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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
CHALLENGES
Of course, no single company, industry, or even nation can address this issue alone. Our industry is part of a complex, energy-intensive global
system. This system is growing even larger and more complex as new markets like China and India come on line with dramatic increases in energy
demands overall as well as significant growth in the number of vehicles on the road and miles traveled. Stabilization will therefore require
strategies that make financial sense, engage consumers, encourage technological innovation and provide stable, market-based mechanisms across
the entire economy.
Within the road transport sector, we see the opportunities to reduce in-use GHG emissions defined by three inter-related factors:
• The embedded carbon content of the fuel available to consumers.
• The carbon efficiency of vehicles.
• The purchase decisions and driving behavior of customers, including vehicle miles traveled
This “fuel + vehicle + driver” formula underpins our engagement with both fuel companies and consumers in addressing the GHG challenge.
CONVERGENT ISSUES
Importantly, the issue of climate change is closely related to the equally pressing issues of energy security (which tends to be reflected primarily in
regulations) and fuel prices (which drive market behavior). GHG emissions are a common currency for all of these issues. But we recognize that
customer and policy priorities differ around the world, and our approaches vary accordingly; for example, our voluntary agreement as part of ACEA in
Europe has been focused directly on CO
2
reduction. Our aggressive investment in hybrid production in the U.S. has been driven in part by consumer
demand for more fuel efficient vehicle choices and innovative technologies. And our support for an expanded bio-ethanol infrastructure in the U.S. is
underpinned by the call for less dependence on imported oil. Each of these initiatives results in lower CO
2
emissions, but emerges from different
market and policy priorities.
In this climate change report we will focus on GHG emissions and stabilization of atmospheric CO
2
. However, it’s important to note that our climate
change strategy fits within a much more comprehensive approach to sustainability that includes overall environmental management, safety, and our
leadership in human rights. For further information on our broader sustainability framework, we invite you to refer to our recently released
Sustainability Report, available at www.ford.com/go/sustainability.
COMMITMENTS
Against this background, we are committed to playing a leadership role in the reduction and stabilization of GHG emissions. Specifically:
• We are continuously reducing the GHG emissions and energy usage of our operations.
• We are developing the flexibility and capability to market lower-GHG-emissions products that will attract consumers.
•
We are working with industry partners, oil companies and policy makers to establish an effective and more certain market, policy and
technological framework for reducing road transport GHG emissions.
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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
Background
THE CLIMATE ISSUE
The evidence for environmental and social impacts of climate change is discussed in detail and greater authority in numerous sources and will not
be addressed here. However, we recognize that some key conclusions have earned widespread support by scientists, policy makers and business
l
eaders and therefore define the assumptions underpinning our approach to climate change. We find these conclusions compelling enough to serve
a
s a framework for our analysis and planning.
For example, the growing weight of evidence holds that man-made greenhouse gas emissions are starting to influence significantly the world's
climate in ways that affect all parts of the globe.
And many scientists, businesses and governmental agencies have concluded that stabilizing the atmospheric CO
2
concentration at around 550 parts
per million (ppm) (compared with the current 380 ppm and the pre-industrial level of approximately 270 ppm), may help forestall or substantially
delay the most disruptive aspects of global climate change.
BUSINESS DRIVERS
The related issues of climate change and energy security have become a market force that is changing the operating environment in the automobile
industry and putting business value at stake. That value can be measured in at least four dimensions.
Market share
We develop, produce and market vehicles for retail customers. Our viability as a business depends above all on offering products and services that
customers will buy.
Over the past decade, the U.S. market shows that few customers choose cars based on specific concerns about climate change and GHG emissions.
Even fewer are willing to pay the incremental cost of “green” automotive technologies or accept trade offs of other attributes (safety, performance,
features, styling). Our experience with retail marketing campaigns based on environmental attributes tend to have very little effect on sales.
However recent research indicates that this might be changing. According to research conducted for Ford in the U.S. by DYG, Inc., fuel economy is
now equal with safety and more important than price in vehicle purchase decisions; up four points from the previous report. This suggests that
consumer concerns about the environmental impact of cars are increasing at a dramatically higher rate than concerns about vehicle safety, reliability
or affordability.
Importance of Automotive Priorities (T
op three Box)
Improved mpg
Increased reliability &
Dependability
Improved safety
Alterna
tive fuel vehicles
Hybrid vehicles
More af
fordable
2005
Rating %
86
85
82
82
80
73
Pt. Change
2004
+4
-2
-3
+4
0
+2
Pt. Change
2003
+4
-4
-4
+7
+3
-2
We have seen sales of truck-based SUVs across the industry decline during 2005, while
sales of lighter weight cars and car
-based utility vehicles have increased.
There are
many reasons for this, but we assume that at least part of this shift is based on growing
consumer interest in cars and trucks that deliver higher fuel economy figures.
The picture looks somewhat different in markets outside the U.S. In Europe and Japan,
f
or example,
CO
2
,
the primar
y g
reenhouse gas, is already part of the consumer’s
lexicon. High fuel taxes,
CO
2
linked vehicle taxation,
CO
2
linked personal taxation,
specific CO
2
vehicle labeling and more widespread environmental awareness have
already begun to shape consumer preferences towards more CO
2
friendly vehicles.
Regulatory compliance
We are a closely regulated industry. Fuel economy standards have long been a staple of regulation in the auto industry, especially in the U.S. But
climate change and GHG concerns are already beginning to drive the regulatory agenda in many countries and even some U.S. states
In some cases voluntary agreements are taking the place of regulation. In Europe, for example, the European Automobile Manufacturers Association
(ACEA) set a goal of achieving average CO
2
emission reductions of 25 percent by 2008 compared with 1995. And in Canada the auto industry
agreed with the Canadian government to reduce GHG emissions from Canada's f
leet of cars and trucks b
y 5.3 mega
tonnes by 2010.
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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
Whether legislated, voluntary or market driven we continue to anticipate the need for additional GHG emissions reductions and to pursue innovative
ways to cost-effectively introduce required product and advanced technology solutions.
Shareholder Value
We see early signs that investors and analysts are paying increasing attention to the impact of climate change on the companies and industries they
cover. For example, in May 2005, a group of 28 institutional investors with assets in excess of US$3 trillion released an action plan that calls on
companies, regulators and the investment industry to provide greater disclosure and comprehensive analysis on the investment risks associated with
climate change. Since then, we have seen investment research reports by Merrill Lynch and JP Morgan Chase that explore these investment risks in
the automobile industry. And Goldman Sachs recently declared that “diverse, healthy natural resources… are a critical component of social and
sustaina
ble economic development” and committed to “help find effective market-based solutions to address climate change, ecosystem degradation
and other critical environmental issues.” The quality of corporate strategies for managing the risks and capturing the opportunities associated with a
carbon constrained economy will likely become more important in investor decisions.
INDUSTRY CONSIDERATIONS
There are several characteristics of the global automotive industry that bear significantly on how we are able to respond to the challenge of climate
change. The U.S. industry, in particular, is addressing significant and well-publicized structural challenges, from legacy and health care costs, to
excess manufacturing capacity, to high costs in our supply chain.
First, our business involves a
with greenhouse gas emissions that vary at each stage. Only approximately 10 percent of the
GHG emissions associated with any given car or truck we make are emitted directly by our plants and facilities. Most of the remaining 90 percent of
the emissions attributed to any vehicle over the course of its lifetime is emitted during its use by the consumer. This means that addressing lifecycle
GHG emissions depends on engaging consumers on their purchase decisions, driving behavior and their choice of fuels.
Second, we face at times
. The picture varies by geography, market segment, and
demographic profile. For example, governments are often tempted locally to encourage specific technology solutions, but there is considerable
uncertainty about which technologies, combinations of technologies and technology pathways will prevail and over what time frames, and
governments are rarely best equipped to pick technology winners and losers.
Also, some policy makers favor demand-side measures such as fuel taxes and Green Public Procurement policies, while others prefer supply-side
controls such as fuel-econom
y or GHG emissions standards,
crea
ting significantly different market dynamics and product strategies from one region
to another.
And often regulations designed to promote different public goods directly compete with one another; for example the addition of new safety
technolog
y to vehicles often drives up weight which in turn has a nega
tive effect on fuel economy. And all these conflicting signals drive costs into
our products which cannot al
ways be recovered in the sales price.
Third,
the GHG footprint of the in-use phase of light duty vehicles must be measured on a
basis,
that is,
the total emissions from the
production of the original source of energy (e.g. crude oil, bio-fuels, etc) into a usable fuel, the amount of energy consumed to produce the vehicle, to
the fuel consumed by the vehicle during its in-use lifetime.
Fourth, the automotive industry operates on
. It can take four or more years
and billions of dollars to bring a totally new vehicle and powertrain from the drawing board to the show room floor. The long time frame and heavy
financial commitment underscore our fiduciary responsibility to carefully weigh the risks of investing our shareholders' capital on products with
uncertain prospects.
They also highlight the need for more certainty stable and predictable pricing signals and policy frameworks.
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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
Strategic Roadmap
STRATEGIC PRINCIPLES
Going forward, our approach to GHG stabilization will be based on some key principles.
First, technical, economic and policy approaches to climate change need to recognize that all CO
2
molecules (or GHG equivalents) produced by human
activity make the same contribution to the atmosphere's concentration of greenhouse gases. The cost of mitigating those emissions, however, varies
significantly depending on their source, and
The road transport sector is commonly perceived as a low-cost target for emissions reduction. The light duty vehicles fleet in particular is
characterized by a low consumer elasticity of demand for mobility, long lags in vehicle design and slow turnover in the vehicle stock (e.g., 15-20
years), and lack of a practical large-volume substitute for petroleum-based fuel. It also lacks easy access to emissions-reducing mechanisms
available in other sectors such as fuel-switching to less carbon intensive sources and carbon capture and storage. The relatively high costs of
emission reduction make it important that control policies be as efficient as possible, which implies that the marginal costs of compliance be
equalized across sectors.
Among other things, this means that while reducing GHG emissions from the road transport sector will be an important element in addressing long
term climate change concerns, care should also be taken to achieve the most economically cost-efficient reductions. A pure pro-rata assignment of
burden for reducing GHG emissions across individual sectors without the ability to trade-off costs and benefits may not be the most appropriate
response.
Second, relative to in-use GHG emissions, the auto industry represents a closely interdependent system, characterized best by the equation:
. That means, simply, that the total in-use GHG emissions of any given vehicle depends on the carbon content
of the fuels that fuel companies bring to market, combined with fossil fuel efficiency of the vehicle itself, combined with the fuel choices, vehicle
choices, miles driven and driving behaviors made by the consumer. This point of view that fuel, vehicle and driver are all critical stands in contrast to
policy prescriptions that focus solely on vehicle technology and design.
Each link in this chain depends on the others. For example, fuel companies can produce a range of fuels with varying carbon content, but
successfully bringing those fuels to market depends on consumer demand and a critical mass of vehicles equipped to use alternative fuels.
Similarly, auto companies can (and do) provide a wide range of products with varying fuel economy performance. The deployment on the road of
more fuel-ef
ficient vehicles depends on consumer preference and willingness to pa
y and – in the case of alterna
tive fuel powertrains – the
a
vaila
bility of low-carbon alternative fuels.
And consumers can affect thier own GHG emissions by making decisions about how they drive, how many miles they drive, what modes of
transporta
tion they choose to use,
which cars or trucks they purchase, and which fuels they buy.
Importantly, in a system in which no single player controls all inputs, changes in output – in this case GHG emissions – will require unprecedented
coordination across all sectors.
Third, the future developments of technologies, markets, political expectations and even the natural manifestations of climate change are all
uncertain.
Tha
t means tha
t the business strategies we implement – and the public policies that we encourage – will be based on the
.
For us tha
t means developing and maintaining the flexibility and ca
pa
bility to respond to changes in
consumer demand, new technological breakthroughs, competitive actions and regulations. It also means that it is in our business interest to work to
reduce uncertainty and increase the predictability of policy frameworks and market conditions.
We know that almost any scenario will call for reduced fossil GHG emissions, but inside that broad directional expectation lie a host of conflicting
possibilities. Will GHG reductions be driven by fuel efficiency, energy security, or pocketbook concerns? Will hydrogen, bio-fuels, battery electricity,
diesel or some combina
tion emerge as the powertrain technolog
y of choice? Will the emerging markets of China and India pursue a unique path
toward low GHG emissions in their road transport sectors?
Finally,
ma
y dela
y the need f
or drastic and costly reductions
later. Lack of agreement on long term solutions cannot be used as an excuse to avoid near term actions.
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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
STRATEGIC ACTIONS
Our long-term strategy is to contribute to climate stabilization by
• continuously reducing the GHG emissions and energy usage of our operations.
• developing the flexibility and capability to market more lower-GHG-emissions products in line with evolving market conditions.
• working with industry partners, energy companies, consumer groups and policy makers to establish an effective and predictable market, policy
and technological framework for reducing road transport GHG emissions.
Product
Our evolving product portfolio is by far the most important element of our strategy for (and contribution to) a climate stabilization goal.
Our product GHG strategy is unfolding in a series of overlapping phases:
in which we are accelerating our steps toward integrating innovative fuels, efficiencies and GHG reductions into our product
cycle plan and building the capability to innovate further.
in which we take innovative technologies across a range of platforms and develop the full capability to move forward with the
most promising technologies in packages that are competitive on performance and convenience;
in which low GHG vehicles achieve penetration across vehicle categories and represent significant market share; and
in which low GHG vehicles reach dominant market share and fleet CO
2
emissions converge with a target global
stabilization curve.
We have announced publicly several product actions that will increase the number of higher fuel economy, lower GHG emissions vehicles available to
our customers, and others we have not announced for competitive reasons. For example, we have already announced plans to expand our capacity
to build hybrid electric vehicles to 250,000 units per year by 2010. We are also expanding the application of existing technologies that deliver fuel
economy benefits including variable valve timing, fuel shut off, direct injection gasoline engines, clean diesel, and six-speed transmissions.
In addition, we will increase our investment in a portfolio of technologies that deliver improved fuel economy and lower GHG emissions, including:
•
W
eight stabilization and reduction
• Expanded FFV vehicles and partnerships with fuel providers to increase infrastructure
• Gasoline engine downsizing, combined with Direct Injection Spark Ignition (DISI) and pressure charging
•
Hybrid gasoline powerpacks,
shared among the brands
• Clean diesels and the technology to allow them to run on biodiesel above 5% blends
• In Europe, diesels with partial hybrid technologies such as engine stop start, regenerative braking, parallel lithium-ion batteries or
super-capacitors
•
Hydrogen Internal Combustion Engine (ICE) demonstra
tion fleets
• Hydrogen fuel cell research and demonstration fleets
At the portfolio level, the mix of vehicles we sell will continue to be dictated by the marketplace, but we believe that the trend towards more fuel
efficient vehicles, such as cross-over vehicles and smaller SUVs will continue. In addition, by utilizing common platforms, we will be able to offer
greater fuel economy across a wide range of product designs. Specifically, we will be better able to apply weight reductions achieved in one model to
other models without compromising safety, quality or performance.
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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
We are also moving to a system that makes greater use of set combinations of engines and transmissions or Powepacks. An increasing portion of
o
ur products will employ these powerpack drivetrains which are optimized for fuel efficiency.
Our plan also includes innovations aimed at the fuel part of the equation. In the last decade we have produced over 1.5 million flexible fuel vehicles
and beginning in 2006, we will offer an expanded line up of flexible fuel vehicles (FFV) capable of using fuel blends with up to 85 percent bio-
ethanol. While current bio-ethanol production in the US does not provide a substantial reduction in GHG emissions on a well-to-wheels basis, having
a substantial fleet of FFVs in operation is a bridge to widespread use of lower carbon bio-fuels in the future.
The potential exists for expanding production of bio-ethanol from cellulosic sources that would lead to further significant reduction in lifecycle GHG
emissions, but only if we pursue a policy agenda designed to do so. If the five million FFVs (industrywide) on the roads today were operated solely on
fuel blends of 85 percent bio-ethanol based on celluslosic feedstocks, this could displace as much gasoline and provide nearly the same GHG
benefits as about 10 million new hybrid vehicles.
We already have begun positioning our fleet for a future in which bio-fuels play a more significant role. In September 2005 we announced we would
introduce a new line of flexible fuel vehicles (FFVs) in the U.S. including the world's best selling vehicle – the Ford F-150 – which can use blends up
to 85 percent ethano, as well as take proactive steps to support expanded availability of bio-ethanol and customer awareness of the advantages of
FFVs.
In Europe, Ford was the first manufacturer to introduce FFV technology when it launched the product in Sweden. In 2005 Ford took the step of
making the Focus FFV available across Europe and is presently looking at a number of potential partners to explore the possibilities and feasibility of
developing a bio-ethanol fuel infrastructure.
Policy
From a global business perspective, we see a significant amount of political activity around energy security, energy diversity and climate change.
Going forward, we are committed to participating in – and leading, if necessary – a dialogue on energy policy and greenhouse gas emissions that
promotes more energy security and lower GHG emissions across the entire economy, while ensuring stable economic growth and the viability of our
business.
At Ford we believe policies that put constraints on carbon need to focus on all sectors of the economy. They should encourage conservation and the
introduction of lower-carbon fuels and energ
y sources, while increasing the demand for more energy efficient products across all sectors at the
lowest possible social cost and a
t a pace consistent with consumer demand and economic viability
.
These policies need to be implemented in ways
tha
t mitigate any related transitions to avoid economic disruptions and unnecessary costs, with incentives playing a key role.
We also believe that in the transportation sector, vehicle, fuels and fuel-use must be addressed as a system. Also, broad GHG policies in the U.S.,
Europe or other markets need to focus on pursuing the most-efficient and cost-effective ways to reducing fossil energy use and GHG emissions.
Future reduction programs should be based on upstream, carbon trading systems that establish reasonable, gradually reducing the limits on carbon
introduced into the economy. In addition, they must include a safety valve that is based on economic/energy indicators that would allow for the
release of additional emission allowances a
t reasona
ble prices to avoid unintended constraints on economic growth, maintain price stability and
protect vital economic growth and social development needed to help spur demand for more efficient products and support long-term investment,
research and an innovation.
Future policies need to encourage the use of lower
-carbon fuels and energ
y (e.g.,
bio-ethanol fuels and blends) through fa
vorable market signals and
incentives, as well as encourage energy efficiency, carbon sequestration initiatives, offsets, and credits across all phases of the energy value chain.
We believe that a properly structured, upstream system would allow all sectors of the economy to respond to the market signals and pursue the most
cost-ef
fective solutions to improve energ
y conservation and energy efficiency. From a transportation point of view, an effective system would require
gradual but dramatic changes in our product and technology mix to remain consistent with shifting consumer demand for more efficient products.
There are no simple solutions and open deba
te among all the diverse stakeholders is necessar
y
. A long-term solution will take time to evolve, but we
also believe that early, foundational policies can help reduce GHGs. For example, educating consumers on their role – through programs like eco-
driving training – will be a very important part of a comprehensive and consistent market-based solution. We also must focus on vehicle
performance through advanced technology research and development as well as manufacturing incentives that reach through to suppliers and OEMs.
And we must continue to pursue policies that improve road transport and infrastructure (e.g. mass transit) by reducing congestion and fuel
consumption through improved traffic flow.
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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
Plants
GHG emissions in manufacturing account for about 10 percent of the total emissions over the lifecyle of a vehicle. Since 2000, we have cut the GHG
emissions from our facilities worldwide by more than 15 percent. We're also on track to meet a five year goal of improving the energy efficiency of
our plants by 14 percent, normalized for changes in production.
We continue to make and meet new commitments to reducing our energy use and GHG emissions. Through our participation in the Chicago Climate
Exchange, we’ve made a commitment to reduce the GHG emissions from our North American operations by six percent by 2010. Likewise, our plants
subject to the UK Emissions Trading Scheme must reduce their GHG emissions by five percent over five years. We are the only auto manufacturer
participating in these voluntary programs and Ford has successfully received the required third-party verification of our emissions reductions annually.
Our involvement in these trading initiatives builds our capability to manage our overall emission profile while advancing these important efforts to
integrate a value for GHG emission reductions into the day-to-day world of financial management.
In addition to reducing our energy use, we’ve also led efforts to make more electric power available from renewable energy sources with lower GHG
emissions and that contribute to energy security. We have the world’s only automotive plant powered entirely by on-site wind turbines at Dagenham in
the UK. We also use methane gas from landfills at our Wayne Assembly Plant.
People
Communications and education of consumers and employees is an important key to reducing energy use and GHG emissions. We can provide
employees and customers with both information and the proper tools to enable them to be a part of the solution.
Our emission offset program is one way to begin educating customers about climate change and GHG emissions. In September 2005, we announced
that we would pilot a program to offset the CO
2
emitted from the production of our hybrid vehicles in the U.S. The purchase price of the offset is
applied to a project that reduces or sequesters the emission of CO
2
elsewhere.
We also will be developing materials designed to help consumers’ understanding of what an offset is and how they can act on further opportunities –
by offsetting the CO
2
emitted when they drive their vehicles.
We also have been piloting Eco-driving programs in Europe, Canada and in the U.S. to educate consumers about how their specific actions affect the
GHG emissions of their vehicles. By driving in a more careful and environmentally responsible way, individuals can cut exhaust emissions, save fuel
and money at the pump. Research has shown that many individuals can reduce their fuel consumption by approximately 20-25% by just following a
few simple steps.
And we’re bringing that initiative to our own employees. An employee Eco-Driving program will be rolled out to all US salaried employees during the
first half of 2006. We hope to expand the program globally, including a rollout to suppliers and consumers, as well. This web-based training is
designed to heighten employee awareness of driving behaviors and their relationship with emissions and fuel economy.
We also are supporting efforts to educate fuel consumers about the importance of which fuels they use. Ford recently announced an initiative with
V
eraSun,
a provider of bio-ethanol blends. Critical to acceptance of bio-ethanol fuel is consumer awareness. Ford and VeraSun will launch an
inf
orma
tional campaign to educa
te consumers on the benefits of bio-ethanol as an alterna
tive fuel.
Partnerships
The systems a
pproach to reducing GHG emissions confirms the importance of strong and diverse partnerships.
Our existing partnership with Ballard
Power Systems on fuel cell vehicles is an example of a partnership focused on technology development. We also have partnerships with BP on
developing special lubricants and fuels that will reduce GHG emissions.
Within our supply chain, we will build significant capacity to deliver low GHG emission vehicles. We need to expand the focus of our supplier
relationship to include the value that suppliers will need to bring to our expanded capabilities. Cost will always remain a key criterion, but overall
system perf
ormance will increase in importance.
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FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
W
e’ve mentioned our current and future efforts on FFVs in several sections. Our partnership with VeraSun, a provider of bio-ethanol fuels, will both
expand the infrastructure needed to bring bio-ethanol to customers and engage those customers on the merits of bio-ethanol and FFVs.
We are involved in several important research partnerships with implications for climate change. In some cases, Ford is leading the research.
Examples include research on the inter-relationships between air quality and climate change as well as on the potential emission issues associated
with a hydrogen fuel system. In other instances, Ford supports research related to climate change. Examples include our partnership with the
Princeton Center for Energy and Environmental Studies and the MIT/AGS project.
Conclusions
Ford Motor Company views stabilization of greenhouse gases in the atmosphere and energy security as critical and related business issues that
warrant precautionary, prudent and early action. It is our hope that this report will lead to a better understanding of the business implications for the
automotive industry and to more predictable policy frameworks and market conditions.
This report is not the last word you will hear from Ford on the subject of climate change. We continue to work on technology, policy, marketing and
product initiatives that we expect will move the issue – and our business – forward over the near to medium term.
In the meantime, we are acting on the principle that a sustainable approach to the reduction and stabilization of GHG emissions in the road transport
sector needs to be approached as a system and be introduced at a pace consistent with consumer acceptance and the financially viability of the
industry. We believe that there is need for a strategic approach to stabilization that makes appropriate cost-benefit tradeoffs. We need to focus on
the most environmentally and economically efficient and effective way to reduce emissions with a goal of stabilization. And we are convinced that our
long-term business competitiveness will benefit by leading the development of market-based solutions to the climate change issue, both on our own
and with partners.
A
PPENDIX 1
Excerpt from 2004-2005 Sustainability Report.
Climate change
COMMITMENT – PRODUCTS
European Automobile Manufacturers
Association CO
2 commitment
Australia fuel economy commitment
Canadian Greenhouse Gas
Memorandum of Understanding
COMMITMENT – OPERATIONS
Global manufacturing energy
efficiency
UK Emissions Trading Scheme
Chicago Climate Exchange
Alliance of Automotive
Manufacturers
REGULATORY REQUIREMENTS
United States
China
TARGET
EU new car fleet average of 140 g/km by 2008; equivalent to 25%
average CO2 reduction compared with 1995.
Fuel economy of 6.8 l/100 km by 2010 from 2001 level of 8.28 l/100 km
Industrywide voluntary agreement to reduce greenhouse gas
emissions from the Canadian car and truck fleet by 5.3 megatonnes
by 2010
TARGET
Improve manufacturing energy efficiency by 1% year over year,
following an improvement of more than 12% from 2000 to 2004
UK operations to achieve 5% absolute reduction target over
2002-2006 timeframe based upon an average 1998-2000 baseline
Reduce U.S. facility emissions by 6% over a 2003-2006 timeframe
based upon an average 1998-2001 baseline
Reduce U.S. facility emissions by 10% per vehicle produced between
2002 and 2012
The United States has set fleet average motor vehicle fuel economy
for over 25 years. To date Ford has always met the prescribed
standar
ds.
The federal government has introduced weight-based fuel
consumption standards for passenger cars and trucks. The standards
began with new 2005 model y
ear (MY) passenger vehicles and
incr
ease in stringenc
y for new 2008 MY vehicles. Proposed
standards for commercial trucks start in 2008. All of Ford’s product
offerings comply with the appropriate 2005 MY standar
ds and ar
e
fully expected to comply with the 2008 MY standards as well.
1 Ford climate change commitments and requirements
11
12
FORD REPORT ON THE BUSINESS IMPACT OF CLIMATE CHANGE
THE CLIMATE CHANGE CHALLENGE
The cars of the 21st century will need to be ever
more stylish, safe, spacious, powerful and fuel
efficient. The auto companies best able to deliver
vehicles that meet these tremendous challenges
a
re likely to increase market share and reap the
financial rewards of technological leadership.
Many factors influence greenhouse gas emissions
from vehicles, and many institutions and individuals
influence those factors (see
Figures 2 and 3).
Reducing greenhouse gases is a global concern
that can only be addressed through coordinated
international efforts. For these efforts to have
meaningful, long-term impacts, global patterns
of consumption of fossil fuels must be changed.
For the transportation sector, this will require not
only improvements in fuel economy, but also
changes in fuels, infrastructure, mass transportation
and driver behavior, as well as a reduction of the
overall number of vehicle miles traveled.
Addressing climate change is a significant
undertaking involving numerous actors, but it also
represents an opportunity for companies that can
The vehicles we produce have significant impact on society and the environment, including the issue of climate change. We
are committed to doing our part to address the climate change challenge. But for all our influence, we can only succeed if
we work on the factors influencing greenhouse gas emissions from vehicles in partnership and collaboration with other
actors including:
Go
vernments and polic
y makers.
Create regulatory environments governing
markets and behaviors, and establish
infrastructure for new fuels and technologies
price signals/fuel taxes; infrastructure
development
Customers.
Choices about types of vehicle purchased
and driving behavior
number of vehicles; choice of
transportation mode; vehicle usage patterns;
vehicle miles traveled
Nongovernmental organizations.
Affect public opinion and policy and influence
consumers. Collaborate with companies
bring fresh thinking and technological and social
innovation to the challenge. We are working
internally and externally to understand the business
implications of climate change and generate business
value by contributing to solutions. For example, we
a
re investing in a broad range of product technologies
(see Mobility section), we are making progress on a
series of commitments to reduce manufacturing and
product greenhouse gas emissions (see
Figure 1),
and we are forming partnerships and collaborative
efforts to address the full range of factors
influencing climate change.
Ford is affected by fuel economy regulatory
requirements and commitments in all of our major
markets around the world. We cannot predict the
future, but it is unlikely that energy security and
climate change concerns will be resolved in the
near term. It is more likely that regulations and
commitments to improve fuel economy will increase
in stringency as policy makers react to these
challenges. Ford is in compliance with all fuel
economy regulations and is on track to meet
all of our voluntary commitments. A summary of many
of these commitments can be found in
Figure 1.
FORD GOVERNANCE AND ACTIONS
A vice president-level task force appointed by Bill Ford
has responsibility for identifying the business
implications of the climate change issue and directing
t
he development and implementation of our climate
c
hange strategy. During 2004, the task force
completed a review of the scientific evidence and
implications of climate change. The review concluded
that consensus is forming around the appropriateness
of a broad societal goal to stabilize atmospheric CO
2
concentrations and explored the implications of this
goal for Ford’s business. (For a more detailed
discussion of stabilization see
Figure 3 on Page 18.)
During 2004 and early 2005, the task force worked in
three major areas: establishing an organization and
governance process to develop Ford’s strategic
approach to sustainable mobility (see
Figure 4);
overseeing preparation of a stand-alone climate
change report to be issued in late 2005; and planning
fuel economy improvements through technological
solutions. Also discussed in this section are our efforts
to reduce greenhouse gas emissions from our facilities
and our participation in a variety of collaborative
initiatives to meet the climate change challenge.
Energy companies. Provide different types
of fuel and influence public policy
fuel cost and a
vaila
bility;
f
ossil carbon content of fuels
Suppliers. Of
fer innova
tive ma
terials,
technolog
ies and components
F
ellow automakers.
Share learning and
technolog
ies and inf
luence consumers and
public policy
.
Provide vehicles/mix of vehicles
marketing; vehicle fuel
ef
ficiency (CAFE)
Capital markets. Account f
or risks and
inf
luence actions of companies and investors
Labor. Shape and implement solutions
and influence public policy
Dealers. Inform consumers and ser
vice new
generations of vehicles
2 The role of Ford and the need for collaboration
SUPPLY-SIDE DEMAND-SIDE