Sustainability 2011/12

Climate Change and the Environment

U.S. Policy

Climate Change Legislation

In the U.S., the policy debate surrounding climate change has been overshadowed by other issues, including concerns over budget deficits. Nevertheless, the U.S. Environmental Protection Agency (EPA) has continued to pursue greenhouse gas emissions regulations for mobile sources using their authority under the Clean Air Act, while the U.S. National Highway Transportation Safety Administration (NHTSA) has continued to pursue fuel economy regulations. In 2011, the EPA and NHTSA proposed joint greenhouse gas emission and fuel economy regulations for 2017–2025 model year light-duty vehicles. These regulations, which continue the “One National Program” approach, are discussed below under Greenhouse Gas and Fuel Economy Regulation.

Ford has participated in the public discourse on broad-based, national climate policy for some time. In 1999, for example, 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 U.S. Climate Action Partnership (USCAP) to support the prompt enactment of national climate legislation. Because the USCAP organization has been dormant for nearly a year and this policy issue is now not expected to be taken up legislatively in the U.S., we asked to be delisted as a member of USCAP. We nonetheless remain committed to improving fuel economy and reducing greenhouse gas emissions as evidenced by our support for the One National Program approach to fuel economy regulations discussed below.

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.

The auto industry has supported the rules proposed by EPA and NHTSA, but regulations focusing on just one sector of the economy will not enable us to achieve the necessary level of GHG reductions. We believe we need a comprehensive, market-based approach to reducing GHG emissions if the U.S. is going to reduce emissions at the lowest cost per ton. An economy-wide 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.

As part of an integrated approach to addressing energy security and climate change, Ford supports comprehensive legislation that will create a price signal to encourage consumers to purchase more fuel-efficient vehicles. Thoughtful and comprehensive national energy and climate policy that provides a price signal 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 an endless cycle wherein development of the advanced technologies needed to help address climate change and energy security is sporadic and not aligned with fuel providers or consumer demand.

Ford 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

In July 2011, the Obama Administration announced that the state of California, the auto industry and other stakeholders had committed to support the single national program for motor vehicle fuel economy and greenhouse gas standards covering the 2017 to 2025 model years. This would be an extension of the “One National Program” regulations that have already been put in place for the 2012–2016 model years. Ford views the continuation of the “One National Program” agreement as a positive step for all stakeholders toward our common goals of energy security and reduced greenhouse gas emissions. In November 2011, EPA and NHTSA jointly issued proposed rules, with harmonized standards GHG and fuel economy standards, for public comment. The auto industry and other interested parties have filed comments on the proposed rules, and the agencies expect to issue final standards in July 2012.

A national program is essential for the efficient regulation of motor vehicle fuel economy and GHG emissions. It allows manufacturers to average the fuel economy and carbon dioxide (CO2) emissions of their vehicles based on nationwide sales, which in turn enables manufacturers to formulate their product plans on a national scale. In contrast, state-by-state or regional regulations could force manufacturers to restrict the sale of some products in certain parts of the country, harming both consumers and dealers in those areas. Since CO2 emissions do not create localized air-quality problems, state or regional standards are unnecessary, and the incremental benefits of such standards are negligible in comparison to the costs and market disruptions they would impose.

Ford is committed to working constructively with all stakeholders toward the implementation of workable and effective One National Program standards for 2017–2025. Given the long time frame at issue in this rulemaking, the agencies have committed to undertake a “mid-term evaluation” of the standards in the 2018 time frame to make sure that the industry is on track to be able to comply with the 2021–2025 standards. Ford supports the mid-term evaluation provisions as an essential element of this rulemaking. For the longer term, Ford supports a legislative solution requiring One National Program, in order to head off the possibility that various agencies may promulgate and enforce multiple, inconsistent fuel economy/GHG regulations in the future.

In October 2011, the EPA and NHTSA also finalized a single national program for greenhouse gas and fuel economy standards for heavy-duty vehicles. The CO2 and fuel consumption requirements for 2014 through 2018 model year target combination tractors, heavy-duty pickup trucks and vans, and vocational vehicles. The agencies estimate that the combined proposed standards have the potential to reduce GHG emissions by nearly 270 million metric tons and save approximately 530 million barrels of oil over the life of vehicles sold during the program. A second phase of regulations is planned for model years beyond 2018.