Biofuel sustainability standards and public policy: A case study of Swedish ethanol imports from Brazil: Report for the OECD

Public demand for assurances that the liquid biofuels (ethanol and biodiesel) they choose to or are required to use in their vehicles are produced and traded in ways that consider the environment and the local populations has led to a number of public and private initiatives to develop sustainability standards for those fuels. Central to these standards are criteria addressing the direct, and sometimes also indirect, greenhouse gas emissions resulting from the production, transport and use of the biofuels. This case study examines the first scheme applied to a traded biofuel, the Verified Sustainable Ethanol Initiative (VSEI), a private initiative of the Swedish fuel-ethanol supplier, SEKAB. VSEI went into operation in August 2008 to verify that the ethanol it was importing from Brazil met its own minimum standards for ―field-to-wheel‖ (life-cycle) greenhouse-gas emission standards and a number of other environmental, as well as social, criteria. The study first explores the broader policy context behind the establishment of the VSEI, noting especially the public debates that informed the criteria that were ultimately selected. It then examines the salient features of the VSEI, focusing on those relating to carbon emissions, and the process by which its standards were developed. The Initiative’s brief history in applying and verifying conformity with the standards is discussed. The study notes that the perceived benefits to Brazilian producers participating in the Initiative is that it reduces consumer doubts about their product, and reduces competition from producers not participating in the Initiative; for SEKAB it increases the company’s credibility in various private and public forums working on sustainability standards for biofuels, and gives it a first-mover advantage once mandatory regulations relating to the sustainability of biofuels go into force. Whether, on balance, both market access and environmental outcomes are improved as a result of the VSEI is, however, difficult to assess at this early stage and will hinge on how and when recognized international standards begin to emerge.