AIR QUALITY

CRITERIA POLLUTANT TAILPIPE EMISSIONS

Hydrocarbons, nitrogen oxides (NOx) and carbon monoxide — all byproducts of fuel combustion — are linked to various air quality issues such as smog formation as well as various health effects. Limiting criteria pollutant tailpipe emissions from our vehicles helps to reduce some of the environmental impacts of driving.

The U.S. Environmental Protection Agency (EPA) and the state of California have certification programs to categorize vehicles in terms of their level of tailpipe emissions (the Canadian program is aligned with the U.S. federal program).

While the EPA Tier 3 and California Low Emission Vehicle III (LEV III) regulations have different nomenclature for categorizing vehicle emissions, the bins include the same vehicle emission groupings. For the 2017 model year, EPA Tier 3 and California LEV III regulations required an auto manufacturer’s fleet average to meet an emission standard for non-methane organic gas with nitrogen oxides (NMOG + NOx) of 0.086 g/mi for passenger cars and light-duty trucks up to 3,750 pounds, and 0.101 for other light-duty trucks. The standard decreases until 2025, when the NMOG + NOx average for both sets of vehicles will become 0.030 g/mi.

The EPA Tier 3 vehicle standards were intended to be harmonized with California's Low Emission Vehicle program and create a federal vehicle emissions program that allows automakers to sell the same vehicles in all 50 states.

Environment and Climate Change Canada has issued Tier 3 regulations aligned with the final U.S. Tier 3 rule.

Toyota's goal is to maintain flexibility to build vehicles based on customer preferences. In setting tailpipe emission regulations, we believe standards should be performance-based and consider the interaction with other vehicle rules — such as fuel economy/greenhouse gas standards — to ensure the total package of requirements is effective and acceptable to the consumer. Fuels must be considered with vehicle technologies as a holistic system. Reduced sulfur levels in gasoline, required by the federal Tier 3 and California LEV III programs, are enabling the after-treatment systems being designed for compliance.

Toyota annually complies with the state of California, U.S. and Canadian federal vehicle emissions programs, and we have met the requirements for each model year.

The American Council for an Energy Efficient Economy (ACEEE) "Greenest Vehicles of 2020" list names the Toyota Prius Prime as the greenest vehicle. Prius Prime’s number one ranking comes after several years of all-electric cars dominating the list. Three other Toyota vehicles made the list: Toyota Prius Eco⁵, Toyota Corolla Hybrid and Toyota Camry Hybrid LE. The list is notable in that it considers a variety of criteria when determining the greenest cars, including the car’s emissions, emissions from the electric grid on which the vehicle is charged, and energy necessary to build and dispose of the car.

⁵The Prius Eco is an available trim level within the Prius model line. This trim option offers customers even better fuel efficiency thanks to lighter weight and further optimized aerodynamics.

VOLATILE ORGANIC COMPOUNDS

ABOUT THIS CHART: The primary concern with non-greenhouse gas air emissions is smog. Smog is formed as particulate matter, nitrogen oxides and volatile organic compounds (VOCs) react with sunlight. Smog has been linked to several health issues and is particularly prevalent in dense urban areas with heavy traffic, industrial activity and sunny, warm climates.

Vehicle body painting operations generate most of Toyota's VOC emissions. Toyota's North American manufacturing plants measure grams of VOCs emitted per square meter of vehicle surface area coated (g/m2). VOC emissions from vehicle body painting decreased 5.4 percent between fiscal years 2019 and 2020. We expect VOC emissions to continue to decrease as we further improve transfer efficiency and launch additional water-borne paint systems.

BIODIVERSITY

ENDANGERED AND PROTECTED SPECIES

ABOUT THIS CHART: As sites apply for certification of their conservation programs with Wildlife Habitat Council, they work with a WHC biologist to take an inventory of species onsite. This inventory includes any species listed by federal law as endangered or threatened. In addition to the 13 sites with WHC-certified programs, we assess new sites for the presence of endangered and protected species. To our knowledge, there are no endangered, threatened or protected species on or near the site of the new manufacturing plant in Apaseo el Grande, Guanajuato (Mexico).

“Protecting Species”

PROTECTED AREAS/CRITICAL HABITAT

ABOUT THIS CHART: TMNA has begun an analysis to determine whether sites are in a protected area, critical habitat or biodiversity hotspot (see below for definitions of these terms). We started with our largest facilities, those that have Conservation Certification from Wildlife Habitat Council, and those undergoing major renovations. In the table above, we only include the sites located in these areas. We will be analyzing additional sites going forward, and the information will be used to inform our biodiversity strategy and project selection.

Our newest assembly plant in Apaseo el Grande, Guanajuato (Mexico), which started production in December 2019, is not in or adjacent to a protected area, critical habitat or biodiversity hotspot.

A Protected Area is defined as a geographic area that is designated, regulated or managed to achieve specific conservation objectives. (GRI Standards Glossary 2016)

Critical Habitat is a term defined and used in the U.S. Endangered Species Act. It is a specific geographic area(s) containing physical or biological features that are essential for the conservation of a threatened or endangered species and that may require special management and protection. Critical habitat may include an unoccupied area(s) if it is determined to be essential for the conservation of the species.

A Biodiversity Hotspot is defined as an area that meets two criteria:

• It must have at least 1,500 vascular plants as endemics — which is to say, it must have a high percentage of plant life found nowhere else on the planet. A hotspot, in other words, is irreplaceable.
• It must have 30 percent or less of its original natural vegetation. In other words, it must be threatened.

Around the world, 36 areas qualify as biodiversity hotspots. They represent just 2.3 percent of Earth’s land surface, but they support more than half of the world’s endemic plant species and nearly 43 percent of endemic bird, mammal, reptile and amphibian species.

Critical Ecosystem Partnership Fund (CEPF) maintains a list of hotspots by region. CEPF is a joint initiative of l’Agence Française de Développement, Conservation International, the European Union, the Global Environment Facility, the Government of Japan, the MacArthur Foundation and the World Bank.

“Conserving Habitats”

WHC CONSERVATION CERTIFICATIONS

ABOUT THIS CHART: Wildlife Habitat Council (WHC) partners with corporations, fellow conservation organizations, government agencies and community members to empower and recognize wildlife habitat and conservation education programs. WHC's certification standard, Conservation Certification, recognizes meaningful wildlife habitat management and conservation education programs.

Our partnership with WHC began in 1999 when Toyota joined WHC's membership. In 2008, the conservation program at our Kentucky assembly plant became Toyota's first WHC certification. WHC helps us inventory plant and animal species on our sites and identify appropriate projects. We now have programs certified at 13 sites in North America. Our protected areas include grassland, wildflower meadows, pollinator gardens and forests.

“Protecting Species”

CARBON

VEHICLE CO₂ EMISSIONS: UNITED STATES

ABOUT THIS CHART: Our efforts to improve fuel economy and reduce GHG emissions have become more aggressive with the adoption in the United States of new fuel economy and GHG emissions standards for passenger cars and light-duty trucks through the 2025 model year. While overall compliance is based on a fleet average, each vehicle has a fuel economy/GHG target based on its footprint.

One significant challenge to meeting these standards is having technology options available in vehicles that consumers are willing to purchase in sufficient quantities needed for compliance with the standards. Low fuel prices have added to this challenge. In 2012, when the standards were set through the 2025 model year, it was impossible to predict market outcomes so far into the future, since preferences are largely determined by factors such as fuel price and economic conditions, which are beyond an auto manufacturer’s control. As such, the regulations called for a feasibility evaluation of the 2022-2025 standards. Toyota is collaborating with the relevant government agencies to ensure that future regulations are aligned with technology and market realities while achieving the program's environmental goals.

In the chart above, the performance of the U.S. vehicle fleet is being shown in two ways. The green line shows Toyota's fleet-wide fuel economy (CAFE) presented in terms of grams of CO₂ per mile. This measure of performance, shown in previous Toyota North American Environmental Reports, only reflects GHG emissions reductions measured at the tailpipe during the official government test procedure.

The shorter, teal line depicts a broader view of GHG performance that entails provisions in the U.S. EPA GHG program (starting with the 2012 model year). The annual GHG compliance values account for real-world GHG benefits from off-cycle technologies such as air conditioning and aerodynamic improvements not observed over the official testing conditions. Beginning with the 2017 model year, Toyota is only showing the fleetwide GHG values for our light-duty fleet under EPA’s GHG program. In the 2017 model year evaluation, NHTSA’s CAFE program started to incorporate certain off-cycle technology reductions similar to those that are accounted for in EPA’s GHG program. This results in very similar CAFE and GHG values. Those interested can still find the 2017 model year and beyond CAFE data using NHTSA’s PIC tool, linked below.

Showing both values provides a transparent way of looking at Toyota’s historical fleet performance as we continue to pursue both GHG reductions and fuel economy improvements under both the GHG and CAFE programs.

Follow this link for more information about the U.S. National Highway Traffic Safety Administration (NHTSA) Corporate Average Fuel Economy (CAFE) program.

Follow this link for more information about the U.S. EPA GHG program.

VEHICLE CO₂ EMISSIONS: CANADA

ABOUT THIS CHART: The Canadian federal government introduced a GHG emissions regulation under the Canadian Environmental Protection Act for the 2011‐2016 model years, and in October of 2014 issued final GHG emissions regulations for the 2017‐2025 model years. Toyota has met the regulatory obligations regarding vehicle CO₂ emissions in Canada for each model year.

Natural Resources Canada (NRCan) named three Toyota vehicles as best-in-class for fuel efficiency for the 2020 model year:

• Toyota Corolla Hybrid (Compact car)
• Toyota Prius (Mid-size car)
• Toyota Highlander Hybrid AWD (Standard Sport Utility Vehicle)

Best-in-class vehicles have the lowest combined fuel consumption rating, based on 55 percent city and 45 percent highway driving.

VEHICLE CO₂ EMISSIONS: MEXICO

ABOUT THIS CHART: In Mexico, the government has modeled vehicle GHG standards after U.S. requirements. The standards require automakers to meet a single sales‐weighted fleet average over the period 2014 through 2016, and allow credits generated in 2012 and 2013 to be used towards compliance. These standards have been appropriately tailored to the unique driving conditions and product mix associated with the Mexican market and contain similar compliance flexibilities and lead time as those offered in the United States. Toyota continues to be in compliance with these standards.

ENERGY

During fiscal year 2020, Toyota's North American operations used 3.8 million megawatt-hours (MWh) of energy to power both stationary and mobile activities. Of this:

• 1.67 million MWh were from non-renewable sources of electricity.
• 59,718 MWh were from renewable electricity sources – either onsite solar, landfill gas, geothermal or renewable energy credit purchases. This represents 3.4 percent of Toyota’s total electricity consumption in North America.
• 2.05 million MWh were from using natural gas as a fuel.
• 78,700 MWh were from fuels used in mobile sources, such as gasoline and diesel.

Energy reduction activities resulted in electricity and natural gas savings of 195,000 MWh.

Energy intensity, measured in MWh of energy consumed per vehicle produced, was 2.11 in fiscal year 2020, down from 2.15 in 2019.

CO₂ from Operations

GREENHOUSE GAS EMISSIONS

TOTAL GHG EMISSIONS

ABOUT THIS CHART: Total Scope 1 and 2 GHG emissions have decreased 9 percent between fiscal years 2019 and 2020. The decrease is a result of implementing energy and GHG efficiency measures and changes in production volumes and model mix.

TMNA uses The GHG Protocol: A Corporate Accounting and Reporting Standard, Revised Edition (published by WBCSD and WRI) to develop the emissions inventory. TMNA follows the financial control approach.

Scope 1 sources include stationary combustion (such as burning natural gas for energy) as well as owned mobile sources (such as Toyota-owned fleet vehicles and owned logistics trucks).

Scope 2 emissions include consumption of purchased electricity from 102 Toyota sites in North America. Scope 2 emissions are calculated using the location-based approach. Indirect emissions from electricity used at Toyota's U.S. locations are calculated using EPA eGRID emission factors. For sites in Canada, provincial emission factors are sourced from Canada's National Inventory Report, and for Mexico, a country-specific emission factor is sourced from Climate Transparency's G20 Brown to Green Report 2019. Where renewable electricity is purchased, an emission factor of zero is assumed.

Toyota does not purchase steam.

Three of Toyota's U.S. manufacturing plants are required to report GHG emissions data under U.S. EPA's Greenhouse Gas Reporting Program. Individual plant data for our plants in Kentucky, Texas and Indiana are available on EPA's website through its online data publication tool.

In Canada, Toyota Motor Manufacturing Canada (TMMC) and Canadian Autoparts Toyota, Inc. (CAPTIN) are required to report GHG emissions data. TMMC's Cambridge plant is required to report under Environment Canada's Greenhouse Gas Emissions Reporting Program; both the Cambridge and Woodstock plants are required to report GHG emissions to the province of Ontario under its Environmental Protection Act. CAPTIN is required to report GHG emissions to the province of British Columbia under its Greenhouse Gas Reduction Act.

Carbon Targets

SCOPE 1+2 GHG INTENSITY (PER VEHICLE)