Governing biofuels: A principal-agent analysis of the european union biofuels certification regime and the clean development mechanism

Journal of Environmental Law

Volumn 24, Issue 1, 2012, Pages 43-73

  Lin, Jolene ^a  

^a UNIVERSITY OF HONG KONG   (Hong Kong)

Author keywords

Biofuels; Clean development mechanism; European union; Kyoto protocol; Non state Actors; Regulation

Indexed keywords

BIOFUEL; CERTIFICATION; CLEAN DEVELOPMENT MECHANISM; ENVIRONMENTAL LEGISLATION; EUROPEAN UNION; KYOTO PROTOCOL; NONGOVERNMENTAL ORGANIZATION; SUSTAINABILITY;

EID: 84863267569     PISSN: 09528873     EISSN: 1464374X     Source Type: Journal    
DOI: 10.1093/jel/eqr025     Document Type: Article

References (117)

1. See discussion in James Smith, Biofuels and the Globalization of Risk: The Biggest Change in North-South Relationships Since Colonialism? (Zed Books 2010) 5-7, where the author suggests that '[b]iofuels fire the imagination of policy-makers, entrepreneurs, researchers and governments because of the possibility of being all things to all people.'
2. OECD, Trade and Agriculture Directorate, Committee for Agriculture, Working Party on Agricultural Policies and Markets, 'A Review of Policy Measures Supporting Production and Use of Bioenergy' TAD/CA/APM/WP(2007)24/FINAL accessed 23 March 2011.
3. Arthur Mol, 'Environmental Authorities and Biofuel Controversies' (2010) 19 Environmental Politics 63
4. See also M Kojima and others 'Considering Trade Policies for Liquid Biofuels' (World Bank Renewable Energy Special Report 004/07, May 2007) accessed 20 March 2011, for discussion on how liberalising trade in liquid biofuels might affect biofuel production and consumption.
5. Mol (n 3) 66
6. The term 'politically instituted market' refers to '.. .the political construction of specified products or services to be provided by market actors for consumers through the market organisation of exchange'.
7. Sarah Pilgrim and Mark Harvey, 'Battles over Biofuels in Europe: NGOs and the Politics of Markets' (2010) 15(3) Sociological Research Online 4, s 2.2.
8. The carbon market is another example of a politically instituted market; it only exists by virtue of a politically constructed product (the carbon credit) to be exchanged under the Kyoto Protocol or the European Union Emissions Trading Scheme
9. Bart Dehue, Sebastian Meyer and Carlo Hamelinck, 'Towards a Harmonised Sustainable Biomass Certification Scheme' (Ecofys 2007) 4 accessed 1 March 2011.
10. Oran Young, 'Rights, Rules and Resources in World Affairs' in Oran Young (ed), Global Governance: Drawing Insights from the Environmental Experience (MIT Press 1997) 6
11. United Nations Environment Program (UNEP), 'Towards Sustainable Production and Use of Resources: Assessing Biofuels' (October 2009) 34
12. Kees Kwant and others, 'Overview of World Bioenergy Trade: IEA Task 40', ('Developing Sustainable Trade in Bioenergy' workshop, International Energy Agency Bioenergy Exco65, Nara, Japan, 12-14 May 2010) accessed 20 March 2011, slide 12.
13. Kees Kwant and others (n 10) slide 13
14. UNEP (n 8).'The development of the biodiesel industry in Europe is an important reason why rapeseed production in Europe has been maintained at current levels despite the reduced support levels for oilseeds under Common Agricultural Policy (CAP) reforms'.
15. See also US Department of Agriculture (Foreign Agricultural Service, Production Estimates and Crop Assessment Division), 'Rapeseed Production May Benefit from New EU Directive', 4 November 2003 accessed 20 March 2011.
16. These studies are available online at accessed 20 March 2011.
17. Pete Harrison, "'EU Draft Reveals Biofuels" "Environmental Damage"' Reuters (London, 4 March 2010)
18. Most mandates require blending 10-15% ethanol with gasoline, or blending 2-5% biodiesel with petroleum diesel; UNEP (n 8) 35
19. Energy PolicyAct of 2005, 42 USC Section 7545(o) (2006)
20. The petroleum industry is required to blend at least 36 billion gallons of biofuels into gasoline by 2022; Energy Independence and SecurityAct of 2007, Pub L No 110-140, s 202
21. Malaysian Biofuel Industry Act 2007, Act 666, Laws of Malaysia. See Gregore Pio and Tara Laan (September 2008) 'Biofuels At What Cost? Government Support for Biodiesel in Malaysia' - an excellent analysis of the Malaysian biofuels industry accessed 20 September 2010.
22. The RenewableTransport Fuel Obligation (Amendment) Order 2009, SI 2009/843, pursuant to the Energy Act 2004. Amendment of Article 4 (the Renewable Transport Fuel Obligation) is part of this Order.
23. Goran Berndes and others, 'Bioenergy, Land Use Change and Climate Mitigation' (International Energy Agency Bioenergy and Swedish Energy Agency, January 2011) 4 accessed 20 March 2011.
24. See discussion in: Nuffield Council on Bioethics, 'Biofuels: Ethical Issues' (April 2011) 32-33 accessed 9 June 2011.
25. This list of direct effects is reproduced from: United Kingdom Renewable Fuels Agency, The Gallagher Review of the Indirect Effects of Biofuels Production (July 2008) 18
26. Also see the case study on Brazil at Nuffield Council (n 24) 36-37
27. See Jean Ziegler, Report of the Special Rapporteur on the Right to Food, UN Human Rights Council, GE.08-10098 (E) 180108.
28. The Gallagher Review (n 25)
29. A broad definition of 'regulation' is used in this article. Regulation, as defined by Scott, refers to 'any process or set of processes by which norms are established, the behaviour of those subject to the norms monitored or fed back into the regime, and for which there are mechanisms for holding the behaviour of regulated actors within acceptable limits of the regime.'
30. Colin Scott, 'Analysing Regulatory Space: Fragmented Resources and Institutional Design' [2001] Public Law 329
31. Donald H Schepers, 'Challenges to Legitimacy at the Forest Stewardship Council (2010) 92 Journal of Business Ethics 282-3
32. Directive 2009/28/EC of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC [2009] OJ L140/16 (Renewable Energy Directive)
33. See for details of the EU's climate and renewable energy policy package accessed 20 December 2010.
34. The criteria are also set out in the Fuel Quality Directive (Directive 2009/30/EC of 5 June 2009 amending Directive 98/70/EC as regards the specification of petrol, diesel and gas-oil and introducing a mechanism to monitor and reduce greenhouse gas emissions and amending Council Directive 1999/32/EC as regards the specification of fuel used by inland waterway vessels and repealing Directive 93/12/EEC [2009] OJ L140/88, art 7(b)) for consistency
35. Renewable Energy Directive, art 17(1)
36. Renewable Energy Directive, para 94 of the Preamble
37. Renewable Energy Directive, art 17(2)
38. Renewable Energy Directive, art 17(3)
39. Renewable Energy Directive, art 17(4)
40. Renewable Energy Directive, art 17(5)
41. Renewable Energy Directive, art 17(7)
42. Renewable Energy Directive, art 17(7)
43. A Swinbank, 'EU Support for Biofuels and Bioenergy: "Environmental Sustainability" Criteria and Trade Policy' (ICTSD Issue Paper No 17, 2009) 6-8
44. European Commission, 'Report from the Commission on Indirect Land-use Change Related to Biofuels and Bioliquids' (22 December 2010), COM(2010) 811 final
45. The list of qualifying standards can be found at accessed 15 February 2011.
46. For an excellent discussion of the FSC, see Steven Bernstein and Benjamin Cashore,'Nonstate Global Governance: Is Forest Certification a Legitimate Alternative to a Global Forest Convention?' in John Kirton and Michael J Trebilcock (eds), Hard Choices, Soft Law: Voluntary Standards In Global Trade, Environment And Social Governance (Ashgate 2004)
47. See for more information accessed 1 July 2011.
48. European Commission, 'Communication from the Commission on Voluntary Schemes and Default Values in the EU Biofuels and Bioliquids Sustainability Scheme' [2010] OJ C160/01, para 2.2.
49. Renewable Energy Directive, art 18(4)
50. Tim Bartley,'Certification as a Mode of Social Regulation' in David Levi-Faur (ed), Handbook on the Politics of Regulation (Edward Elgar 2011)
51. Renewable Fuels Agency (RFA), 'RFA Benchmarks of Sustainability Assurance Schemes Against the RED' accessed 16 June 2011.
52. Renewable Energy Directive, art 18(6). It should be noted that new rules governing the 'comitology' procedure entered into force on 1 March 2011. Regulation (EU) No 182/2011 of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers [2011] OJ L55/13 repeals Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [1999] OJ L184/23. These new rules are not likely to affect the biofuels decision-making procedure outlined above. I am grateful to Joanne Scott for bringing this to my attention.
53. Renewable Energy Directive, arts 18(6) and 25(3); Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [1999] OJ L184/23 (Commission Powers Decision), arts 3 and 7
54. Commission Powers Decision, art 3(3)
55. Commission Powers Decision, art 3(4) C
56. Art 7(3) of Commission Powers Decision states that the Parliament shall receive agendas for committee meetings, draft measures submitted to the committee, the results of voting and summary records of the meetings and lists of the authorities and organisations to which the persons designated by the Member States to represent them belong
57. Summary Report, Meeting of the Committee on the Sustainability of Biofuels and Bioliquids held in Brussels on 7 October 2010 (Summary Report) accessed 1 January 2011.
58. Commission Press Release IP/10/711 of 10 June 2011, 'Commission Sets up System for Certifying Sustainable Biofuels' accessed 3 January 2011.
59. Commission's Guidance, para 2.2.2.
60. ISO (International Organisation for Standardisation) 19011 refers to the Guidelines for Quality and/or Environmental Management Systems Auditing. This example is drawn from Table 2, Commission's Guidance.
61. Commission's Guidance, Para 2.2.1.
62. See discussion in Jody M Endres, 'Clearing the Air: The Meta-standard Approach to Ensuring Biofuels Environmental and Social Sustainability' (2010) 28 Virginia Environmental Law Journal 108-111
63. Kira Matus, 'Assessing Challenges for Implementation of Biofuels Sustainability Criteria' (Inter-American Development Bank and UNEP Seminar on Assessing the Challenges for Implementation of Biofuels Sustainability Criteria, Washington DC, 25-26 January 2010) Workshop Report, 5 accessed 20 September 2010.
64. An interesting analogy can be drawn with similar harmonisation efforts in the voluntary carbon market
65. See Michelle Passero, 'The Voluntary Carbon Market: Its Contributions and Potential Legal and Policy Issues' in David Freestone and Charlotte Streck (eds), Legal Aspects of Carbon Trading: Kyoto, Copenhagen and Beyond (OUP 2009) 525-7
66. See eg Darren G Hawkins, David A Lake, Daniel L Nielson and Michael J Tierney (eds), Delegation and Agency in International Organizations (Cambridge University Press 2006)
67. Jonas Tallberg, Leadership and Negotiation in the European Union (Cambridge University Press 2006)
68. Daniel L Nielson and Michael J Tierney, 'Delegation to International Organizations: Agency Theory and World Bank Environmental Reform' (2003) 57 International Organization 241
69. Darren G Hawkins and others, 'Delegation Under Anarchy: States, International Organizations, and Principal-agent Theory' in Hawkins and others (n 70) 3, 7
70. Catherine M Donnelly, Delegation of Governmental Power to Private Parties (OUP 2007) 78
71. David Epstein and Sharyn O'Halloran, Delegating Powers: A Transaction Cost Politics Approach to Policy Making under Separate Powers (Cambridge University Press 1999) 28
72. Hawkins and others (n 70)
73. Kathleen M Sullivan, 'The Supreme Court, 1991 Term - Foreword: The Justices of Rules and Standards' (1992) 106 Harvard Law Review 22, 57
74. AdrianVermeule, 'Interpretive Choice' (2000) 75 NewYork University Law Review 74, 92
75. Kenneth A Bamberger, 'Regulation as Delegation: Private Firms, Decisionmaking, and Accountability in the Administrative State' (2006) 56 Duke Law Journal 387-8
76. JC Coffee Jr, Gatekeepers: The Professions and Corporate Governance (OUP 2006) 137
77. Mathew McCubbins and Thomas Schwartz, 'Congressional Oversight Overlooked: Police Patrols versus Fire Alarms' (1984) 28 American Journal of Political Science 165
78. K Bawn, 'Choosing Strategies to Control the Bureaucracy: Statutory Constraints, Oversight, and the Committee System' (1997) 13 Journal of Law, Economics, and Organization 101, 104
79. Jody Freeman, 'Private Parties, Public Functions and the New Administrative Law' in David Dyzenhaus (ed), Recrafting the Rule of Law: The Limits of Legal Order (Hart Publishing 1999) 331, 335
80. Annex I refers to the Annex to the UN Framework Convention on Climate Change and the Kyoto Protocol which lists the countries which agreed to assume binding emissions limitation and reduction targets. Such targets are set out in Annex B of the Kyoto Protocol (hereinafter 'KP'), 37 ILM (1998) 22, which came into force on 16 Feb 2005.
81. Art 12(4) of Kyoto Protocol states that 'The clean development mechanism shall be subject to the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to this Protocol and be supervised by an executive board of the clean development mechanism'
82. Tyson W Dyck, 'Enforcing Environmental Integrity: Emissions Auditing and the Extended Arm of the Clean Development Mechanism', draft manuscript, p 2 (final edition of the article will appear in (2011) 36 Columbia Journal of Environmental Law)
83. For a description of the CDM project cycle, see Charlotte Streck and Jolene Lin, 'Making MarketsWork: A Review of CDM Performance and the Need for Reform' (2008) 19 European Journal of International Law 414-5
84. The DOE's scope of work is set out in Section E of Decision 3/CP. 7/CMP.1. The criteria that a Project Design Document must meet are set out in Appendix B, Decision 3/CP.7/CMP.1.
85. Jessica F Green, 'Delegation and Accountability in the Clean Development Mechanism: The New Authority of Non-State Actors' (2008) 4 Journal of International Law and International Relations 29-31
86. On reform of the CDM generally, see eg Lambert Schneider, 'Is the CDM Fulfilling its Environmental and Sustainable Development Objectives? An Evaluation of the CDM and Options for Improvement' (2007) accessed 1 February 2011.
87. Maosheng Duan, 'Reform of the Clean Development Mechanism: Where Should We Head For?' forthcoming in (2011) 5(2) Carbon and Climate Law Review169-177
88. On the DOEs, see Green (n 88) and Dyck (n 85)
89. Green (n 88) 21
90. Dyck (n 85) 68-9
91. This issue of the independence of auditors also arises in financial regulation
92. For discussion, see eg Amy Shapiro, 'Who Pays the Auditor Calls the Tune?: Auditing Regulation and Clients' Incentives' (2005) 35 Seton Hall Law Review1029
93. Securities and Exchange Commission, Roundtable Discussion on Financial Disclosure and Auditor Oversight (6 March, 2002) accessed 28 June 2011.
94. See eg the RSPO Certification Systems Document accessed 28 June 2011.
95. Information on RSPO website accessed 28 June 2011.
96. K Nadvi and F Waltring, 'Five Generations of Codes and Labels' reproduced in Doris Fuchs, Understanding Business Power in Global Governance (Nomos 2005) 134
97. Bartley (n 52) 4
98. JGS Koppell, 'Global Governance Organizations: Legitimacy and Authority in Conflict' (2008) 18 Journal of Public Administration Research and Theory 177
99. Interview with a sustainability manager of a major biofuels processor, on file with author
100. 'The Other Oil Spill: The Campaign Against Palm Oil' The Economist (London, 24 June 2010) accessed 1 July 2011.
101. See Donald H Schepers,'Challenges to Legitimacy at the Forest Stewardship Council' (2010) 92 Journal of Business Ethics 286 for discussion of this issue in the context of the Forest Stewardship Council
102. See Kevin T Jackson, Building Reputational Capital: Strategies for Integrity and Fair Play That Improve the Bottom Line (OUP 2004) for discussion of reputational capital which Jackson defines as 'a firm's intangible long-term strategic assets calculated to generate profits' which is part of a new global business ethic that features growing expectations of corporate social responsibility (p 3)
103. Many market participants also believe that the suspensions lack legitimacy, eg because the suspensions concern actions that do not materially affect the emissions reductions of the project in question; Dyck (n 85) 80
104. Dyck (n 85) 76-77
105. Nielson and Tierney (n 70)
106. Pilgrim and Harvey (n 5)
107. Liesbet Hooghe, The European Commission and the Integration of Europe (Cambridge University Press 2001) 41
108. Damian Chalmers and Adam Tomkins, European Union Public Law: Texts and Materials (Cambridge University Press 2007) 92
109. Michele M Betsill,'Transnational Actors in International Environmental Politics' in Michele M Betsill, Kathryn Hochstetler and Dimitris Stevis (eds), International Environmental Politics (Palgrave Macmillan 2006) 189
110. These NGOs are central players in Brussels because they cover a wide range of EU environmental issues, including climate change and have a large number of supporters/members
111. Rudiger KW Wurzel and James Connelly, 'Environmental NGOs: Taking a Lead?' in Rudiger KW Wurzel and James Connelly (eds), The European Union as a Leader in International Climate Change Politics (Routledge 2011) 214
112. CDM Watch website homepage accessed 14 June 2011.
113. Sandbag website, 'Why We Are Here online' accessed 14 June 2011.
114. Jolene Lin and Charlotte Streck, 'Mobilising Finance for Climate Change Mitigation: Private Sector Involvement in International Carbon Finance Mechanisms' (2009) 10 Melbourne Journal of International Law 87-9
115. Duan (n 89)
116. See Martin Hedemann-Robinson, Enforcement of European Union Environmental Law (Routledge Cavendish 2007) Part I which is dedicated to the role of the European Commission in enforcing EU environmental law
117. See Streck and Lin (n 86) for a conceptualisation of the Executive Board as a market regulator