Tuesday, December 20, 2005

Ford Report on Business Impact of Climate Change

(cross posted on TechPolicy)

In response to a shareholder resolution urging the company to outline its strategy to deal with climate change, Ford Motor Company has released a report on Business Impact of Climate Change. Related WSJ article here.
As such you may not find anything new in this report, specially if you were looking for specific targets and so on, but yet it is an interesting piece of document. Firstly, Ford has embraced "Fuel+Vehicle+driver" formula:

Within the road transport sector, we see the opportunities to reduce in-use GHG emissions defined 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
This “fuel + vehicle + driver” formula underpins our engagement with both fuel companies and consumers in addressing the GHG challenge.

Readers of this blog may find this argument vaguely familiar.

Secondly, Ford has very nicely outlined the constraints faced by the auto companies:

...our business involves a long product lifecycle with greenhouse gas emissions that vary at each stage.
...we face at times conflicting regulatory, market and technological signals. The picture varies by geography, market segment, and demographic profile. (Some times) governments are often tempted locally to encourage specific technology solutions, but there is considerable uncertainty about which technologies, combinations of technologies and technology pathways will prevail and over what time frames, ...some policy makers favor demand-side measures such as fuel taxes and Green Public Procurement policies, while others prefer supply-side controls such as fuel-economy or GHG emissions standards, creating significantly different market dynamics and product strategies from one region to another.
...the GHG footprint of the in-use phase of light duty vehicles must be measured on a well-to-wheels basis, that is, the total emissions from the production of the original source of energy (e.g. crude oil, bio-fuels, etc) into a usable fuel, the amount of energy consumed to produce the vehicle, to the fuel consumed by the vehicle during its in-use lifetime.
...the automotive industry operates on long product development times and major capital investments.

All of these points are well made. The heart of this argument is that there are inherent business risks in trying to respond too enthusiastically with all the market and regulatory uncertainties present.

Third, Ford's take on policy matters is in favor of emissions trading system:

...(emission) reduction programs should be based on upstream, carbon trading systems that establish reasonable, gradually reducing the limits on carbon
introduced into the economy. In addition, they must include a safety valve that is based on economic/energy indicators that would allow for the
release of additional emission allowances at reasonable prices to avoid unintended constraints on economic growth, maintain price stability...

Economists would argue that an upstream carbon trading system would be most efficient. Oil and Gas companies are not always happy with the upstream system though. This brings us to the part of the report dealing with stakeholder issues (taken from Ford's sustainability report):
Many factors influence greenhouse gas emissions from vehicles, and many institutions and individuals influence those factors. (click on picture for a larger image)Ford_stakeholder_model_6

... to have meaningful, long-term impacts, global patterns of consumption of fossil fuels must be changed. For the transportation sector, this will require not only improvements in fuel economy, but also changes in fuels, infrastructure, mass transportation and driver behavior, as well as a reduction of the overall number of vehicle miles traveled.

Again, this is an argument that readers of this blog should find familier.

What is to be made out of this report? Frankly, not much, but it is a step in the right direction. The reality is that we are going to have to deal with how to respond to climate change sooner or later. Some tough decisions will have to be made. The sooner we prepare ourselves to make those decisions the better off we will be afterwards.


Anonymous HiPath Open office said...

Unfortunately this won't happen any time soon as George W Bush doesn't consider it a priority. I expect that as soon as the Democrats are voted in they'll announce reforms on the use fossil fuels.

10:10 AM  

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