The sugar industry is the oldest in Brazil and evolved a lot with the growing diversification towards ethanol, from the 1970s, and subsequent use of bioelectricity. Other uses of the considerable energy contained in sugarcane have been developed with second-generation ethanol, residue biodigestion, bagasse pelletization, use of yeast, transformation of ethanol into chemical and plastic products and carbon dioxide capture. biogenic.

It is impressive that the sector has reached its size and importance, given that, until recently, there was no regulation that indicated a long-term development goal. The entire expansion took place due to an entrepreneurial spirit that motivated the use of pastures that generated little income for the production of sugarcane and the installation of plants for its processing.

The dimension reached is related to the accumulation of capital obtained by this diversification and is a result of it, which distinguishes it from equivalent industries in other countries. It was because of this expansion that ethanol reached a share of 48.4% in the consumption of Otto cycle fuels in equivalent gasoline, in 2019 (share that fell to 41.9%, in 2022), and that electricity from biomass reached 4.4% of all electricity generation in 2022, contributing to the enviable mark of 92% of renewable electricity generation in that year.

The regulation that resolved the deficiency of a long-term goal was RenovaBio , approved through Law 13,576, of 2017, regulated by various decrees and resolutions of the National Agency of Petroleum, Natural Gas and Biofuels and implemented, in practical terms, from April 2020. Through approved and always renewed decarbonization targets for the next 10 years, RenovaBio started to offer this direction.

In practice, however, since the 2010 and 2011 harvest, the supply of total sugars recovered from the sector has been practically stagnant in the range of 87 to 94.4 million tons, with sugarcane crushing, throughout Brazil, between 600 and 670 million tons. There are more than 12 years of virtual stagnation. Not that the sector has stood still. Investments were made to increase industrial flexibility for the production of sugar or ethanol and hydrous or anhydrous ethanol, and, in a few cases, diversification into second generation ethanol and biogas, biomethane.

In fact, to the offer of ethanol produced from sugarcane, increasing volumes of ethanol produced from corn have been added, which has supported the maintenance and, at times, expansion of the use of ethanol in the Otto cycle fuel market. This has happened relatively quickly. In 2015, 2016, corn ethanol production went from just 141 million liters to, in 2022, 2023, reaching the mark of 4.6 billion liters of corn ethanol. By 2031, 2032, projects in progress and in the planning phase project a corn ethanol production of 9.65 billion liters per year.

The expansion of corn ethanol, in dedicated plants or attached to sugarcane processing plants, is virtuous, as it adds value to the grain, generates a by-product of high protein value (dry distillery grains with solubles ) and oil that drive the intensification of livestock, freeing up pasture areas for the expansion of agriculture, allowing the generation of higher value products with less logistical impact.

However, in the sugarcane sector, there have been very few initiatives to materialize additional investments in sugarcane crushing or distribution. Yes, there have been merger and acquisition operations of assets that were paralyzed due to previous crises, in particular the most recent one, from 2011 to 2014, arising from price controls on gasoline, something that had already happened in the period of 1985 to 1989, but very few additional investments.

New investments in expansion have not occurred, even though there has been the approval and full validity of the RenovaBio decarbonization targets approved by 2032, which project a demand of 99.22 million tons of carbon dioxide equivalent per year, with a variation already admitted between 90.79 and 107.72 million tons of carbon dioxide equivalent per year.

It is worth remembering that the target approved for 2023 is 37.50 million tons of carbon dioxide equivalent , and that, in 2022, 31.448 million tons of carbon dioxide equivalent were generated, basically with sales of ethanol and biodiesel, although still there is potential for biogas, biomethane and biokerosene. Considering that sugarcane has an average production cycle of 5 to 6 years in Brazil, we are little more than one sugarcane cycle away from reaching the period in which these goals would need to be met.

Therefore, even with efficient regulation in place, conditions have not been generated to enable or encourage private investments that could achieve these goals. One of the explanations may lie in the government's own reaction, which, in 2022, reacted to the achievement of the price of the decarbonization credit by reaching values that exceeded 200 reais per ton of carbon dioxide equivalent.

Although this value was still far from values observed in similar carbon markets, such as California, where 200 dollars per ton of carbon dioxide equivalent was exceeded, or the European Union, where more than 85 dollars per ton of carbon dioxide was reached of equivalent carbon, the Brazilian government, during the last federal administration, showed that it was not willing to accept values of such magnitude, distorting the RenovaBio program with changes to its basic rule and goals.

For RenovaBio to function at its fullest, it would be necessary that, once the decarbonization target has been defined and approved, the value of the decarbonization credit would be that necessary and sufficient to stimulate new investments. This was not what happened in practice, as the government preferred to prioritize the impact on the price of fossil fuel to consumers in the short term, rather than the possibility of achieving its own long-term goal.

The price of the decarbonization credit should also cover the obstacle to new investments, which is generated by the high real interest rate, which also inhibits investments. The truth is that, even with the approval of an efficient and modern regulation such as RenovaBio, the lack of a clear long-term strategic vision has hindered its effectiveness as a mechanism that induces planning.

This same lack of strategic vision has prevented a more vigorous expansion of electricity generation from biomass. Its positive attributes are numerous, such as the fact that it is steady energy and not intermittent like wind and solar photovoltaic energy, although it is seasonal, but with beneficial seasonality and favorable to planning the electricity sector.

Or the fact that it is generated close to load centers (close to cities), saving investments in transmission lines and transmission losses estimated in Brazil at around 11% of total consumption. It is generated in the winter period, perfectly complementing the generation regime of our huge hydroelectric park, responsible for 72.1% of all electricity generation in the country in 2022, increasing the generation base of the hydroelectric system without the need for new investments.

Biomass energy generated mainly in the winter months, when sugarcane is harvested in the main producing region of the country, therefore valuable due to its seasonality, receives a tariff that varies between 260 and 320 reais per megawatt hour. Meanwhile, the interconnected electrical system remunerates thermal plants powered by fossil energy, in many cases, imported diesel oil, which burdens the trade balance and generates greenhouse gas emissions at rates above 1,800 reais per megawatt hour.

The same lack of strategic vision that interferes with RenovaBio , not allowing the program to fulfill the purpose for which it was created, also does not recognize the value of electric energy from biomass that could be being generated with more efficient and modern boilers in sugarcane mills-of-sugar, reducing the cost of manufacturing sugar and ethanol, making them more competitive for consumers, generating more decarbonization credits and more possibilities for meeting environmental goals across the country.

If there were such a strategic vision, special lines of financing should be created through development banks, such as the National Bank for Economic and Social Development and others, to boost the use of this currently wasted potential. The lack of strategic vision also prevents one from seeing and recognizing that Brazil has developed in recent decades an efficient automotive technology, using biofuels, which allows the country to have the vehicle with the lowest emission of carbon dioxide equivalent in the world, in the evaluation of the life cycle.

In reality, Brazil has all the conditions to position itself as a supplier of sustainable mobility technology to the world, as it is currently doing for India. Over the last four decades, Brazil has developed a successful automotive technology based on the use of liquid fuels with a low carbon footprint, capable of efficiently using ethanol and biodiesel, and is now technologically ready to launch the use of biomethane in buses and vehicles heavy, all with a very low carbon footprint. Brazil is also one of the largest producers and exporters of iron ore, the basic raw material for steel production.

It has a competent local industry for the production of plastics and elastomers, including a relevant production of green plastics. In addition, among the largest economies in the world, it has the most renewable energy matrix, capable of producing steel, components and parts with a low carbon footprint that can leverage the electrification process with engines that optimize the use of clean and renewable fuels, accelerating the adoption of hybrid technologies that combine these advantages with the adoption of electrification, which uses the already installed energy distribution infrastructure in the form of clean fuels.

A technology that is, at the same time, clean and affordable for the consumer and that allows automakers to reach the long-awaited goal of zero emissions by 2050. An industrial policy based on valuing the technology developed in Brazil, for the local production of low-emission, high-performance vehicles and the export of this mobility model to other countries, is an opportunity that the country, its entrepreneurs and workers should recognize, value and to enjoy.

Incentives to convert old and more polluting vehicles into new ones with lower emissions, associated with the proper recycling of materials and rewards to consumers for the use of renewable fuels, could recover and leverage an automotive industry, which is strategic and has a great impact on development economic and social due to its high multiplier effect.

A new re-industrialization of the country could be being stimulated, if there were a strategic vision for an integrated planning of the energy, environment, industrial and agro-industrial and foreign trade sectors. Valuable opportunities have been wasted due to lack of a strategic vision. At the beginning of a new cycle, we can only hope that common sense, the public spirit and the general interest prevail, so that conditions are created that stimulate private investment in this direction.