U.S. Policy

Climate Change Legislation

In the United States, the policy debate surrounding climate change intensified in 2009, particularly at the end of the year. Among other developments: the U.S. government took an active role in the Copenhagen climate negotiations; Senator Cantwell introduced legislation that would cap greenhouse gases (GHGs) and return revenues from the program back to U.S. citizens; Senator Murkowski introduced an amendment that would have prevented the U.S. Environmental Protection Agency (EPA) from regulating greenhouse gases under the Clean Air Act; and Senators Kerry, Lieberman and Graham proposed a framework outlining principles for a comprehensive approach to climate and energy legislation.

Ford has been one of the more supportive companies on climate policy for some time. In 1999, we discussed greenhouse gases in our first corporate citizenship report. In late 2005, we published a special report on the Business Impact of Climate Change, and in 2007 we joined the United States Climate Action Partnership (USCAP) to support the prompt enactment of climate legislation.

These experiences, as well as our participation in carbon markets globally, have helped to shape Ford's position on climate policy. The linked issues of climate change and energy security create an urgent need to transform the country's economy into one with lower greenhouse gas emissions, higher energy efficiency and less dependence on fossil fuels and foreign oil. This transformation will require changes in all sectors of the economy and society. A comprehensive legislative framework is needed to spur these changes.

We believe we need a national, market-based approach to reducing GHG emissions if the United States is going to reduce emissions at the lowest cost per ton. Thus, we support the creation of an efficient, economy-wide cap-and-trade framework with mechanisms to avoid unintended adverse effects on the economy. An economy-wide cap-and-trade program would provide flexibility to regulated entities while allowing market mechanisms to determine where GHG reductions can be achieved at the lowest cost. The environment doesn't care where reductions occur, but the economy does, and given the potentially high cost of abatement, it is important to achieve the lowest cost possible.

This position is consistent with that of USCAP, a group of businesses and leading environmental organizations that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of GHG emissions.

Ford has been criticized for taking this position. On one side of the argument, some stakeholders do not think Ford should be supporting climate legislation and question our membership in groups like USCAP. To those, we say that without a cohesive national energy and climate policy that places a price on carbon, we could be caught in a cycle of starting and stopping technology development. That is simply not good policy or good business, particularly when the technology development requires billions of dollars of investment. We need predictability in order to plan our products.

On the other side are stakeholders who urge Ford to be more aggressive and want us to drop out of groups like the U.S. Chamber of Commerce that may have views and actions on climate change that potentially conflict with Ford's position. To them we say that despite differences on this specific issue, Ford has not changed its position on climate change.

The Chamber has been a critical ally on a broad range of business and environmental issues important to Ford and the global auto industry, including the One National Program, vehicle scrappage program, trade issues, anti-counterfeiting parts actions and legal reforms. It is important to our business, our customers and other stakeholders that we remain a member of the Chamber.

Yet Ford will always speak with its own voice. We will do so on climate change (and other issues, for that matter) where it is essential to our business that we articulate our position separately from that of any association of which we are a member.

We believe our position on climate change is very clear. You know it by our actions. You see it in our commitment to reduce the CO₂ emissions from both our products and facilities. Bottom line – we are doing what's right for our customers and the environment.

We will continue to advocate for effective climate change policies that drive down GHG emissions and provide a framework for sound business and product planning.

Greenhouse Gas and Fuel Economy Regulation

Since our last report, a number of significant developments have taken place in the United States with respect to regulatory programs that would set greenhouse gas emissions or fuel economy standards for motor vehicles.

• In May 2009, President Obama announced an agreement in principle among the EPA, the National Highway Traffic Safety Administration (NHTSA), the state of California and the automotive industry to implement a National Program for motor vehicle greenhouse gas and fuel economy standards.
• In September 2009, the EPA issued a final rule mandating greenhouse gas reporting. The rule requires facilities that emit 25,000 metric tons or more carbon dioxide equivalent per year to submit annual reports to the EPA. It also imposes new reporting requirements on heavy-duty engine and vehicle manufacturers, who must measure and report CO₂ beginning in the 2011 model year, methane in the 2012 model year, and N₂O in the 2013 model year.
• In December 2009, the EPA finalized its endangerment finding that greenhouse gas concentrations in the atmosphere threaten public health and the welfare of current and future generations. This finding is a prerequisite to establishing federal regulations for greenhouse gas emissions.
• On April 1, 2010, the EPA and NHTSA published a joint final rule that implements the National Program agreement by establishing harmonized Corporate Average Fuel Economy and greenhouse gas emissions standards for the 2012 to 2016 model years. The standards target an overall industry fleet-wide average for fuel economy of 35.5 mpg (250 g/mi CO₂). After the 2016 model year, the standards are expected to increase year-over-year, approaching 40 mpg by 2020.
• The EPA and NHTSA are planning to set greenhouse gas and fuel economy standards for medium- and heavy-duty trucks. The EPA plans to publish draft greenhouse gas regulations for these vehicles in mid-2010, with a phase-in beginning in 2014 model year, while NHTSA's fuel economy standards are not expected to take effect until the 2016 model year. The focus will be on complete vehicles with 8,500–14,000 lb. gross vehicle weight rating.

The finalization of the National Program for fuel economy and greenhouse gas emissions sets the regulatory path forward that we need to carry out our plans and achieve the goals of improved fuel efficiency, increased energy security and reduced GHG emissions. The National Program will employ an attribute-based vehicle target-setting methodology, which allows manufacturers to build a single light-duty fleet that would satisfy all of the requirements under both programs.

From an environmental standpoint, the National Program avoids a patchwork of competing state and federal regulations that would have led to unnecessary duplication, market disruption and increased compliance costs. This program addresses our concerns about state-by-state overlapping and competing regulations.

The National Program also gives us flexibility to meet the final standards by making the progression toward the 2016 goal more linear, allowing us the time needed to phase in advanced technology on future models. The National Program also allows for fleet averaging on a nationwide basis, which is critical to vehicle manufacturers. Since a manufacturer's fleet mix at the state level can vary considerably from its overall national fleet mix, state-specific standards would likely lead to product restrictions and reduced consumer choice in some states. Nationwide fleet averaging avoids this problem with no loss of environmental benefits.

We support the manner in which President Obama and the federal agencies have harmonized fuel economy and greenhouse gas emissions rules into a single National Program. Ford views the One National Program as a significant and positive step for all stakeholders toward our common goals of energy security and reduced greenhouse gas emissions. We are committed to working constructively with the Obama administration, Congress and federal regulators at NHTSA and EPA toward the implementation of One National Program beyond the 2016 model year.

Incentives and Market-Based Mechanisms

In June 2009, the U.S. Congress passed and the President approved a "Cash for Clunkers" program. For two months over the summer, the program provided a popular consumer incentive for trading in a less fuel-efficient vehicle for a new, more fuel-efficient one. The Ford Focus and Ford Escape were among the top new vehicles purchased in the Cash for Clunkers program. Ford increased production to meet demand and saw sales rise significantly during those months. Ford supported the legislation, as did several associations of which it is a member, including the Alliance of Automobile Manufacturers and the U.S. Chamber of Commerce. The benefits of this program in terms of reduced fuel consumption and lower carbon emissions from the vehicle fleet have been significant and will be realized over the coming years as these more-efficient vehicles continue to operate.

Ford also supports comprehensive legislation that will create a price signal for consumers. Thoughtful and comprehensive national energy and climate policy that places a price on carbon is needed to support the billions of dollars being invested into low-carbon and fuel-efficient vehicle technologies. Without a cohesive policy that includes a price signal, we could be caught in a cycle where development of the advanced technologies needed to help address climate change and energy security is sporadic.