Climate Change Public Policy
Climate change and the closely related concerns of energy security and fuel prices are global issues but policy approaches vary regionally. Everywhere we operate, we seek to be a constructive partner in developing policies that will be effective and efficient in reducing GHG emissions. In this section, we describe our perspective and policy activities in the United States and Europe, two of our major markets.
United States
In the United States, there is growing interest and activity in regulating GHG emissions at the federal and state level. We are participating in policy development at both levels.
U.S. Federal Policy
At the federal level, we believe that policies that put constraints on carbon need to include all sectors of the economy. They should encourage conservation and the introduction of lower-carbon and renewable-carbon fuels and energy sources, while increasing the demand for more energy-efficient products across all sectors at the lowest possible social cost and at a pace consistent with technology maturation, consumer demand and economic viability. These policies need to be implemented in ways that mitigate any related transitions to avoid economic disruptions and unnecessary costs, with incentives playing a key role. Future reduction programs should be based on upstream carbon trading systems that gradually reduce the limits on carbon introduced into the economy.
Within the transportation sector, vehicle, fuels and fuel use must be addressed as a system. Policies need to encourage the use of lower-carbon and renewable-carbon fuels and energy (e.g., bio-ethanol fuels and blends) through favorable market signals and incentives, as well as encourage energy efficiency, carbon sequestration initiatives, offsets and credits across all phases of the energy value chain. An effective system would require gradual but substantial changes in our product and technology mix to remain consistent with shifting consumer demand for more efficient products. Policies should also address educating consumers on their role through programs like eco-driving training and improving road transport and infrastructure (e.g., mass transit) by reducing congestion and fuel consumption through improved traffic flow.
We support working with the technical and safety experts at NHTSA to set standards at maximum feasible levels and to reform the CAFE system. We also support market-driven incentives for advanced technology vehicles to increase their presence in the marketplace.
During 2006 and early 2007, we provided this perspective to policymakers in a variety of settings. In March 2006, we appeared before the Senate Energy and Natural Resources Committee while in May 2006 and again in March 2007, we appeared before the House Subcommittee on Energy and Air Quality. During the summer, we met with Congressional leaders to commit to doubling the number of FFVs we produce, and in the fall, we expanded that commitment to include half of our vehicles produced each year, provided there are sufficient amounts of ethanol and enough retail facilities to support consumers operating these vehicles on E85. In particular, we have promoted federal action to support the development of ethanol fuel infrastructure. We have placed more than 2 million flexible fuel vehicles in service in the United States, but there are only about 1,100 stations that provide high-ethanol-content fuel.
Long term, ethanol is an important step toward development of advanced renewable biofuels that can provide energy security, address customers' concerns over high gas prices and provide environmental benefits. We have advocated specific policy measures as part of an integrated approach that includes support from fuel providers, fuel retailers and automakers in order to engage customers and encourage ethanol infrastructure expansion.
State level
In 2002, the California legislature passed a law directing the California Air Resources Board (CARB) to promulgate rules limiting greenhouse gas emissions from motor vehicles. In 2004, CARB voted to adopt a set of fleet average standards expressed in grams per mile of CO2. Final rules incorporating these standards were adopted in 2005. The standards are set to take effect beginning with the 2009 model year and become increasingly stringent through the 2016 model year. Several other states, including New York, Connecticut, Massachusetts, Vermont, New Jersey, Pennsylvania, Rhode Island, Oregon and Washington, have either adopted parallel regulations or are in the process of doing so.
Ford supports the reduction of vehicle CO2 emissions and is working aggressively toward the development and implementation of real, market-based solutions. However, the entire automobile industry is united in opposition to the AB 1493 rules because they constitute state fuel economy standards. The federal Corporate Average Fuel Economy (CAFE) law calls for a single, nationwide fuel economy program and prohibits individual states from regulating vehicle fuel economy. State-by-state regulation of fuel economy is unworkable because it raises the prospect of an unmanageable patchwork of state standards. Moreover, the AB 1493 regulations seek to impose a fuel economy task that is far more steep and severe than any that has been ever been imposed in the history of CAFE. As time passes and the standards grow more stringent, many if not all manufacturers will have to severely restrict or eliminate sales of larger cars and trucks in order to maintain compliance. Even with our commitment to embrace innovative technologies, Ford would not be able to comply with these standards without restricting our product lineup over time.
In December 2004, the Alliance of Automobile Manufacturers filed an action in federal court in California seeking to overturn the AB 1493 regulations. All members of the Alliance (BMW, DCX, Ford, GM, Mazda, Mitsubishi, Porsche, Toyota and Volkswagen) supported taking this action. The Association of International Automobile Manufacturers (AIAM), which includes Honda, Nissan, Aston Martin, Bosch, Delphi, Denso, Ferrari, Maserati, Hitachi, Hyundai, Isuzu, Toyota, Suzuki, Subaru, Renault, Peugeot, Mitsubishi and Kia, and the Japan Automobile Manufacturers Association, Inc. (JAMA) have since intervened in the litigation on the side of the Alliance. The legal argument being made by the automobile manufacturers in these cases is that state greenhouse gas regulations are functionally equivalent to fuel economy standards and therefore preempted by the federal CAFE law. The Vermont case went to trial in April/May of 2007, and a ruling in that case is expected in the summer of 2007. The California and Rhode Island cases are still pending. It is virtually certain that any ruling in these cases will be appealed by one side or the other, and thus it may be several years before the issue of federal preemption is fully resolved.
Europe
In Europe, Ford has been part of a voluntary industry agreement to reduce the CO2 emissions of vehicles by 2008. Ford also participated in CARS21 ("Competitive Automotive Regulatory System for the 21st Century"), a multi-stakeholder consultation group formed and led by EU Commissioner Verheugen and with Lewis Booth, Executive Vice President, Ford of Europe and Premier Automotive Group as one of the members. CARS21 identified concrete measures to be taken over the next 10 years to enhance the global competitiveness and employment of the European automotive industry while sustaining the progress made on environment and safety at an affordable price for consumers and society as a whole. Ford is a member of ACEA, the European automobile manufacturers association, which is the body that primarily leads the political dialogue on behalf of the European car makers.
The 2008 Commitment
In 1999, ACEA and the EU Commission signed an industry collective agreement in which the European automotive industry committed itself to voluntarily reduce the average fleet CO2 emissions of its new cars sold in the EU. The target is 140 g CO2/km by 2008, down from 185 g/km in 1995 as the reference year. This translates into an average CO2 reduction of 25 percent. Part of the agreement was to reach an interim target of 165–170 g/km in 2003, which was overachieved by the industry, but in the recent years, the progress has slowed down. The latest publicly available figure is 161 g for 2004 (13 percent reduction).
The auto industry's progress to date already represents a very significant contribution to the EU's overall efforts to address climate change. The industry has always said that the agreement represents one of the most challenging CO2 reduction actions within the EU and that it is extremely ambitious, both technically and economically. Despite an increasingly adverse environment, Ford and the industry continue to work hard to move towards the 2008 target.
Future CO2 reduction
In February 2007, the EU Commission proposed its post-2008 CO2 emission reduction strategy for vehicles. The proposal calls for average emissions from new cars sold in the EU-27 to be required to reach a target of 120 g CO2/km by 2012. Improvements in vehicle technology would have to reduce average emissions to no more than 130 g/km, while complementary measures would contribute a further emissions cut of up to 10 g/km, thus reducing overall emissions to 120 g/km. These complementary measures include efficiency improvements for car components with the highest impact on fuel consumption, such as tires and air conditioning systems, and a gradual reduction in the carbon content of road fuels, notably through greater use of biofuels.
Ford takes very seriously its responsibility and will continue to play its part to help further reduce CO2 emissions from automotive sources, as part of concerted international efforts to arrest global warming. We welcome that the Commission has recognized the need for "complementary measures" to further reduce CO2 emissions by 2012, but with the 130 g/km proposal for the automotive industry, the EU Commission's proposal still focuses too much on vehicle technology. There is a broad range of options to reduce CO2 in a more cost-effective way. We call on the Commission to adopt a more integrated approach than envisaged in the current proposal, as per the recommendations by the Commission-led CARS21 High-Level Group. Involving all stakeholders – the auto industry, fuel suppliers, infrastructure providers, consumers and government – will result in larger and more cost-effective CO2 emission reductions from road transport. It will also be crucial to define equitably how to achieve any average CO2 reduction target in future over a wide range of vehicle classes, without endangering product diversity and consumer choice.
CARS 21
After a public consultation round where societal stakeholders were invited to comment on the CARS21 report, simultaneously to its CO2 communication, the EU Commission also presented a final proposal on CARS21.
Simultaneously to its CO2 communication, the EU Commission also presented a final proposal on CARS21.
We believe the proposal does not fully incorporate the recommendations of the multi-stakeholder High-Level Group and the public consultations organized by the EU Commission and the European Parliament. We are asking the EU legislators to adhere to the goals of CARS 21, which are:
- Reduce damaging and costly effects of cumulative legislation by applying better regulation principles
- Conduct proper impact assessments (cost effectiveness, scientific basis, etc.)
- Elaborate integrated approaches to tackle environmental and road safety issues
- Foster R&D/innovation efforts
- Improve international trade environment and protect intellectual property
