MARCH 23, 2005
 
                      CHARTER OF THE COMPENSATION COMMITTEE
                            OF THE BOARD OF DIRECTORS
                                       OF
                              PACIFIC ETHANOL, INC.
PURPOSE
 
         The purpose of the Compensation Committee of Pacific Ethanol, Inc. (the
"COMPANY") established pursuant to this charter is to (i) act as Administrator
of the Company's various Stock Option Plans (collectively, the "PLANS") as
described in each of the Plans, (ii) review forms of compensation to be provided
to the officers and employees of the Company, including stock compensation,
(iii) grant options to purchase common stock of the Company to employees and
executive officers of the Company, and (iv) review and make recommendations to
the Board of Directors regarding all forms of compensation to be provided to the
directors of the Company, including stock compensation. The Compensation
Committee has the authority to undertake the specific duties and
responsibilities listed below and will have the authority to undertake such
other specific duties as the Board of Directors from time to time prescribes.
 
MEMBERSHIP
 
         The Compensation Committee shall consist of a minimum of two (2)
"non-employee directors" of the Company as such term is defined in Rule
16b-3(b)(3)(i) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"). The members of the Compensation Committee will be outside directors
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended. The members of the Compensation Committee are appointed by and serve at
the discretion of the Board of Directors.
 
RESPONSIBILITIES
 
         The responsibilities of the Compensation Committee are set forth below:
 
         o       The Compensation Committee shall review and make
                 recommendations to the Board of Directors regarding the
                 compensation policy for executive officers and directors of the
                 Company, and such other officers of the Company as directed by
                 the Board of Directors.
 
         o       The Compensation Committee shall review and approve the
                 Company's compensation policy regarding all forms of
                 compensation (including, to the extent relevant, all "plan"
                 compensation, as such term is defined in Item 402(a)(7) of
                 Regulation S-K promulgated by the Securities and Exchange
                 Commission, and all non-plan compensation) to be provided to
                 the officers and employees of the Company.
 
         o       The Compensation Committee shall review recommendations from
                 the Chief Executive Officer of the Company regarding all forms
                 of compensation (including, to the extent relevant, all "plan"
                 compensation, as such term is defined in Item 402(a)(7) of
                 Regulation S-K promulgated by the Securities and Exchange
                 Commission, and all non-plan compensation) to be provided to
                 the non-employee directors of the Company.
 
         o       The Compensation Committee shall review and make
                 recommendations to the Board of Directors regarding general
                 compensation goals and guidelines for the Company's employees
                 and officers and the criteria by which bonuses to the Company's
                 employees and officers are determined.
 
         o       The Compensation Committee shall review recommendations from
                 the Chief Executive Officer of the Company regarding all bonus
                 and stock compensation to all employees of the Company.
 
         o       The Compensation Committee shall act as Administrator (as
                 described in each of the Plans) of the Plans within the
                 authority delegated by the Board of Directors. In its
                 administration of the Plans, the Compensation Committee may,
                 (i) grant stock options to individuals eligible for such grants
                 (including grants to individuals subject to Section 16 of the
                 Exchange Act in compliance with Rule 16b-3 thereunder) and (ii)
                 amend such stock options.
 
         o       The Compensation Committee shall review and make
                 recommendations to the Board of Directors with respect to
                 amendments to the Plans and changes in the number of shares
                 reserved for issuance thereunder.
 
         o       The Compensation Committee shall review and make
                 recommendations to the Board of Directors regarding other plans
                 that are proposed for adoption or adopted by the Company for
                 the provision of compensation to employees of, directors of and
                 consultants to the Company.
 
         o       The Compensation Committee shall prepare a report (to be
                 included in the Company's proxy statement) that describes: (a)
                 the criteria on which compensation paid to the Chief Executive
                 Officer for the last completed fiscal year is based; (b) the
                 relationship of such compensation to the Company's performance;
                 and (c) the Compensation Committee's executive compensation
                 policies applicable to executive officers.
 
         o       The Compensation Committee shall review and reassess the
                 adequacy of this Charter annually and recommend any proposed
                 charges to the Board of Directors for approval.
 
MEETINGS
 
         It is anticipated that the Compensation Committee will meet at least
twice each year. However, the Compensation Committee may establish its own
schedule, which it will provide to the Board of Directors in advance. At a
minimum of one of such meetings annually, the Compensation Committee will
consider stock plans, performance goals and incentive awards, and the overall
coverage and composition of the compensation package.
 
MINUTES
 
         The Compensation Committee will maintain written minutes of its
meetings, which minutes will be filed with the minutes of the meetings of the
Board of Directors.
 
REPORTS
 
         The Compensation Committee will provide written reports to the Board of
Directors of the Company regarding recommendations of the Compensation Committee
submitted to the Board of Directors for action, and copies of the written
minutes of its meetings.