>home    >action plan

ENSURING AN ADEQUATE SUPPLY OF ENERGY is rapidly shaping up to be one of the primary societal challenges of the 21st century. Around the world, record-setting petroleum prices and the economic strain they have caused have grabbed news headlines and the public's attention. Everyone is looking for a solution to the increasingly high cost of energy. That high cost has pervaded nearly every aspect of our daily lives — the goods we buy, the food we eat, and the transportation we use.

At Toyota, we believe an important cost of energy is the negative impact it can have on the environment. Not only is petroleum a limited resource that has become increasingly expensive, but consumed as a fuel, it emits CO₂, a primary greenhouse gas and contributor to climate change. The societal threat posed by climate change could eventually be more disrupting than the current high price of fuel. Therefore, a sustainable solution must include not only the pursuit of new energy sources, but sources that are also clean and renewable. Since any source of energy will entail costs, a sustainable solution must also include conservation and more efficient ways to use whatever source is selected.

Toyota strives to lead by example. As the footprint of our operations, the breadth of our product offerings and the volume of our sales in North America have expanded, so, too, has our effort to carefully manage the energy we consume and the greenhouse gases we emit.

For example, since 2003 Toyota's annual vehicle sales have climbed from 1.9 to 2.9 million units. Over that same period, we have been able to improve the estimated fleet average fuel economy of our new cars and trucks by 9% based on Toyota's overall Corporate Average Fuel Economy (CAFE) values for the 2003 and 2007 model years. We have added four new manufacturing plants in North America over the past 10 years as annual production has increased by 700,000 units. Over that same 10 year period, we have been able to reduce the amount of energy required to produce a vehicle by 27%.

These results exemplify our pursuit of sustainable mobility. Our actions are dictated by Toyota's Earth Charter and Five-Year Environmental Action Plan. The goals and targets in our FY2011 Environmental Action Plan challenge us to innovate more efficient ways to design, build, distribute and sell our products, and to explore using renewable energy sources for these processes. Our Action Plan also calls for us to assist in the research, development and commercialization of vehicles that squeeze more mileage out of a tank of gasoline and operate on a diverse array of energy sources such as biofuels, electricity and hydrogen.

Technology will be a key factor in meeting the world's energy needs in a sustainable manner. Since a single solution is unlikely, we are pursuing a broad portfolio of technical approaches. In sum, we are continuously searching for kaizens, small incremental steps of continuous improvement, that lead to new ways to save energy and reduce GHG emissions. Small savings add up. We are conducting GHG emissions inventories and energy audits to monitor our progress. Our business partners such as suppliers and dealers share our commitment. Finally, we are trying to educate consumers on how they can be part of the solution.

Our targets in the areas of fuel efficiency, fuels diversity, advanced vehicle technologies, energy and greenhouse gases are described in this chapter.

VEHICLE FUEL EFFICIENCY

In the U.S. , fuel efficiency of new cars and trucks is regulated through the CAFE standards. Today, the CAFE standard is 27.5 miles per gallon (mpg) for cars and 22.2 mpg for trucks. A new law passed in December 2007 will increase the CAFE standard to at least 35 mpg by 2020 for the U.S. new vehicle fleet.

Transport Canada continues to set voluntary Corporate Average Fuel Consumption (CAFC) targets of 8.6 and 10.6 liters of fuel burned per 100 kilometers traveled for cars and trucks, respectively. As shown in Figure E below, we will exceed CAFE standards and CAFC targets for both passenger cars and light-duty trucks for the 2008 model year. (Target 1.1)

The CAFE and CAFC programs seek to reduce energy/oil consumption through their respective vehicle fuel efficiency standards or targets. Other regulatory programs on the national, state and provincial levels aim to address climate change by reducing GHG emissions from vehicles and their fuels.

Toyota is committed to working with the various regulatory agencies to develop consistent standards that improve vehicle efficiency for the benefit of energy security and climate change. It is most efficient to design, manufacture and sell our vehicles for the North American market as a whole. Approaches based on multiple regulatory requirements at both the federal and state/provincial levels will be challenging for technology and product planning, as well as the vehicle distribution process.

The most direct, immediate measure the auto industry can take to help meet the challenges posed by energy demand and climate change is to offer fuel-efficient products. Toyota offers the most fuel-efficient products of any full line manufacturer. Both the U.S. EPA's 2008 Fuel Economy Guide and the Natural Resources Canada Fuel Consumption Guide list the Toyota Prius as the most fuel-efficient vehicle available for sale in the U.S. and Canada respectively.

The government of Canada recognized the Toyota Yaris and Toyota Prius as recipients of the 2008 ecoENERGY for Vehicles awards as the most fuel-efficient vehicles in their respective classes. Plus, six of our vehicles are eligible for rebates offered by the Canadian government to promote the purchase of fuel-efficient vehicles: Toyota Prius, Toyota Camry Hybrid, Toyota Yaris, Toyota Corolla (manual transmission only), Toyota Highlander Hybrid and Lexus RX 400h.

We also help to meet the challenges posed by energy demand and climate change by developing technologies that improve fuel economy. (Target 1.2)  We are revamping all of our conventional engines and transmissions over the next two years to achieve increased fuel economy, improved air quality and reduced CO₂ output. Toyota is considering several technologies for continued or new introduction including direct injection gasoline engines, forced induction systems and diesel engines.

We consider how material choices may impact fuel economy. The use of high strength steels leads to a reduction in the number of parts needed to build a vehicle, because the same properties can be achieved with fewer or lighter parts. The reduced mass leads to improved fuel efficiency. Toyota currently uses 590MPa or higher strength steel grades in all 2008 model year vehicles. In the spirit of continuous improvement, we are also developing other material choices.

We also consider additional methods to enhance fuel efficiency. For example, low viscosity SAE 0W-20 multigrade gasoline engine oil enables increased fuel economy performance over traditional, higher viscosity oils by reducing friction while maintaining the necessary lubrication in the engine. SAE 0W-20 multigrade gasoline engine oil is now specified (for certain engines) in a number of Toyota, Lexus and Scion vehicles.

Recently, Toyota began using a lower viscosity differential gear oil in the Sequoia, Tacoma and Tundra. This led to a 1.5% improvement in fuel economy in each model. The introduction of lower viscosity transmission fluid in the Corolla and Matrix led to a 1% increase in each vehicle's fuel economy. While these improvements may seem minimal, they are representative of Toyota's philosophy toward continuous improvement.

VEHICLE FUELS DIVERSITY

Toyota is investing in alternative-fuel vehicle technologies that will use a more diversified portfolio of energy and fuel sources. We are excited by the promise these alternative fuels offer to help meet the challenges posed by increasing energy demand and the threat of climate change. However, that excitement is tempered by the knowledge that continued advances are needed before these fuels can be commercialized broadly and reach their full potential. Therefore, we are not focusing on a single path away from conventional fuels; instead, we are exploring many alternatives, including biofuels from cellulose and renewably-generated hydrogen. In last year's report, we described many of the leading alternative fuels and some of the challenges we are working to overcome. We provide additional information on ethanol below. (Target 2.1)

Ethanol

Toyota is actively exploring greener alternatives to petroleum. One such option is ethanol, which currently makes up approximately 5% of the U.S. gasoline fuel pool. Presently, most U.S. ethanol is produced from corn in a relatively simple fermentation process. Unfortunately, studies have shown the benefits of corn ethanol are rather modest (~20% reduction in CO₂ emissions and some petroleum displacement), while the potential side effects are more extensive than initially anticipated (increased water use, farming runoff, higher food costs and federal subsidies). Additionally, most experts agree that corn ethanol can only displace about 10% of our gasoline consumption due to yield and cropland limitations.

To avoid corn's limitations, researchers for many years have been exploring ways to convert plant cellulose, the nonedible parts of plants, into ethanol. This can be done by using enzymes and microbes to convert the plant material into sugars that can be fermented into ethanol or by heating the biomass and thermally converting it into biofuels. Many cellulose to ethanol conversion technologies are being explored in the lab, and some have been demonstrated on a small scale. But high capital costs and difficulties with process scale-up has slowed the development and construction of commercial scale facilities.

In 2007 and 2008, Toyota conducted studies with a pair of leading universities to examine current academic and national laboratory biofuels research. This work will help Toyota better understand the status of biofuel research and select particular fields that have the greatest potential to make biofuels, particularly ethanol, a success.

ADVANCED VEHICLE TECHNOLOGIES

We believe hydrogen fuel cells have the potential to provide practical, reliable and affordable zero-emission propulsion, but we recognize that true commercialization of hydrogen-based transportation is still years away. Toyota is working with industry and government to solve the challenges surrounding full-scale commercialization of this technology. (Target 2.2)  Some of the programs we are involved with include the U.S. Department of Energy's demonstration program for hydrogen vehicles and infrastructure, the Society of Automotive Engineers' working groups to develop codes and standards for hydrogen infrastructure, and demonstration and evaluation programs with the University of California, Irvine's National Fuel Cell Research Center and Davis' Institute of Transportation Studies.

Toyota is investing in a variety of advanced vehicle technologies so that our future products will be ready to operate on the most promising of alternative fuels as they become available. On the next page, we describe our hybrid vehicles and how we promote wider market acceptance of this technology; plug-in hybrid vehicles and what we are doing to address challenges involving the battery; and fuel-cell hybrid vehicles and the accomplishments made in the past year.

Hybrid Vehicles

Toyota sees hybrid technology as a key component for improving the efficiency and minimizing the environmental impact of gasoline-powered vehicles, as well as an essential and enabling element of future powertrains. Toyota and Lexus combined have six full hybrid vehicles on the market. We will unveil two new dedicated hybrids at the 2009 North American International Auto Show in Detroit.

Worldwide, our goal is to sell one million hybrids a year by mid-next decade and offer a hybrid version of all our vehicles by the early 2020s. Toyota globally has sold more than one million Prius worldwide since it was first introduced. We estimate that the Prius vehicles in operation have helped avoid some 4.5 million tons of CO₂ emissions.

Toyota runs a number of campaigns and sponsors events aimed at building awareness and understanding of our hybrid technology. These events promote the development of clean-energy vehicles and help ensure wider market acceptance. (Target 3.1)  Some of the events from the past year include:

• Lexus Hybrid Drive, Lexus Owner Events and Taste of Lexus Events have been conducted across the U.S. These events increased awareness of the Lexus Hybrid Drive and highlighted ways to decrease our environmental footprint. Lexus has also created a new Web site to explore ways that consumers can minimize their impact on the environment without sacrificing comfort and luxury. Please visit www.lexus.com/hybridliving for more information.

• Toyota Hybrid Ride and Drive events were conducted across the U.S. and in 13 cities in Canada . These events provided information about Toyota's hybrid vehicles and offered the chance to test drive one of the six Toyota and Lexus hybrids currently on the market.

• Toyota was a contributing sponsor of The Green Living Show, Toronto's first consumer show dedicated to all things green. Visitors were able to test drive hybrid vehicles. We also sponsored the EPIC (Ethical Progressive Intelligent Consumer) Sustainable Living Expo in Vancouver in March 2008.

• Toyota dealers held over 80 hybrid seminars in communities and schools to build awareness of climate change and increase understanding of Toyota hybrid vehicles.

For more information on Toyota hybrids, please visit
www.toyota.com/highway and
www.hybridsynergydrive.ca.

For more information on Lexus hybrids, please visit
www.lexus.com/hybriddrive and
www.lexushybriddrive.ca.

Plug-In Hybrid Vehicles

As the global leader in hybrid vehicles, it is vital that Toyota explore evolutionary pathways for our hybrid drive technology. A pathway that shows promise to reduce fuel consumption and emissions (including CO₂) from hybrids is the plug-in hybrid vehicle (PHV). In 2007, Toyota became the first auto manufacturer to begin testing a modest fleet of PHV prototypes on public roads in the U.S. , Japan and Europe.

Two PHV prototypes were delivered to the University of California, Berkeley and the University of California, Irvine as part of Toyota's sustainable mobility development program with the two campuses. This multiyear project, partially funded by the California Energy Commission and Air Resources Board, evaluates consumer use and acceptance, infrastructure issues and environmental benefits of three advanced vehicle technologies — hybrid, fuel cell and PHV.

Toyota's president announced at the 2008 North American International Auto Show that Toyota would accelerate our global plug-in hybrid research and development program and deliver hundreds of PHVs powered by lithium-ion (Li-Ion) batteries to a wide variety of global commercial customers in 2010, with many coming to the U.S.

Toyota's PHV offers all the advantages and utility of a conventional hybrid vehicle, plus has the potential to recharge the on-board battery pack from home or any location with an electrical outlet. Depending on the driving profile, regular recharging can significantly reduce gasoline consumption and potentially reduce both mobile source GHGs and criteria pollutants. To reach the potential for reduced emissions, clean electricity sources will be required. Additionally, PHVs offer fuel diversity, as the vehicle can use gasoline or electricity (which itself comes from a variety of sources).

Our prototype is based on the current Prius and designed to demonstrate the flexibility of our Hybrid Synergy Drive (HSD). With software modifications and a second nickel-metal hydride (NiMH) battery pack, it can accelerate briskly and is capable of reaching 60 miles per hour on electric propulsion alone. If higher speeds are needed or the battery is depleted, the engine starts and the vehicle operates like a conventional Prius. This intelligent “blending” of the gas and electric power by the HSD system benefits the user and environment, while not requiring costly development of new vehicle powertrains or platforms that could limit mass marketability of the technology.

Li-Ion Battery Progress

As with all electric vehicles, the primary technical challenge for PHVs is the battery. Great strides have been made in increasing battery power and energy density, but life-of-vehicle durability and cost continue to be major challenges for PHV batteries.

Early in 2008, Toyota announced plans to manufacture Li-Ion batteries for automotive applications at our joint venture battery facility with Panasonic. These batteries will be used in our next generation PHV, scheduled to begin commercial fleet operation in 2010.

Though we chose NiMH batteries for our first generation PHV prototypes, Toyota believes the chemistry will not have adequate energy density or life for production PHVs. NiMH batteries perform well under the duty cycle of our current hybrid products because they excel at supplying electricity in short powerful bursts, similar to a sprinter running a 100 meter dash. However, a PHV adds deep discharge, like running a marathon, on top of our traditional hybrid vehicle duty cycle. For our prototype PHV, we added a second NiMH battery to accommodate the increased battery-only operation.

Li-Ion technology is a leading contender for the PHV application. It has good power and energy density and the potential for lower cost compared to NiMH, but improvements must be demonstrated before commercial introduction. These improvements include high and low temperature operation, durability, cycle life (a measure of the battery's tolerance to repeated deep discharge and charge cycles) and safety under all possible operating conditions. Of these, assuming safety is first and foremost, cycle life will be the most challenging. Consumers have come to expect their HV battery will last the life of the vehicle and are likely unwilling to accept anything less from a PHV.

Fuel-Cell Hybrid Vehicles

Toyota believes that fuel-cell hybrid vehicles (FCHVs) will be an important part of our transportation future, and we have been actively developing this technology for over 15 years. In 2002 we began real world testing of our third generation FCHV in the U.S.

Toyota is now on its fifth generation of this technology, and we have made great strides in overcoming many of the technical challenges. We have increased the on-board hydrogen storage capacity and the vehicle range, increased the durability and reliability of the fuel cell stack, and have succeeded in subzero operation to as low as -34.5° F (-37° C).

Toyota recently completed a seven-day trek in an advanced prototype of the new Toyota FCHV, with 10,000-psi hydrogen fuel tanks, from Fairbanks, Alaska, to Vancouver, British Columbia, along the Alaska-Canadian (ALCAN) highway. The vehicle withstood rough road conditions and severe weather, and performed perfectly. Every mile of the journey was monitored in real time by a dedicated laptop program that measured distance, time, speed, and hydrogen tank temperature and fuel consumption.

The trip along the ALCAN highway highlighted one of the key remaining challenges to bringing fuel-cell vehicles to market — the lack of fueling infrastructure. In fact, one of the key reasons the route was chosen is that Canada allows mobile refueling of high-pressure hydrogen vehicles along its public highways. Without a network of hydrogen fueling stations every 300 miles, mobile refueling was a necessity.

2007 also marked another significant achievement in our fuel cell development program. We tested the increased range of the FCHV by driving from Henderson, Nevada, via state highway routes to Coronado Island in San Diego, California. The total journey from full tank to empty was 436.2 miles — a new record for fuel-cell vehicles. Improvements to on-board hydrogen storage and system efficiencies continue to narrow the gap between gasoline and hydrogen fuel-cell vehicles.

We are confident that we can overcome the challenges of reducing the vehicle cost and increasing the durability of the fuel cell system. Fuel-cell hybrid vehicles will be an important part of our technology strategy in the pursuit of sustainable mobility.

ADVANCED TRANSPORTATION SOLUTIONS

Toyota is committed to putting our engineering efforts on what we can do today to create a brighter future. We have engineers working to develop Intelligent Transportation Systems (ITS) technology that would allow drivers to communicate with public information systems. (Target 4.1)  Our efforts with ITS technology focus on improvements to safety, comfort and environment. The construction of ITS infrastructure aims to ease traffic congestion, improve traffic flow and reduce vehicle CO₂ and NO_X emissions.

ENERGY AND GREENHOUSE GASES IN OUR OPERATIONS

We work to reduce energy consumption and greenhouse gases throughout all aspects of our business. Below, we describe our targets in these areas.

Manufacturing

Our manufacturing facilities consume more than $150 million worth of energy annually, resulting in 1.4 million metric tons of CO₂ emissions per year. It is sound business practice to seek ways to reduce the financial and environmental costs of our energy use.

Energy

Toyota has been an Energy Star partner since 2003. For the fourth year in a row, Toyota Motor Engineering & Manufacturing, North America earned an Energy Star Award. In addition, eight of our U.S. manufacturing plants have earned Energy Star Plant Awards. Energy improvements at Toyota's U.S. manufacturing facilities have saved over $600,000 annually and reduced CO₂ emissions by almost 12,000 metric tons.

Using FY2002 as a base year, we have a target to reduce total energy use in our manufacturing operations in North America by 27% per vehicle produced by FY2011. Over the past year, our overall energy use per vehicle slightly increased (please see Figure I below). This is due to several factors. We increased production at our nonassembly plants in Alabama and West Virginia, and expanded our nonassembly plants in Delta, British Columbia; Jackson, Tennessee; and Troy, Missouri. In addition, energy reduction projects were cancelled due to model change activities, and production volume decreased at several vehicle plants. Nevertheless, we are still on track to reach our target by FY2011, and continue to implement pilot projects and kaizens to reduce energy use. (Target 5.1)

An example of our efforts to reduce energy use can be seen at our facility in Fremont, California, where a 50,000-foot expansion was recently completed. We integrated light harvesting features into the construction. For example, sensors automatically shut off electric lights when enough natural light is available through the skylights, saving energy and reducing greenhouse gas emissions.

Greenhouse Gas Emissions

Energy use is the main source of greenhouse gases from our manufacturing plants. Worldwide, Toyota is committed to a 20% reduction in GHG emissions per sales unit by 2010, against a 2001 baseline. While energy consumption in North America has increased slightly over the past year, CO₂ emissions have slightly decreased. This is because some of the nonassembly plants experiencing increased energy use are being served by cleaner energy sources.

In the U.S. , Toyota, along with other members of the Alliance of Automobile Manufacturers, participates in the U.S. Department of Energy Climate VISION program. Member companies have committed to reducing the level of GHGs emitted from manufacturing operations by 10% per vehicle produced by 2012, compared to a 2002 baseline. We are exceeding this U.S. commitment (please see Figure J). (Target 5.2)

We began tracking CO₂ emissions from our manufacturing logistics group last year, and have implemented a number of CO₂ reduction activities, such as minimizing route length and maximizing the space used in transport containers. We will evaluate additional reduction opportunities in the future.

Managing Nonproduction Energy Use

While we continue to look for ways to reduce our energy consumption from production activities, our manufacturing facilities also implement programs aimed at reducing the amount of energy we consume during nonproduction — during weekends and between production work shifts. As a result of these programs, we have reduced our total nonproduction energy consumption by 10% from last year.

For example, our manufacturing facility in Fremont, California, is now in the fourth year of a program we call “Green Weekends.” During select weekends, the facility turns off virtually all electrical equipment, including the HVAC units and lights, saving electricity consumption and costs.

In St. Louis, we have installed a new, smaller compressor that meets our weekend energy needs more efficiently. It allows us to shut down our larger 150 horsepower compressor on the weekends when it is not needed.

In Tijuana, Mexico , employees have implemented a kaizen to reduce natural gas burned during shift changes. Natural gas burners on the paint ovens are turned off after the second shift leaves and before the first shift arrives. The burners remain off for 2.5 - 3 hours each day, saving approximately 40 - 70% of natural gas consumed.

At our manufacturing facility in Kentucky, the Facilities Control Energy Management Group started an internal contest among departments to reduce nonproduction energy consumption. Designed around a horse racing theme, the “Greenland Stakes” is charted using a horse track with each of the participating departments symbolized as a horse running in the race. As a result of the contests, the departments are now consuming an average of 10% less energy than last year and have avoided 1,596 metric tons of CO₂ emissions.

Sales and Logistics

Just as we do in manufacturing, we strive to improve energy efficiency and reduce greenhouse gas emissions in our logistics operations and sales offices.

Energy

Across North America, Toyota's logistics operations and sales offices are working to reduce energy consumption. Last year, we reported that our U.S. sales and logistics sites exceeded our target of reducing energy consumption (per square-foot) by 18% by FY2011, from a FY2001 baseline. (Target 5.3a)  We set a new target to reduce energy consumption (per square foot) by 35% by FY2011, from a FY2001 baseline. So far, we have reduced total energy consumption per square foot by 22% (please see Figure K). (Target 5.3b)  Data shown in Figure K include updated square footage and new and expanded facilities that have been added since the FY2001 baseline.

Through programs like facility energy treasure hunts, logistics and sales offices are continually audited to identify potential energy efficiency opportunities. For example, our logistics facility in Georgetown, Kentucky, increased their energy efficiency by replacing breakroom refrigerators with Energy Star rated units, purchasing an on-demand, tankless water heater, and replacing interior and exterior lights with high-output, high-efficiency bulbs. These simple steps saved an estimated $38,500 annually and 700,000 kilowatt-hours.

In Canada , we established a five-year target for our logistics facilities and office campus to reduce energy consumption by 10% by 2010, from a baseline of 2004. A team has been assembled to review and analyze energy reduction opportunities. (Target 5.4)

U.S. Sales and Logistics GHG Inventory

Toyota's U.S. sales and logistics division has been tracking GHG emissions since 2000, using The GHG Protocol developed by the World Resources Institute and the World Business Council for Sustainable Development. The scope of the inventory includes GHG emissions from purchased electricity, natural gas use, business travel, employee commuting, and logistics and supply activities (including our third-party logistics providers).

We use the GHG inventory to help us evaluate logistics-related emission reduction methods. (Target 5.5)  Much of our parts and vehicle transport is conducted by third parties. Because our activities influence the emissions of these third parties, we work with them to find ways to reduce GHG emissions. In October 2007, we hosted a conference with our railroad carriers to share best practices.

In an effort to make our fleets and shippers more sustainable, TLS Toyota Transport, one of our in-house carriers, and a number of our third-party carriers are joining the Environmental Protection Agency's (EPA) SmartWay^SM program. The SmartWay Transport Partnership is an innovative collaboration between EPA and the freight industry to increase energy efficiency while significantly reducing greenhouse gases and air pollution. Through this partnership, Toyota has committed to measuring the greenhouse gas emissions of these freight activities using EPA's FLEET Performance Shipper/Logistics Model and increasing the percentage of freight shipped by SmartWay carriers.

LOOKING AHEAD

Over the next three years, one of our biggest challenges to meeting our action plan targets is to find ways to improve the energy efficiency of our operations, even as we produce more vehicles. In addition, we must work closely with government to implement regulations that will improve new vehicle efficiency and reduce CO₂ emissions, while minimizing regulatory duplication and facilitating deployment of advanced technologies.