Sustainability standards for bioenergy--A means to reduce climate change risks?

The paper discusses the importance of standards for sustainable bioenergy production. Sustainability of bioenergy production is crucial if bioenergy is supposed to contribute effectively to climate change mitigation. First, a brief overview of current bioenergy policies and of initiatives and legislation for bioenergy sustainability are given. Then, the authors show that under free market conditions undersupply of sustainable bioenergy will prevail. Two types of market failures are identified: information asymmetry and externalities in bioenergy production. Due to these market failures bioenergy is less sustainable than it could be. It is shown that mandatory certification and subsequent labeling can help to overcome the information asymmetry and lead to a more efficient market outcome since consumers can choose products according to their preferences. The authors conclude, however, that the existence of production externalities asks for stronger market intervention, for example in the form of binding minimum standards or taxes. The paper discusses the efficiency and feasibility of such policy measures and shows that mandatory certification combined with binding minimum standards can be an adequate policy choice to regulate the bioenergy market.