The sector that we currently call “sugar-energy”, in short, is a relatively expanded set of economic activities derived from the planting of sugar cane. If, in the century 16, sugarcane production in Brazil emerged as a response to the demand for an ingredient that was still very expensive and little used (sugar) to “sugar and alcohol”.

This was particularly evident with Proálcool when, concerned about dependence on foreign oil, the Brazilian government made abundant resources available for investment in the production of alternative fuel to gasoline. Evidently, this operation was only successful due to the rapid adoption of the recently created commercial alcohol car, during the 1980s, due to the lower cost per kilometer driven for Brazilians.

The nomenclature, however, lost part of its meaning in the 1990s with the collapse of the alcohol-powered car, reversing much of the emphasis given to biofuel through Proálcool.

In the 2000s, the advent and success of flex fuel cars (capable of running using the now renamed ethanol and/or gasoline) would have justified the maintenance of the sugar and alcohol name, had it not been for an important change that occurred in the operation of the plants: the wide adoption of cogeneration systems, aiming to meet internal energy demands (including the electrification of processes) and the sale of surplus.

The increase in the number of units capable of producing and selling energy led to the progressive adoption of the now common “ sucroenergy ”. Despite the difficulties inflicted by bad economic policy at the beginning of the 2010s, the sector preserved its multi-product characteristic, namely sugar, ethanol and electricity.

Truth be told, although in the 2000s the industry and government encouraged the recognition of ethanol as an environmentally friendly alternative to gasoline, The effect of these efforts was limited, with the growth in biofuel's share resulting from its attractiveness at the pump, just as had happened in the 1980s.

In the mid-2010s, when concerns about global warming took on new proportions, the sector suddenly found itself in great shape in the face of the changing global mood. Progressively, environmental and circular economy aspects have become an important component of the strategy of the now renamed sugar-energy sector, including from a financial point of view.

Looking at the world, the Paris Agreement, signed in 2016, accelerated the process of decarbonizing economies, opening space for carbon markets, fuel mixing mandates, tightening vehicle emissions limits, among others. In Brazil, RenovaBio and the more restrictive requirements of the Motor Vehicle Air Pollution Control Program reflect this new global reality.

The opportunity presented to the sugar-energy sector is immense in terms of its role as a supplier of clean energy, not just through consolidated ethanol and electricity. In addition to its direct use (pure or added to gasoline), ethanol can be the raw material for the production of new “green” fuels, the demand for which is expected to increase across the planet due to increasing legislation. The confirmation, however, of economically viable routes for these new fuels based on ethanol could lead to the sector having a capacity to influence economic life, which has not been seen since when it was just called “sugar”.

The adoption of the concept of biorefinery, as opposed to the “sugar-energy plant”, would make the abandonment of the sector's attachment to specific products even clearer. In this sense, a plant could, itself or through close partners, produce several items in a manner analogous to what occurs in a classic oil refinery, including ethanol, first generation ethanol and second generation ethanol, biomethane, sustainable fuel from Aviation, biobunker, green hydrogen, bioplastics, etc.

Particularly in the case of energy products, the sugarcane chain can be fundamental to its global supply. To meet this potential demand, however, there will be a need for financial resources, management and governance capacity that, today, is not seen in all economic groups.

The players which, in recent years, have combined good sales prices with the rationalization of operations, and the maximization of the use of installed capacity, and, therefore, with cost reduction, at least in the financial aspect, they are now in better conditions to carry out investments needed to convert plants into biorefineries. Furthermore, such groups already signal better management practices and which, in the future, will become even more critical.

If the scenario is confirmed, the new biorefineries could become extremely competitive upstream, putting pressure on local raw material and land market prices. This leaves agro-industrial units technologically outdated and/or with financial problems and difficulties in maintaining activity. This situation could favor a new process of consolidation in the sector.

Furthermore, new fuels will not enter the market without heavy regulation, not only by national bodies such as the National Petroleum, Natural Gas and Biofuels Agency, but also by entities abroad that will impose high quality standards and strict control of all stages of production (including agricultural) with regard to environmental and social aspects of production.

The benefits that exist today through good governance of the production chain are in no way compared to those that will arise if the scenario of multiple ethanol derivatives materializes, the largest market for which will be abroad and in developed countries.

The future of the ethanol market in Brazil is a complex landscape, marked by challenges and opportunities. The rise of ethanol as a more sustainable alternative to fossil fuels is undeniable, given growing concerns about climate change. However, the governance of sugarcane mills in Brazil plays a crucial role in shaping this future.

Again, the level of management and governance necessary to take advantage of these opportunities is not fully disseminated throughout the sector. Thus, groups that wish to take advantage, from the beginning, of the expected window of opportunity will have to redesign their management and governance structures to be able to meet the requirements, not only technical, but also environmental and social, which will be imposed by the buyers of these new products.

The transition to a more sustainable energy matrix requires not only technological advances, but also an unequivocal commitment to ethical and responsible practices, especially regarding governance issues. Recognizing the challenges that arise, the sector can look with optimism at the opportunities that arise.