Current generation biofuels

Ford has a long history of developing vehicles that run on renewable biofuels. We have been selling Flexifuel vehicles (FFVs) capable of running on E85 ethanol since 1997, and we have more than 3 million FFVs on the road today, including 2 million in North America and 1.5 million in Brazil. (E85 ethanol is made up of 85 percent ethanol and 15 percent gasoline.) In 2007 alone, we produced approximately 300,000 FFVs in North America. We currently offer 17 models in the United States, Europe and South America that can run on E85, including the Ford Crown Victoria, Mercury Grand Marquis, Lincoln Town Car, Lincoln Navigator, Ford Expedition, Ford Econoline and Ford F-150 in North America; the Volvo XC60, Ford Mondeo, S-MAX, C-MAX, Focus and Galaxy in Europe; and the Ford Fiesta, EcoSport and Focus in Brazil. We also recently added an FFV version of the Focus to our product lineup in Thailand.

In Europe, Ford has sold more than 40,000 Flexifuel vehicles since their introduction in Sweden six years ago. From early 2008, Ford will have one of the largest ranges of FFVs in Europe, including the Focus and C-MAX Flexifuel, which are currently available, and the new Mondeo, the S-MAX and the Galaxy, which will be available in Flexifuel versions beginning in 2008. We offer Flexifuel vehicles in 16 European markets, including Sweden, Germany, the UK, the Netherlands, Ireland, Austria, France, Spain, Switzerland, Norway, Belgium, Italy, Poland, Hungary, the Czech Republic and Denmark. In August 2007, Ford was granted an "EcoGlobe" award by DEVK, one of the largest German car insurance companies, as recognition of our achievements in the area of bio-ethanol-powered FFVs and our pioneering role in the FFV market. The award was one in a series of ten awards given to what a broad and independent jury regarded as outstanding, environmentally friendly vehicle solutions.

Next-generation biofuels

We are continuing to develop the next generation of biofuel vehicles, including vehicles capable of running on advanced biofuels. Our current research focuses on two primary fuel types: bio-ethanol and biodiesel. Bio-ethanol (such as E85) is a gasoline alternative made from plant material. Most bio-ethanol in the United States is made from corn. In other parts of the world it is made from other locally available crops, including sugar cane in Brazil and sugar beet in Europe. All modern gasoline vehicles can run on a gasoline/bio-ethanol mixture of up to 10 percent by volume of bio-ethanol, called E10.

Biodiesel is a diesel alternative made from oil seeds, such as soy, canola or palm. In the United States, most biodiesel is currently made from soybeans. Any recent-model Ford truck with a diesel engine can run on a mixture of up to 5 percent biodiesel (B5), but higher amounts are not recommended using the biodiesel available today. Ford is working with Michigan State University researchers and other partners to develop a B20 biodiesel (i.e., containing 20 percent biodiesel) that could be used in future diesel vehicles.

Bio-ethanol, biodiesel and other renewable fuels have significant advantages. They can be made with locally available raw materials, reducing the need for foreign-supplied oil and increasing energy independence, and they produce fewer lifetime CO2 emissions. However, important issues remain regarding biofuels' energy density, the best way to use these fuels to reduce greenhouse gas (GHG) emissions, and their ability to meet fuel needs without diminishing food supplies. (These challenges are discussed in more detail later in this section.)

Ford is working to support and promote the next generation of biofuels, including cellulosic biofuels. These are fuels made from plant cellulose – stalks, leaves and woody matter – instead of from plant starch or oil seeds. Cellulosic biofuels have many advantages. They minimize possible competition between food and fuel. They allow more efficient use of seed crops, such as corn and soybeans, by using more of the plant. In addition, cellulosic biofuels can be made from crops that require less energy-intensive farming, such as switchgrass and bamboo. This would further reduce the total CO2 footprint of vehicles running on biofuels.

Biofuel Infrastructure

To make an impact on GHG emissions and energy security, biofuels must become more widely available. In North America, Ford is working with VeraSun to develop the Midwest E85 ethanol corridor, which will increase the number of ethanol fueling stations in Missouri and Illinois by more than one-third and make it possible for the driver of a Flexifuel vehicle to travel from St. Louis to Chicago using E85 alone. Also, Ford recently joined Chrysler, General Motors and 70 other companies in support of the 25x25 campaign, an effort to increase the use of renewable fuels in the United States to 25 percent of our fuel needs by 2025. In addition, Ford has committed to doubling the number of FFVs in its lineup by 2010, and, if the market dictates, will commit to expanding FFV output to 50 percent of total vehicle production by 2012.

Ford is also working in Europe and other parts of the world to promote the use of biofuels. In Europe, we have two biofuel projects. The first is Bio-Ethanol for Sustainable Transport, or BEST, which focuses on ethanol. Pilot projects are planned or under way in the UK, Spain, Italy and the Netherlands. The second, PROCURA, looks at ethanol, biodiesel and natural gas, and is establishing test programs in Italy, Portugal, Poland, Spain and the Netherlands.

In Thailand, Ford introduced a version of its popular Focus model that runs on a specific bio-ethanol/gas blend offered in that market. In Brazil, where ethanol technology is well established and FFVs are the dominant vehicle technology, Ford has produced nearly 1.5 million vehicles with the ability to run on bio-ethanol.

Biofuel Challenges

Much of the interest in biofuels results from their potential to lessen the environmental impacts of vehicles and contribute to energy independence. Biofuels are made from domestic and renewable resources, they provide an economic boost to farmers, and they help to reduce climate-change-causing greenhouse gas emissions because the plants from which they are made absorb CO2 while they are growing. But are biofuels the solution to our growing fuel-related environmental, economic and political problems? The issues are complex. We believe biofuels are an important part of the equation for addressing climate change and energy security. We recognize, however, that major advances need to be made in production processes, source materials and fuel types in order to achieve the full promise of biofuels.

Some of the challenges relating to today's biofuels include:

• Energy density: Ethanol has a lower energy density than gasoline. That is, there is less energy in a gallon of ethanol than in a gallon of gasoline. As a result, drivers using blends with a high amount of ethanol will have to refuel more frequently to drive the same distance. The lower energy density of E85 (compared to gasoline) is partially offset by the lower price of ethanol relative to gasoline.
• Life-cycle greenhouse gas emissions: The plants used to produce biofuels capture as much carbon dioxide during their growth as they release when burned. However, current farming and production processes utilize fossil fuels in the production of bio-ethanol, so the use of bio-ethanol in vehicles results in a net release of fossil-based GHG emissions. We agree with studies that suggest that current E85 ethanol from corn results in 20 to 30 percent less life-cycle GHG emissions than today's gasoline, on an energy-equivalent basis. In addition, GHG emissions related to petroleum can vary greatly depending on the source. Producing crude oil from tar sands, for example, results in a greater release of GHGs than producing crude oil from conventional sources. We believe that developing cellulosic or biomass-based biofuels with next-generation processes will significantly decrease GHG emissions associated with biofuels, perhaps by up to 90 percent1.
• Competition with the food supply: Another concern about current corn- and soybean-based biofuels is that they compete with food supplies and drive up food prices. However, the ethanol used in the U.S. today is made predominantly from feed corn – not corn used for human consumption. Demand for corn used for human food (including high-fructose corn syrup) comprises less than 10 percent of the total corn supply. In 2006, about 20 percent of the corn harvest in the U.S. was used to produce ethanol. Also, the ethanol process removes only the starch from the corn – the remaining portion is a highly valued feed product (called distiller grains) and a good source of energy and protein for livestock and poultry. Despite the misconceptions then, America's farmers appear to be satisfying demand to feed humans as well as livestock. Nevertheless, if next-generation biofuels can efficiently utilize biomass such as plant stalks, woodchips or grasses and be grown on marginal land with little irrigation, then competition with food crops should remain minimal.
• Land use conversion for biofuel production: Recent studies have looked at the overall CO2 impacts of converting natural ecosystems to farmland for the production of biofuels. We agree this is an important and complex issue. Converting natural lands to croplands for fuel production can lead to the release of carbon stored in above- and below-ground biomass. Releasing this carbon in the form of CO2 during land conversion to energy crops creates a carbon "debt" which it may take biofuel production a very long time to repay. The use of degraded pastures or abandoned farmland, by contrast, rather than natural ecosystems, would have practically zero carbon debt, because there is limited CO2 storage in these previously altered ecosystems.

At Ford, we are following the debates over biofuels closely. As we proceed, we need to consider how biofuels are derived, and carefully review issues such as the potential net CO2 benefits; political, economic and environmental concerns related to biofuel and petroleum use; and the management of land and food resources. We agree with the general consensus among scholars and industry experts that the current generation of biofuels (e.g., corn-based bio-ethanol and soybean-based biodiesel) have modest environmental benefits and are a first step toward cleaner vehicles and energy independence. We are actively investigating next-generation biofuels that have even greater environmental and economic benefits. We believe that improvements in the efficiency of farming technologies and biomass production processes, and the development of advanced biofuels, will significantly increase the benefits and long-term sustainability of biofuels. Even with these improvements, solving our climate change and energy security problems will require a multifaceted set of solutions, including new fuels, improvements in vehicle fuel economy and changes in consumer driving patterns and practices.