Tesla (TSLA.US) is poised to profit from EU emissions regulations to the tune of over $1 billion.

UBS analysts predict that Tesla (TSLA.US) could receive more than 1 billion euros ($10 billion) in compensation this year from rival carmakers that need to meet stricter pollution standards in the EU. The company will team up with at least five carmakers, including Toyota (TM.US), Stellantis NV (STLA.US) and Ford (F.US) to balance their fleet emissions, according to a new EU document. Under the agreement, carmakers that sell fewer electric vehicles will pay compensation to companies like Tesla that exceed carbon dioxide emissions limits.Analysts led by Patrick Hummel wrote in a Wednesday report that if Tesla monetized all its carbon dioxide emissions, it could receive more than 1 billion euros. Hummel also predicted that Volvo could receive up to 300 million euros in compensation this year.The region's carmakers have been lobbying the EU to loosen emissions standards, or face fines, production cuts, cooperation with foreign rivals or selling electric vehicles at a loss. Plug-in vehicle registrations stalled last year as subsidies expired.The document showed that manufacturers interested in joining the Tesla alliance had to submit applications and sign confidentiality agreements by Feb. 5, providing their carbon dioxide emissions data to assess the risk of the alliance not meeting its targets.Meanwhile, the deadline for the Volvo-Mercedes alliance is Feb. 7. Stellantis' surprise merger with Tesla eases pressure on the company to speed up production of electric vehicles.Hummel also said that the formation of the Tesla alliance raised questions about the compliance plans of Volkswagen and Renault, which face the biggest emissions targets. It is unclear whether more manufacturers will join.The analyst said that the strategic options for Volkswagen and Renault have been reduced by the formation of the Tesla alliance, which could force them to sell more dilutive electric vehicles, putting their pre-tax profit at risk of about 10% this year.Renault criticized the EU Commission's decision, saying it would lead to the weakening of European industry. The company said: "This leads to the weakening of European industry," adding that it was not yet clear whether it would merge with rivals.Volkswagen and Renault declined to comment.