Ben Richardson, Department of Politics and International Studies, University of Warwick

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Chapter prepared for A. Payne and N. Phillips, eds. Handbook of the International Political Economy of Governance, Cheltenham: Edward Elgar, 2014 forthcoming. Please do not cite without permission.

The governance of primary commodities: biofuel certification in the European Union

Ben Richardson, Department of Politics and International Studies, University of Warwick1

Biofuels are transport fuels made mainly from food crops like maize, palm oil, rapeseed, sugarcane and soybean.2 Despite the fact they were promoted as a green alternative to fossil fuels, they proved immensely contentious, linked to deforestation, biodiversity loss and even increased greenhouse gas emissions. As a result, in 2009 the European Commission passed legislation which effectively required all biofuels sold in the EU to meet high environmental standards, including those imported from developing countries. In its own words, this became ‘the most comprehensive and advanced binding sustainability scheme of its kind anywhere in the world’ (CEC 2010: 1).

In two important ways, this legislation did indeed represent a watershed moment in the governance of primary commodities. Most notably, the sustainability standards applied not to the product itself but to the way it was produced. This was significant given previous rulings under the GATT and WTO dispute settlement process which had made clear that discrimination in favour of ‘dolphin-friendly’ tuna and ‘turtle-friendly’ shrimp would be difficult to uphold. For many observers, discrimination in favour of ‘eco-friendly’ biofuels was simply the latest manifestation of green protectionism (Erixon 2012). Yet to the extent that the EU has avoided legal challenge to its new market access arrangements, it has suggested that an expanded remit for environmental protection within the multilateral trading system may be possible.
The other important aspect to the EU scheme was the way in which compliance would be monitored. Instead of relying on public inspection or government legislation in third countries, it would use certification systems to provide assurance that the complicated environmental requirements were being met. Certification systems are member-driven organisations which devise their own standards of production and monitor compliance through site visits by independent auditors. In this case they were comprised solely of non-state actors like corporations and NGOs, leading one scholar to refer to it as regulatory ‘outsourcing’ to the private sector (Lin 2011).
At first glance, it would appear that these private certification systems have helped bridge the ‘governance gap’ between the supra-national nature of many ecological challenges and the frequently ineffective inter-national institutions that exist to tackle them. Certainly this has been the opinion of one their leading proponents, the World Wide Fund for Nature (WWF). They have argued that in the context of weak multilateral agreements on the environment, certification systems ‘fill an important gap in the governance of natural resource use’ and have ‘raised the bar and contributed to strengthen and improve the regulatory and policy context for natural resource management’ (WWF 2010a: 5). Moreover, their emergence also suggested that a more consensual and technocratic means of doing regulation was possible; one where attention could be focused on harmonisation of the various biofuel production standards and the methods of carbon footprinting they relied on (IUCN 2010; UNCTAD 2008).
This chapter seeks to contest the benign view of power underpinning this account. It argues that ‘non-state’ governance in biofuels is something of a misnomer, since the state has been integral to its formation and adoption. Rather than conceding power to these certification systems, both national governments and the European Union have used them as a means to try and control how agricultural production takes place in developing countries. Furthermore, rather than placating political opposition, this process has bifurcated it. A wedge has been put within civil society between those NGOs that have supported the process of certification and others that have dismissed it. Those oppositional voices have noted how social issues like labour rights and food security have been marginalised in the EU legislation and notions of sustainability reduced to a much narrower concern with greenhouse gas emissions. More critically, they have depicted this new form of governance as, on the one hand, legitimising further monoculture plantation production in the Global South, whilst on the other, denying the role of energy-intensive ‘modern’ lifestyles in the Global North as a source of ecological crisis. In short, governance has only partially tamed market activity, and yet, in so doing, also helped to extend it.
The chapter proceeds by drawing on the existing literature on private governance to show how the twin concerns around the ‘non-state’ and ‘market-driven’ character of certification systems have been raised in respect to other primary commodity sectors. It then shows how the bourgeoning biofuels market in the EU was undermined as the product became linked to rising food prices and environmental degradation, leading policy-makers to search for a more ambitious mode of governance to restore public faith in the project. Taking the insights from the literature review, the next two sections show how national governments helped ‘ratchet up’ the standards of certification systems which were then ‘levelled down’ by the EU, and how oppositional NGOs have since depicted them as ‘smokescreens’ which mask the bigger problems associated with biofuel production.

The politics of private certification and non-state governance

For scholars interested in the shift from government to governance, activity in the primary commodity sector has provided much food for thought. A variety of institutions have emerged over the last two decades that in one way or another have attempted to regulate corporate activity from ‘beyond the state’. Examples include: the Extractive Industries Transparency Initiative, which has encouraged oil, gas and mining companies to disclose their payments to governments; the UN Global Compact, which has aimed to instil values of good corporate citizenship among its multi-stakeholder membership; and the Kimberley Process, which has sought to identify ‘blood’ diamonds linked to armed conflict and put industry-led sanctions upon their trade (Haufler 2010; Woods 2002; Shaw 2003).

Despite the involvement of non-state actors and the use of ‘soft law’ compliance mechanisms, these arrangements still included representatives of the state and/or were situated in traditional intergovernmental forums. In contrast, other governance initiatives appeared to have a purely private constitution. Among these were certification systems dealing with fair-trade, organic and food management standards. These were self-regulating bodies that pulled businesses into their system of rule by relying on the desire of corporations to avoid reputational scandal and on consumer demand for safe, sustainable and ethical products. This in turn provided the credible threat on which compliance with their respective standards depended: expulsion from the scheme, accompanied by negative press and a loss of market share. Based on this particular make-up and mechanism of rule, these systems were dubbed ‘non-state market-driven’ governance (Cashore 2002).
There were, of course, important differences between the individual systems. One of these was the mix of corporate and charitable actors that manage them. For instance, the Fairtrade Labelling Organisation (FLO) has traditionally been led by development NGOs while the GlobalGAP farm management scheme has been led by Dutch and UK supermarkets. Another difference was the scope of retail sales they intended to cover. While the FLO targeted a consumer niche with products from small-scale cooperatives, GlobalGAP effectively became a minimum requirement for any developing country producer wishing to sell through multiple European retailers.
It is in this context that the Forest Stewardship Council (FSC) certification system – one of the most ubiquitous case studies in this field – must be understood (Auld and Gulbrandsen 2010; Bernstein and Cashore 2007; Gale and Haward 2011). Resting on a multi-stakeholder membership of industry actors and civil society organisations, and from both developed and developing countries, the FSC seemed to encompass the best of both worlds. That is to say, it has moved beyond the comfort-zone of business in tackling illegal logging and deforestation, yet by virtue of its commercial-orientation, also targeted mainstream markets. Indeed, based on the successes of this experiment, one of the founder members of the FSC, the WWF, came to launch ‘roundtable’ certification systems for commodities including palm oil, sugarcane, soybeans and biofuels themselves – each of which would later enter the world of EU biofuel governance.
In thinking about the politics of the FSC and its roundtable membership, many scholars have used the conceptual prism of legitimacy. As Ruggie (1982: 380) argued in the context of intergovernmental regimes, authority rests on a form of legitimacy that could only be derived from a ‘community of interests’. Applied to the FSC, this suggested that unless the chosen standards of production and rules of enforcement were seen as justified and appropriate by NGOs and local associations (as well as by the traditional regulatory community of businesses, public agencies and consumer-citizens) they were unlikely to function effectively. The result was that certification systems have had to set themselves higher requirements for inclusiveness, transparency and accountability vis-à-vis intergovernmental regimes (Bernstein and Cashore 2007). In practice, this meant the adoption of a member-based organisational form designed to facilitate input from groups in developing countries and/or with smaller budgets, the open publication of assessment and audit reports carried out on members, and the tacit acceptance that NGOs would withhold or withdraw support should egregious environmental degradation and human rights violations not be prevented.
This conceptual focus on legitimacy has also been prominent within the literature on biofuels. For instance, Upham et al. (2011) have argued that given the limited knowledge base about the impacts of biofuels and the complexity of the policy arena, a broader co-production of regulation between scientists/academics and the policy-making community was needed to provide the requisite cognitive legitimacy upon which a social mandate for governance by certification could be based. Looking at the certification systems themselves, Partzsch (2011) has argued that more developing country producers and oppositional civil society groups must be drafted into the membership and that accountability processes beyond internal complaints procedures and the threat of withdrawal had be fostered.
While governments are not considered unimportant within this perspective they have been frequently cast as somewhat passive or reactive actors and often only written into the private governance story in the context of trade liberalisation and deregulation. As Hall (2010) has noted, this is framed as a retreat from the arena of economic management and another signal of the clear movement from public to private forms of production standardisation, third-party monitoring and self-regulation. Again, this is reflected in the literature on biofuels that has depicted authority as a zero-sum contest which the state is losing, or at least conceding, due to globalisation and the de-territorialisation of the biofuels production network (Mol 2010).
Uneasy at this characterisation, a number of scholars began to question the ‘non-state’ credentials of certification systems. As Vandergeest (2007: 1154) has argued, ‘the idea that regulation is private, non-state and market driven assumes a clear separation between state and market, or public and private – a distinction that is difficult to sustain when examining specific examples of certification’. Picking up on this theme, Hall (2010) outlined three ways in which governments have purposefully advanced privatised forms of primary commodity governance. These were: (a) choosing to withdraw from particular markets and shift responsibility for expensive, difficult and controversial regulatory tasks onto others; (b) introducing new regulatory measures which, intentionally or not, stimulated the uptake of private standards and ‘ecolabels’; and (c) providing direct support for the development and dissemination of private governance through financial subsidies, network infrastructure, public research and discursive support (Hall 2010: 828).
Relevant to our study of roundtable certifications systems, Bell and Hindmoor (2011) have shown how important mechanism (b) has been in the expansion of the FSC in British and American markets. In the former, the UK government’s Forestry Commission helped negotiate the Woodland Assurance Scheme with environmentalists and landowners. Whilst not directly mandating FSC-certification, the sustainability standard devised did draw upon the FSC and so directly benefitted that scheme since this could immediately offer the robust auditing and traceability services to forestry companies as a way for them to meet their new obligation. In the US, a similar but unintentional outcome followed the country’s trade ban on illegally harvested wood. Not only did this prevent competition to the US timber industry from disreputable loggers, it also required importing firms to undertake time-consuming and costly exercises in demonstrating the legality of their more reputable suppliers. Again, this created an opportunity for the FSC in the sense that they were on hand to provide international buyers with a credible means of proving that the wood they had sourced was sustainably produced.
Such insights are undoubtedly useful for understanding how non-state governance has emerged through ‘positive-sum’ forms of public-private interaction. We return to this theme later in relation to the role of the state in shaping biofuel certification systems and their adoption by industry. However, this particular critique has had less to say about the purpose to which ‘hybrid’ governance is put and the mode of accumulation it underpins. As Payne has noted, ‘the very notion of a clear separation between the public and the private is a feature of classical liberal thinking’ and it has been the very liberalism of non-state market-driven governance that other scholars have sought to interrogate (Payne 2005: 78).
While scholars initially depicted certification systems as a means of re-embedding the liberal market economy in the Polanyian sense (Raynolds 2000; Watson 2006), others have since been more wary of the compromises made in order to effect change through the market, especially for those more commercially-oriented schemes. For example, Ponte (2008) has noted how, unlike the Fairtrade Labelling Organisation, the Marine Stewardship Council has not attempted to redistribute wealth within the commodity chain by providing financial premiums or minimum prices to producers. Rather, the requirement to provide large volumes of certified fish at no extra cost acted as a barrier to entry to developing country fisheries, especially the smallest among these, and effectively put ‘certified sustainability at the service of dominant firms in the industry’ (Ponte 2008: 171). Writing on the Roundtable on Sustainable Palm Oil, meanwhile, Djama and Daviron (2010) have questioned whether the NGOs that supposedly seek to protect society from the vagaries of the price mechanism really are opposed to this worldview. This is particularly the case for those professional and international NGOs which have taken an avowedly managerial perspective on sustainability.
Placing these certification systems in the context of a neo-liberal economy, Loconto and Busch (2010) offered the timely reminder that ultimate objective of neo-liberal policy, whether public- or private-led, is not to dispense with rules and laws but rather to reorient them from a regulation of the market toward a regulation for the market. In this respect, Paterson’s work on global standards and certification schemes in the carbon market is especially useful. In it he has made the case that this form of governance emerged precisely to deflect broader criticism that the marketisation of the environment had resulted in ‘climate fraud’ and ‘carbon colonialism’, whereby inaccurate emissions savings were claimed and the burden of adjustment forced upon developing countries. Thus rather than the second half of a Polanyian ‘double movement’, certification here served as the very basis on which the carbon trading industry was able to renew the creation of these markets and create further opportunities for profit (Paterson 2010: 362). This is particularly apposite to the case of biofuels, which, like carbon, was also a newly created and politically-dependent EU commodity market. The chapter now shows how this market was first established, before returning later to the notion of certification as a means of market extension.

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