Sustainability 2011/12

Climate Change and the Environment

Emissions Trading

Emissions trading is a key tool in both voluntary and mandatory greenhouse gas (GHG) emissions-reduction programs. Ford was an early participant in carbon markets, with a goal of gaining experience that will be valuable in an increasingly carbon-constrained world.

For example, Ford, along with 11 other companies and the city of Chicago, founded the Chicago Climate Exchange (CCX) in 2003. The CCX was a GHG emissions-reduction and trading program for emission sources and projects in North America. It was a self-regulated, rules-based exchange designed and governed by CCX members. Ford was the first and only auto manufacturing participant in the Exchange. Through the CCX, we committed to reducing our North American facility emissions by 6 percent between 2000 and 2010, and we exceeded that reduction target. CCX elected to end the emissions-trading portion of the program after 2010, with cumulative verified emission reductions totaling nearly 700 million metric tons of carbon dioxide (CO2) since 2003.

Ford was also one of the original companies to join the U.K. Emissions Trading Scheme, the first voluntary government-sponsored, economy-wide, cross-industry GHG trading program. Ford Motor Company Limited (U.K.) entered the program in March 2002, committing to and achieving a 5 percent CO2 reduction for eligible plants and facilities over five years.

Ford now participates in the mandatory EU Emission Trading Scheme, which commenced in January 2005 and is one of the policies being introduced across Europe to reduce emissions of CO2 and other greenhouse gases. The second phase of this program runs from 2008 to 2012 and coincides with the first Kyoto Commitment Period. Additional five-year phases are expected to follow.

Despite Ford facilities’ low-to-moderate CO2 emissions (compared to other industry sectors), the EU Emission Trading Scheme regulations apply to five Ford facilities in the U.K., Belgium and Spain. The trading scheme requires us to apply for emissions permits, meet rigid emissions monitoring and reporting plans, arrange for third-party verification audits and manage tax and accounting issues related to emissions transactions.

Ford is actively involved in an ongoing evaluation of the EU Emission Trading Scheme at both the EU and member-state levels. We have used the experience gained from participating in the market-based mechanisms described above to ensure that we operate in compliance with the scheme’s regulatory framework. Ford anticipated the start of the EU Emission Trading Scheme and established internal business plans and objectives to maintain compliance with the new regulatory requirements.

Through our participation in CCX, we built a world-class CO2 tracking infrastructure for our facility emissions. We will continue to leverage this system to support voluntary reporting globally, to measure progress against our new facility CO2 target, and to ensure compliance with the EU trading program and the new mandatory U.S. Environmental Protection Agency reporting requirements.

Comprehensive reporting forms the foundation for all emissions trading. We voluntarily report GHG emissions in Argentina, Australia, Brazil, Canada, China, Mexico, the Philippines and Taiwan. This reporting, which has won several awards, is discussed in the Greening our Operations section.