Brazil occupies a unique position in the global energy transition. While the world debates how to decarbonise transport at scale, Brazil has quietly operated the world’s most successful liquid biofuel programme for nearly five decades. Sugarcane ethanol — produced from one of nature’s most efficient energy crops and blended into virtually every litre of petrol sold in the country — has displaced hundreds of millions of tonnes of CO2 from Brazil’s transport sector that would otherwise have been emitted from fossil fuels. In 2026, as global interest in sustainable fuels intensifies, Brazil’s biofuel experience offers lessons, inspiration, and a growing range of commercial opportunities.
The Scale of Brazil’s Ethanol Programme
Brazil is the world’s second-largest ethanol producer after the United States, producing approximately 35–38 billion litres per year. The US programme is primarily corn-based; Brazil’s is overwhelmingly sugarcane-based. Sugarcane has significant advantages over corn as a biofuel feedstock: it produces approximately 8 units of energy for every unit of energy invested in its production (an energy return ratio roughly twice that of corn ethanol), generates much lower lifecycle greenhouse gas emissions, and uses biomass waste (bagasse) to generate the thermal and electrical energy needed for processing, making mills largely energy self-sufficient and in many cases net electricity exporters to the grid.
Brazil’s flex-fuel vehicle fleet — cars that can run on any blend of petrol and ethanol, including pure hydrated ethanol (E100) — is the backbone of the programme’s success. Over 85% of new cars sold in Brazil have flex-fuel engines, and around 40–45% of total fuel consumption in the light vehicle fleet is ethanol rather than petrol. This means that at any given time, roughly half the passenger cars on Brazilian roads are running on a largely renewable fuel. The carbon intensity of Brazilian sugarcane ethanol — certified under international standards including those of the European Union’s Renewable Energy Directive — is approximately 70–90% lower than fossil petrol on a lifecycle basis.
RenovaBio: Market-Based Policy for Biofuels
Brazil’s biofuels policy has evolved significantly since the founding of the ProÁlcool programme in 1975. The most important recent development is RenovaBio, a decarbonisation credits scheme launched in 2020 that assigns a “CBIO” credit to each tonne of CO2 equivalent avoided by biofuel production relative to fossil alternatives. Fuel distributors are required to purchase CBIOs to meet annual decarbonisation targets — creating a market-based revenue stream for biofuel producers tied to the carbon intensity of their production.
RenovaBio has been widely praised as an innovative market mechanism that incentivises continuous improvement in biofuel efficiency and carbon intensity, rather than simply subsidising volume. Producers that achieve lower carbon intensity scores — through better agricultural practices, improved processing efficiency, and higher bioelectricity cogeneration — earn more CBIOs per litre produced and therefore higher revenues. The scheme is also helping to establish Brazil’s biofuel industry as a credible supplier under the European Union’s Sustainable Aviation Fuel (SAF) mandate, which requires growing volumes of low-carbon aviation fuels through 2050.
Biodiesel: Expanding the Portfolio
Brazil’s biofuel programme extends beyond ethanol into biodiesel — a renewable diesel substitute produced primarily from soybean oil (the byproduct of Brazil’s dominant soy farming sector) and increasingly from tallow, used cooking oil, and other feedstocks. The mandatory biodiesel blend in diesel fuel sold in Brazil has been progressively increased and stood at B14 (14% biodiesel) in 2026, with government plans to continue raising it to B20 and beyond over the coming years.
Brazil is the world’s largest exporter of soybeans and one of the largest soy oil producers, giving it abundant feedstock for biodiesel. The integration of soy-based biodiesel into Brazil’s fuel system means that the agricultural and energy sectors are closely linked — soy prices, soy oil prices, and biodiesel policy all interact in ways that affect both farmers and motorists. The development of hydrotreated vegetable oil (HVO) — a higher-quality renewable diesel compatible with existing engines without blending limits — is an area of growing investment, as HVO commands premium prices in export markets including Europe.
Sustainable Aviation Fuel: A New Frontier
The global aviation industry is under intense pressure to decarbonise, and sustainable aviation fuel (SAF) — made from biomass, waste, or synthetic routes — is the primary near-term pathway identified by airlines and regulators. Brazil is exceptionally well-positioned to become a major SAF exporter. Sugarcane-derived SAF has excellent lifecycle carbon credentials, and Brazil’s existing ethanol infrastructure provides a foundation for SAF production using the alcohol-to-jet (ATJ) pathway — converting ethanol into jet fuel through a chemical process.
Several Brazilian and international companies are advancing SAF production projects in Brazil, attracted by the feedstock advantage, export infrastructure, and the alignment with growing mandatory SAF requirements in the EU, UK, and United States. The IEA has highlighted SAF as a critical decarbonisation tool for aviation in its net zero scenario, with demand expected to grow from a tiny fraction of today’s jet fuel market to 10% or more by 2030 under proposed mandates. Brazil is positioning itself as a key supplier to this emerging global market. Follow global renewables and biofuel developments and the latest energy news across our site.
Challenges: Land Use, Food Prices, and the Social Dimension
Brazil’s biofuel success is not without critics. The expansion of sugarcane and soy cultivation raises questions about land use, deforestation risk, and competition with food production. Proponents point out that Brazilian sugarcane expansion has occurred primarily on degraded pastureland in the Centre-South region, not in the Amazon or Cerrado, and that zoning regulations restrict sugarcane cultivation in environmentally sensitive areas. But critics argue that indirect land use change — where biofuel crop expansion displaces other agriculture, pushing food production into frontier areas — creates displacement effects that undermine the carbon credentials of biofuels.
The social dimension of Brazil’s biofuel sector is also complex. The sugarcane sector employs hundreds of thousands of workers in rural Brazil, providing livelihoods in regions with limited alternative economic opportunities. Mechanisation of harvesting — driven by environmental regulations banning field burning and by cost competitiveness — has reduced employment in cane cutting while improving working conditions and environmental performance. Managing this labour market transition fairly, while improving efficiency and sustainability, is an ongoing challenge for the industry and government alike.
Brazil’s Biofuel Influence on Global Markets
Brazil’s ethanol exports are a significant factor in global biofuel trade, with the United States, Europe, and several Asian markets being key buyers of Brazilian ethanol for blending. The competitiveness of Brazilian ethanol on world markets depends on sugarcane yields, processing efficiency, exchange rates, and the oil price (which affects the value of the fuel it displaces). At current oil prices and with Brazil’s cost structure, sugarcane ethanol is commercially competitive with fossil petrol, a remarkable achievement for a biofuel programme that required decades of investment and policy support to reach this point.
