From its earliest days, Honda has developed environmental initiatives to meet the challenges of each era. In 1992, Honda established the "Honda Environment Statement, " which clarifies our position on environmental conservation. Since then, we have carried out our environmental activities in line with this statement.
In fiscal 2006, Honda achieved all of its own fiscal 2006 environmental impact reduction targets. In fiscal 2007, we took the initiative in announcing our new global CO2 reduction targets for products and production activities for 2010. This stringent target requires us to reduce CO2 emissions by 10% for products and production activities by 2010 compared to fiscal 2000. We have recently set and announced new environmental impact reduction targets for 2010 within Japan. These achievements and targets indicate our determination to further advance our efforts to address environmental issues and be at the forefront of the times in the area of the environment.

Honda's Advanced Environmental Initiatives
Honda's mission is to operate manufacturing facilities throughout the world that place as little burden on the environment as possible as they manufacture products with superior environmental performance. Following is a look at the environmental performance of automobiles in our major regions. Through our unique technologies, Honda introduces products that demonstrate environmental performance that exceeds the regulations established in each region for the reduction of emissions and improvement of fuel efficiency. It is our responsibility to contribute to the achievement of a sustainable mobility society by meeting people's mobility needs while minimizing the environmental impacts caused by our products. In the product domain, we are implementing measures based on the following three approaches.

1. Further Improvements in the Reduction of Emissions from Internal Combustion Engines and Improvement of Fuel Efficiency

North America (the United States)
In the United States, Honda continues to lead the automotive industry in corporate average fuel economy for cars and trucks combined. Moreover, in terms of cleaner emissions all Honda and Acura brand vehicles meet or exceed the U.S. EPA*1's stringent Tier II Bin5*2 exhaust gas standard for clean emissions.

Europe
In Europe, since the introduction of the 2001 Civic (with some local variations) Honda has promoted reductions in exhaust emissions by ensuring that all models meet the Euro4 emissions standard when they undergo full model changes. By increasing the fuel economy of existing models and introducing hybrid and diesel vehicles, we are steadily reducing vehicle CO2 emissions, particularly for diesel vehicles. Since the Accord equipped with a Honda-developed 2.2-liter engine went on sale in December 2003, we have equipped the FR-V (called Edix in Japan) with this engine. In January 2006, we also began offering the new Civic with this engine. In January 2007, we released a new CR-V equipped with a diesel particulate filter (DPF)*3 to achieve higher fuel efficiency and cleaner exhaust.

Asia
In Thailand, Honda's locally produced Jazz (called Fit in Japan) has already achieved the Euro4 emissions standard, which is to be required in the future. Since the introduction of the Jazz , all models introduced in Thailand have achieved the Euro4 emissions standard. The new Civic , introduced in 2005, and the new CR-V , introduced in 2006, are also made in Thailand and are compliant with the Euro4*4 emissions standard.

China
Honda has attained Europe's Euro4*4 emissions standards ahead of Chinese regulations for all models introduced in the country. In July 2007, the Company plans to release the Civic Hybrid , a vehicle with even higher fuel efficiency than the City (called Fit ARIA in Japan) and the Civic , which are already at the top of their class in this area.

2. Evolution of Hybrid Vehicles

In November 1999, Honda introduced the Insight , the first hybrid vehicle equipped with the Honda integrated motor assist (IMA*5) system, achieving the world's highest fuel economy among mass-produced gasoline-powered vehicles. In December 2001, we introduced the Civic Hybrid , and in December 2004, we began sales in North America of the Accord Hybrid , adopting Honda's Variable Cylinder Management system for its V6 engine. Further, in November 2005 we began sales of an all-new Civic Hybrid , equipped with the new 3-Stage i -VTEC + IMA Honda Hybrid System. In the future, Honda is developing a new dedicated hybrid vehicle suitable for family use in major automobile markets in the world. With this new dedicated hybrid vehicle, Honda will achieve further advancement of fuel efficient technologies and a reduction in cost. We plan to contribute to the reduction of CO2 emissions by delivering hybrid vehicles that are priced affordably enough to be practical for more customers throughout the world.

3. Promotion of Alternative Fuel-Powered Vehicles

North America (the United States)
In 2005, we were the first company in the world to lease a fuel cell vehicle to an individual owner. Honda's track record now extends to 23 FCX fuel cell vehicles leased in North America (a total of 34 leases of the FCX in Japan and the United States). In 2007, we also delivered one of these vehicles to American actress Q'orianka Kilcher. In Torrance, California, we are converting natural gas to hydrogen and using the hydrogen to power fuel cell vehicles. We are in the process of testing hydrogen fueling stations, such as the Home Energy Station , which also provides hydrogen to generate heat and electric power in homes. We have substantially enhanced the power and highway fuel economy of the third generation natural gas-powered Civic GX , following the first-generation in 1998 and the second-generation in 2001. As these vehicles have advanced, we have offered affordable a home refueling appliance for natural gas-powered vehicles. Honda is thus playing a leading role in promoting alternative fuel-powered vehicles.

Other Regions (Brazil)
In Brazil, where ethanol produced from sugar cane is commonly used as fuel, since the mid-1980s Honda has offered motorcycles and automobiles that run on a mixture of ethanol and gasoline. The ethanol ratio of fuels in Brazil is increasing, and a 100% ethanol fuel—E100—is now available. To meet this challenge, Honda introduced flex-fuel models of the Civic in November 2006 and the Fit in December, both of which can operate on any gasoline-ethanol mixture.

Other Product Deployment
Since Honda released its home-use cogeneration unit in Japan in March 2003, total unit sales through gas companies have reached 45,000. In March 2007, the Company launched Freewatt , a compact home-use cogeneration system developed in cooperation with Climate Energy, LLC, in North America. We began sales in the cold northeastern United States and aim to expand into other cold regions of the country.

*1: EPA The U.S. Environmental Protection Agency *2: Tier II Bin5 This standard for exhaust emissions was established in the United States by the Environmental Protection Agency based on the U.S. Clean Air Act and went into effect in 2004. Regulating the value of NOx for emissions category BIN5: 0.07g/mile. To meet Tier II Bin5 standards, we have cut emissions by 75% or more from the previous levels. *3: Diesel particulate filter (DPF) This ceramic filter attracts and strains out black smoke and other particulate matter from the exhaust of diesel vehicles, cleaning their emissions. *4: Euro4 Emissions regulations implemented in Europe from 2005. Although China and many Asian countries have introduced European regulations, at present they only require compliance with Euro3 standards. Euro4 is a stringent level that Thailand is considering adopting from 2008. *5: Honda IMA (Integrated Motor Assist) A new hybrid system developed independently by Honda. While the engine is the primary power source, an electric motor will assist during acceleration. Due to a design that is more simple than a conventional hybrid system, a structure that is both lighter weight and more compact in size was achieved. Using energy efficiently, this new hybrid system achieves high fuel efficiency during both city and highway driving.

Freewatt , manufactured by Climate Energy, LLC (Honda's cogeneration unit at left)