Corporate Governance Guidelines

March 25, 2011

The following Corporate Governance Guidelines (the “Guidelines”) have been adopted by the Board of Directors (the “Board”) of Pacific Ethanol, Inc. (the “Company”), to assist the Board and its committees in the exercise of their respective responsibilities. Although these Guidelines should be interpreted in the context of all applicable laws, regulations and listing requirements of the NASDAQ Capital Market, as well as the Company’s Certificate of Incorporation and Bylaws, as the same may be amended or restated from time to time, they are not, subject to any contractual or other commitments of the Company, intended to establish by their own force any legally binding obligations. The Board will periodically review these Guidelines in light of evolving circumstances or as required by applicable laws and regulations.

ROLE OF THE BOARD OF DIRECTORS

The basic responsibility of the Board is to be the ultimate decision-making body of the Company except with respect to those matters reserved to the vote of the Company’s stockholders. Directors are responsible for exercising their business judgment and acting in good faith in a manner that they believe to be in the best interests of the Company and its stockholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. In discharging these obligations, directors should be entitled to rely on the honesty and integrity of, and information, representations and documentation provided by, the Company’s officers and other employees, its advisors, the Company’s independent registered public accounting firm and any consultant or professional retained by management, the Board or any committee of the Board. The directors are also entitled to (i) have the Company purchase reasonable directors’ and officers’ liability insurance on their behalf, and (ii) the benefits of indemnification to the fullest extent permitted by law and Company’s Certificate of Incorporation, Bylaws and any indemnification agreements.

In furtherance of its general responsibilities, the Board shall:

COMPOSITION OF THE BOARD

COMMUNICATIONS WITH STOCKHOLDERS

The Board believes that the Chairman of the Board and senior management speak for the Company. Individual directors occasionally may meet or otherwise communicate with the stockholders and various constituencies involved with the Company, but it is expected that directors would do this with the knowledge of management and, absent unusual circumstances, at the request of management.

DIRECTOR COMPENSATION

The Compensation Committee will review the form and amount of director compensation annually and recommend any changes to the Board. Non-employee directors are expected to received a substantial portion of their annual compensation in the form of equity. Employee directors are not paid additional compensation for their services as directors.

DIRECTOR RESPONSIBILITIES

ACCESS TO EMPLOYEES AND THE COMPANY’S OUTSIDE ADVISORS

The Company’s executive management will provide the Board, the independent directors as a group, and the Board’s committees with access to Company employees and the Company’s independent registered public accounting firm and legal advisors to ensure that directors can obtain all information necessary to fulfill their duties. The Board will specify protocols for making such inquiries and contacts. In general, outside the context of Board and committee meetings and executive sessions of the independent directors where employees and advisors are present, except in unusual circumstances, directors should coordinate their inquiries and contacts through the Chairman of the Board. The Chairman of the Board in turn will, in the absence of unusual circumstances, normally route such inquiries to the CEO, or to the Chief Financial Officer or to the General Counsel, and will normally arrange such contacts with Company employees through the CEO and the business unit head or functional area head to whom such employee reports.

The Board, the Chairman of the Board, each committee of the Board and the independent directors as a group may retain and have access to independent legal, financial or other advisors of their choice with respect to any issue relating to their activities at the Company’s expense, which advisors shall report directly to the retaining person or entity.

BOARD COMMITTEES

BOARD EVALUATION

The Board should undertake an evaluation of the Board, its committees and each member at least annually to determine whether it and its members and committees are functioning effectively. The Nominating and Corporate Governance Committee is responsible for coordinating and overseeing the annual Board evaluation process in accordance with the charter of that committee.

ETHICS AND CONFLICTS OF INTEREST

The Board expects Company directors, officers and employees to act ethically at all times and to acknowledge their adherence to the policies comprising the Company’s Code of Ethics. In the absence of exceptional circumstances, the Board will not permit any waiver of any ethics policy for any director or executive officer. If a director becomes aware that he or she has a conflict of interest with the Company (or that a significant potential exists that he or she will have a conflict of interest with the Company in the foreseeable future), the director shall promptly inform the Chair of the Audit Committee. If a significant ongoing long-term conflict exists and cannot be resolved, the director should offer to resign. All directors will recuse themselves from any discussion or decision affecting their personal, business or professional interests. The Board, through the Audit Committee, will be responsible for resolving or addressing any conflict of interest question involving the CEO or any other Board-elected officer, and the CEO will be responsible for resolving or addressing any conflict of interest issue involving any other employee of the Company.

FINANCIAL REPORTING, LEGAL COMPLIANCE AND ETHICAL CONDUCT

The Board’s governance and oversight functions do not relieve the Company’s executive management of its primary responsibility for preparing financial statements that accurately and fairly represent the Company’s financial results and condition. Executive management shall maintain systems, procedures, controls and a corporate culture that promote the accuracy of the Company’s financial reports and compliance with legal and regulatory requirements and the ethical conduct of the Company’s business.

REPORTING OF CONCERNS TO NON-EMPLOYEE DIRECTORS OR COMMITTEES

Anyone who has a concern about the conduct of the Company or any of its officers or employees, or about the Company’s accounting, internal controls, disclosure controls and procedures, auditing, compensation and governance matters may communicate that concern directly to the Audit Committee. Communications of this type may be confidential or anonymous, and may be communicated in the manner posted from time to time on the Company’s website. Concerns relating to accounting, internal controls, disclosure controls and procedures, auditing matters, fraud or deceptive financial practices shall be forwarded to the Chair of the Audit Committee. The Company’s policies prohibit retaliation or adverse action against anyone for raising or helping to resolve an integrity concern.

MANAGEMENT REVIEW AND SUCCESSION PLANNING

The Compensation Committee should conduct, and review with the Board, an annual evaluation of the performance of all executive officers, including the CEO. The Compensation Committee is expected to use this review in the course of its deliberations when considering the compensation of the CEO and senior management. The Board also reviews the CEO’s performance evaluation to ensure that the CEO is providing effective leadership of the Company. As part of the annual evaluation, the Board and CEO should conduct an annual review of management development and succession planning for senior management, including the CEO.