ($74.5 million) in carbon credit revenue in 2026. For European automakers, these credits provide another compliance tool as emissions standards tighten. For Chinese EV makers, they create an additional revenue stream from their growing zero-emission vehicle fleets.

Chinese automakers are therefore increasingly selling not only electric vehicles into Europe, but also the emissions-compliance value created by those vehicles.

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Disseminated on behalf of Sierra Madre Gold & Silver Ltd.

Silver has had a volatile 2026. It has pulled back sharply from its 2026 peak. The metal reached a 52-week high of about $115 per ounce in January before falling sharply during the year. 

By mid-September, silver futures had dropped to about $63 per ounce, roughly 45% below that peak. Prices later recovered to around $66.70 by September 18.

That move highlights an important shift for silver producers. The market is no longer simply a story of rising prices. Producers now have to operate through a much wider price range while managing costs, production growth, and capital spending.

The decline has changed the operating backdrop for silver producers, but the underlying supply picture remains tight.

According to the World Silver Survey 2026, global silver mine production increased 3% in 2025 to 846.6 million ounces. Recycling added another 197.6 million ounces. Yet, total demand reached 1.13 billion ounces, leaving the market with a 40.3 million-ounce deficit, the fifth consecutive annual shortfall.

Metals Focus expects another deficit in 2026, estimated at 46.3 million ounces. That backdrop matters for Sierra Madre Gold & Silver as it moves from restarting one mine to building a larger production base.

The changing silver price environment, therefore, tests the company’s strategy: how does an operating producer manage growth when the commodity price can move sharply in either direction?

Silver’s 2026 Rally Gives Way to a Sharp Reset

Silver entered 2026 at elevated levels after a strong run in late 2025 and early 2026, but it significantly dropped this month. The decline was not driven by one factor alone.

Higher U.S. Treasury yields, a stronger dollar, and changing expectations for Federal Reserve policy have affected precious metals. Silver can also experience larger price swings than gold because it combines investment demand with industrial uses.

Recently, silver had recovered to over $66 per ounce. That rebound, however, does not erase the earlier decline. Instead, it shows why mining companies must plan around changing commodity prices rather than rely on a single price environment.

For Sierra Madre, that distinction matters because the company is already generating revenue from an operating mine.

La Guitarra Is Already Generating Silver Revenue

La Guitarra is no longer simply a development project. Sierra Madre restarted commercial production at the Mexican mine on January 1, 2025. The operation includes an underground mine and a processing plant that previously operated at 500 tonnes per day.

Moreover, the company reported 66,691 ounces of silver sold in Q2 2026, compared with 65,683 ounces in the same quarter of 2025.

The mine generated US$25 million of revenue and US$8.9 million of gross profit in 2025, its first full year back in production.

In the first half of 2026, La Guitarra generated another US$18.3 million of revenue and US$3.5 million of adjusted EBITDA. Sierra Madre also repaid its US$5 million First Majestic loan in July and ended June with US$22.2 million in cash and US$25 million in working capital.

The company received US$75.65 per silver-equivalent ounce sold in Q2 2026, compared with US$33.22 a year earlier.

Those figures show the effect that higher realized metal prices had on revenue. But they also highlight why future results cannot simply be extrapolated from the second quarter.

The spot and futures market has since moved below the $75.65 realized silver price reported for Q2. If lower prices persist, the company could face lower revenue per ounce even as production increases. That makes the production ramp-up increasingly important.

That higher realized price helped offset higher costs during a development-heavy quarter.

Sierra Madre reported all-in sustaining costs of US$54.73 per ounce produced, up from US$32.54 a year earlier. The company attributed the increase to development ore, lower recoveries, power outages, a stronger Mexican peso, and higher royalties.

The cost increase shows why the silver price pullback matters. Higher metal prices can support revenue and margins, but production growth can also bring temporary cost pressure.

SEE MORE: Sierra Madre: Breathing New Life into Mexico’s Silver and Gold Heartland

Sierra Madre Pushes La Guitarra Toward Higher Throughput

Sierra Madre is working to increase processing capacity at La Guitarra. The first phase is expected to bring capacity to about 750–800 tonnes per day, with the company expecting the expansion to come online before the end of Q3 2026. 

• A second phase is planned to increase capacity to 1,200–1,500 tonnes per day by Q3 2027.

The company reported that throughput had reached as high as 672 tonnes per day in August, as it continued to ramp up the operation. This timing matters.

Higher throughput can increase the number of ounces produced and sold, although the actual financial benefit will depend on factors including grades, recoveries, operating costs, capital requirements and the silver and gold prices received.

Sierra Madre reported Q2 2026 cash costs of $49.28 per silver-equivalent ounce produced, compared with $26.89 in Q2 2025. Its all-in sustaining cash cost was $54.73 per silver-equivalent ounce, versus $32.54 a year earlier.

The company said it expects higher production from the expansion, along with a reduction in costs as the operation scales up. That makes the next stage of the ramp-up particularly important in a lower-price environment.

Del Toro Adds Another Mexican Silver Asset

Sierra Madre added a second permitted silver mine to its portfolio in June 2026 with the acquisition of the Del Toro Silver Mine in Zacatecas, Mexico.

The company closed the deal with First Majestic Silver on June 22, 2026. First Majestic previously operated Del Toro from 2013 to 2019 and invested about US$175 million to build the operation.

The site includes three underground mines — San Juan, Perseverancia and Dolores — with more than 60 kilometres of underground development. It also has a 3,000-tonne-per-day flotation circuit and about 3,650 tpd of installed mill capacity.

Del Toro has a production history. It averaged 2.54 million silver-equivalent ounces per year from 2015 to 2018 under First Majestic.

Sierra Madre plans to restart the mine at a smaller scale. The company expects to spend about US$10 million initially, targeting 800 tpd, with a potential increase to 1,600 tpd. The restart is targeted for mid-2027, with production expected to begin in mid-2028.

Exploration will also be important. Sierra Madre has identified 23 deposits at Del Toro and plans about 30,000 metres of diamond drilling at a cost of roughly US$12 million.

A 2020 historical estimate reported 7.57 million silver-equivalent ounces of measured and indicated material and 11.18 million ounces of inferred material. These figures are historical and are not current mineral resources. 

Sierra Madre plans new drilling and resource modelling to establish an updated resource.

The acquisition gives the company another developed Mexican silver asset with existing infrastructure, past production and exploration upside, while the company continues expanding La Guitarra.

Mexico Matters to the Silver Supply Story

Del Toro also places Sierra Madre in one of the world’s most important silver-producing countries.

Mexico produced 172.9 million ounces of silver in 2025, down 5% from 181.1 million ounces in 2024. Still, it remained the world’s largest silver-producing country and accounted for about 20% of global mine supply.

That makes Mexico an important part of the global supply story, while Zacatecas itself has a long history of silver production.

The Katusa Research report notes that roughly half of global silver production comes from Latin America, with Mexico accounting for about one-fifth of global output.

Sierra Madre’s strategy therefore combines existing Mexican infrastructure with a market where new supply remains difficult to bring online quickly.

Lower Silver Prices Put More Focus on Mine Execution

The silver pullback changes the economics of new production, even if the longer-term supply deficit remains. For Sierra Madre, the key issue is no longer simply whether silver prices are rising. The company now has to execute two different stages of growth.

La Guitarra needs to increase throughput while bringing costs under control. Del Toro needs to move through drilling, resource definition, mine planning, and restart work before it can contribute production.

The company is therefore entering a more demanding phase. The next stage of Sierra Madre’s story will depend on how efficiently it converts existing infrastructure, resources, and permits into production.

For now, La Guitarra provides an operating base while Del Toro offers a second potential source of growth. The silver price has pulled back, but Sierra Madre’s production strategy is moving forward. 

• MUST READ: Most Silver Juniors Are Still Drawing Pictures. This One Is Shipping Concentrate.

DISCLAIMER
New Era Publishing Inc. and/or CarbonCredits.com (“We” or “Us”) are not securities dealers or brokers, investment advisers, or financial advisers, and you should not rely on the information herein as investment advice. Sierra Madre Gold and Silver Ltd. (“Company”) made a one-time payment of $25,000 to provide marketing services for a term of one month. None of the owners, members, directors, or employees of New Era Publishing Inc. and/or CarbonCredits.com currently hold, or have any beneficial ownership in, any shares, stocks, or options of the companies mentioned.

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Certain statements contained in this news release may constitute “forward-looking information” within the meaning of applicable securities laws. Forward-looking information generally can be identified by words such as “anticipate,” “expect,” “estimate,” “forecast,” “plan,” and similar expressions suggesting future outcomes or events. Forward-looking information is based on current expectations of management; however, it is subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those anticipated.

These factors include, without limitation, statements relating to the Company’s exploration and development plans, the potential of its mineral projects, financing activities, regulatory approvals, market conditions, and future objectives. Forward-looking information involves numerous risks and uncertainties and actual results might differ materially from results suggested in any forward-looking information. These risks and uncertainties include, among other things, market volatility, the state of financial markets for the Company’s securities, fluctuations in commodity prices, operational challenges, and changes in business plans.

Forward-looking information is based on several key expectations and assumptions, including, without limitation, that the Company will continue with its stated business objectives and will be able to raise additional capital as required. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, or intended.

There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially. Accordingly, readers should not place undue reliance on forward-looking information. Additional information about risks and uncertainties is contained in the Company’s management’s discussion and analysis and annual information form for the year ended December 31, 2025, copies of which are available on SEDAR+ at www.sedarplus.ca.

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information reflects management’s current beliefs and is based on information currently available to the Company. The forward-looking information is made as of the date of this news release, and the Company assumes no obligation to update or revise such information to reflect new events or circumstances except as may be required by applicable law.

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