The worldwide transition to renewable energy sources requires adequate environmental laws and strict compliance procedures, especially in bioethanol production from lignocellulosic biomass. This chapter investigates the complex network of environmental policies and regulatory structures of green energy systems, focusing on bioethanol. It reviews all the significant international and national policies governing their roles in sustainable biofuel production, including the Paris Agreement and national policy mechanisms such as the U.S. Renewable Fuel Standard and the EU’s Renewable Energy Directive II. Energy and sustainability auditing methodologies such as life cycle assessment (LCA) and carbon accounting are also reviewed as instruments for enforcement and pollution prevention. Case studies from around the world demonstrate these audits in action and the problems encountered in carrying out industrial practices and environmental standards. Combining policy with auditing methodology in this chapter offers a holistic approach to illustrate mechanisms for environmental compliance in green energy production, better practice, and future directions towards sustainable bioethanol production.