Energy Policy 36 (2008) 1577–1583 Viewpoint Towards a sustainably certifiable futures contract for biofuels John A. Mathews à Macquarie Graduate School of Management, Macquarie University, Sydney, NSW 2109, Australia Received 23 November 2007; accepted 14 January 2008 Available online 7 March 2008 Abstract How are biofuels to be certified as produced in a sustainable and responsible fashion? In the global debate over this issue, one party to the proceedings seems rarely to be mentioned—namely the commodities exchanges through which a global biofuels market is being created. In this contribution, I propose a solution to the problem of sustainability certification through a biofuels futures contract equipped with ‘proof of origin’ documentation. The proposal does not call for any radical break with current practice, extending existing certification procedures with a requirement for the vendor to provide documentation, probably in barcoded form, of the history of the biofuel offered for sale, including plantation and biorefinery where the biofuel was produced and subsequent blendings it may have undergone. The proposal is thus compatible with the blending practices of large global traders, whose activities are the source of the difficulties of other approaches to certification. It is argued that if such a sustainable futures contract for bioethanol (in the first instance) were to be introduced, then it would likely trade at a premium and become the primary vehicle for North–South trade in biofuels. r 2008 Elsevier Ltd. All rights reserved. Keywords: Biofuels; Sustainable certification; Bioethanol futures contract 1. Introduction In May 2007, the Brazilian Mercantile and Futures Exchange (BM&FE) launched a US$-denominated anhy- drous ethanol futures contract, with a full set of technical specifications and designating ethanol deliveries at the port of Santos (Sao Paulo). This is the port through which 67% of Brazilian ethanol exports are channeled. This is a bold move by BM&FE, and intended to be the first step towards creating a global trading market for ethanol. It comes in the wake of the collapse of a similar effort launched by the NY Board of Trade, in 1994, where the ethanol futures contract failed to ignite market interest. By contrast, in the first few months of trading, the BM&FE contract is building liquidity, and could well establish itself as the premier trading vehicle for ethanol in the world. I suggest that this development has a two-fold signifi- cance. Firstly, it demonstrates that there is progress in creating a standardized commodity market for bioethanol, with all that this implies for reliability of trading and the growth of a global market. Secondly, it acts as a template for certification of biofuels, as a simple extension of the technical certification that is already required as part of the futures contract. A global debate rages on the issue of certification of biofuels to ensure their sustainable and responsible production. While several schemes for certification have been proposed, and sets of criteria have been drawn up, including by a government-level panel in the Netherlands, nevertheless the models of certification have yet to inspire confidence or credibility. They lack ‘traction’ in the real world of market trading. In this contribution, I discuss the prospects for certifica- tion of biofuels by linking the question to the development of futures trading contracts, which have the potential to provide some audited and legitimate certification that the biofuels are being produced in a sustainable fashion. The core of the paper is a discussion of a novel proposal: would it be feasible to see certification criteria incorporated in a trading instrument such as a biofuels futures contract? If this were to be achieved (and it would be the first time that such certification would be effected through trading of a commodity) then it would solve a lot of problems ARTICLE IN PRESS www.elsevier.com/locate/enpol 0301-4215/$ - see front matter r 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2008.01.024 à Tel.: +61 2 9850 6082; fax: +61 2 9850 9942. E-mail address: John.Mathews@mq.edu.au