Although other automakers (Ford included) issue environmental and sustainability reports, with this report—the Business Impact of Climate Change (BICC)—Ford becomes the first openly to outline and to discuss its view of the different factors contributing to the complexity of the climate change problem as well as potential solutions.

A shareholder resolution filed in November 2004 by the Interfaith Center on Corporate Responsibility (ICCR), Ceres (a coalition of investors and environmental groups and founder of the Investor Network on Climate Risk) and others was subsequently withdrawn in March 2005 when Ford announced it would publish this report.

Concerns about climate change—along with growing constraints on the use and availability of carbon-based fuels—affect our operations, our customers, our investors and our communities. The issue warrants precautionary, prudent and early actions to enhance our competitiveness and protect our profitability in an increasingly carbon-constrained economy.

The relevant long-term challenge facing society today and in the future is to stabilize the concentration of GHGs in the atmosphere at a level that prevents dangerous human-induced interference with the climate system.

...while we are proud of our accomplishment in reducing CO₂ from our operations [15% reduction since 2000] and have benefited from the energy cost savings that go with it, we recognize that only about 10 percent of the lifetime GHG emissions from a vehicle occur during its production. The remaining 90 percent attributed to each vehicle is emitted when the customer is using it—when it burns gasoline or diesel fuel from fossil sources.

[...]This means that addressing lifecycle GHG emissions depends on engaging consumers on their purchase decisions, driving behavior and their choice of fuels.

[...]Finally, early, affordable steps to reduce GHG emissions and improve fuel efficiency may delay the need for drastic and costly reductions later. Lack of agreement on long term solutions cannot be used as an excuse to avoid near term actions.

—BICC

Ford sees the opportunities to reduce in-use GHG emissions defined (or limited) 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.

Ford notes that because customer and policy priorities differ around the world, its approaches to markets vary accordingly. Europe’s regulatory focus on CO₂ reduction, for example, has Ford participating in the ACEA effort to voluntarily reduce CO₂ emissions. (The ACEA effort seems likely to fail, and Europe is gearing up for more stringent mandated reductions. Earlier post.)

Ford links its investment in hybrid production in the US to a (slowly) growing consumer demand for more fuel-efficient vehicles, and links its support for an ethanol infrastructure in the US (earlier post) to calls for less dependence on imported oil.

Each of these initiatives results in lower CO₂ emissions, but emerges from different market and policy priorities.

In an appendix at the end of the report, Ford addresses the contradiction inherent in its support for the court challenge against California’s GHG regulations by embracing the industry argument that the regulations amount to state-level fuel-efficiency regulations.

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.

California, of course, disagrees.

Ford views its approach to climate change through three primary business drivers:

• Market share. “Over the past decade, the US 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). However recent research indicates that this might be changing.”

• Regulatory compliance.

• 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.”

Ford also notes four main characteristics of the global automotive bear significantly on how it responds to climate change:

• A long product lifecycle.

• Conflicting regulatory, market and technological signals. The picture varies by geography, market segment, and demographic profile.

• The Well-to-Wheels measurement of the GHG footprint of the in-use phase of light duty vehicles. The upstream fuel production process also needs to be factored in. This becomes much more of an issue as synthetic fuels, some biofuels, and some sources of hydrogen enter the picture.

• Long product development times and major capital investments. “The long time frame and heavy financial commitment...highlight the need for more certainty—stable and predictable pricing signals and policy frameworks.”

Product. On the product side, Ford has already announced its plans to expand its capacity to build hybrid electric vehicles to 250,000 units per year by 2010, as well as a commitment on flexible fuel vehicles.

Ford says that it will expand its 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.

The company is also increasing its investment in a portfolio of technologies that deliver improved fuel economy and lower GHG emissions, including:

• Weight stabilization and reduction

• 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 (micro) hybrid technologies such as engine stop-start, regenerative braking, parallel lithium-ion batteries or super-capacitors.

• Hydrogen Internal Combustion Engine (ICE) demonstration 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.

Correction. In the prior version of this piece, I had noted that Ford did not address its support of the court challenge to the California greenhouse gas regulations. That was incorrect; the last page of the report is an appendix stating the company’s stance on the issue. The piece above is corrected to reflect that. —MM

Resources:

• Ford Report on the Business Impact of Climate Change