We talk, in particular, about the sector's rapid response to the appreciation in the price of sugar registered until the end of November 2023: large volumes of sugar had their export prices blocked by the mills and announcements of expansion of the sweetener's production capacity were rightly celebrated.

If it weren't for the unexpected sugar prices, the sector would have experienced severe difficulties, resulting from the situation in the ethanol market. Given the abandonment of the Import Parity Price policy by Petrobras, the movement towards sugar in the next harvests is understandable and expected.

This prioritization of sugar, however, contrasts with the recognition that the future of the sugar-energy sector depends on its role in the energy transition, starting with the growth in the relevance of ethanol in the transport matrix.

In addition to its traditional role as an alternative to gasoline in flex engines, conventional fuel, hybrid flex models are beginning to gain popularity in Brazil, thus being the next step in the use of biofuel in the country. Also associated with electrification, the potential of ethanol as a raw material for the production of hydrogen to be used in fuel cells is discussed. The search for greater sugar production in the coming cycles, however, seems to go in the opposite direction and its reasons must be well understood. In short, the sweetener has presented very remunerative prices and, more relevant to the present discussion, is not subject to sudden changes arising from domestic policy on duty.

Thus, the solution to the apparent contradiction between the need for revenue diversification, aiming to reduce risks and active participation in the energy transition process, involves the incorporation of a new range of sustainable energy products, some of which derive directly from the application of precepts of the circular economy.

This process appears to be the only way in which the sector can play its role in the low-carbon economy without, however, being exposed to changes in gasoline pricing that influence ethanol sold in the domestic market.

In relation to new products, for example, it is expected that the sugar-energy sector, in the next decade, will play a fundamental role in the production of sustainable aviation fuel. By being linked to a global market, such a product would be much less subject to non-economic risks. A similar concept would apply to the eventual production of green hydrogen from ethanol.

These products ( sustainable aviation fuel and green hydrogen), when derived from ethanol, tend to constitute an additional destination for the sector's traditional raw material (total recoverable sugar). However, other sources of revenue can be established from industrial waste that, to some extent, is already reused.

Currently, the most widespread of these products is biomethane produced from vinasse derived from ethanol production. Just like filter cake, vinasse is currently used predominantly for fertigation. However, its destination for the production of biomethane does not imply the elimination of this already consolidated use. Digestate (anaerobic reactor effluent) can be used as biofertilizer, both in liquid and solid form depending on the processes applied to it.

It should be noted that biomethane, when presented as a direct substitute for natural gas in the regulated market, finds itself in a similar situation to ethanol in terms of the influence of external factors on its price, that is, its role, as a risk mitigator, is limited. However, if a free market is consolidated, biomethane can be used especially in situations where it is desired to mitigate emissions from the burning of natural gas (such as in electricity production), as well as replacing diesel. In any case, as it involves optimizing the use of already available organic matter, it favors maximizing the sector's revenue.

Associated with biomethane, mention should also be made of the possibility of capturing biogenic carbon dioxide resulting from its separation from biogas. It is possible to purify it to be sold for industrial purposes. This process can also be carried out in the fermentation of ethanol, helping the biofuel to present negative net emissions, enabling additional revenue from carbon markets.

Still emerging in the sector, but with a great impact in terms of image, there is ethanol of lignocellulosic origin (second generation ethanol) and pellets. Both are derived from the processing of bagasse, which is traditionally used to generate driving force for manufacturing units and electricity generators to be sold on the free market and regulated by the plants.

In the case of second generation Ethanol, although it represents a minimal fraction of total production, it has great acceptance in the international market given its very low level of emissions when analyzing its life cycle. Pellets, in turn, have the potential to replace mineral coal in thermoelectric plants. Both bagasse derivatives would be strongly associated with the external market, also contributing to reducing the political risks to which the sector is currently exposed.

The future envisioned for the sector, therefore, is one of multiple products, with great emphasis on bioenergy, and less risk associated with domestic economic policies. The transition to the biorefinery concept implicit in the present discussion, however, should prove to be a complex and time-consuming process. In addition to technologies still under development, such as the production of sustainable aviation fuel and green hydrogen, others that have already been mastered signal challenges associated with the learning curve, as can be seen in biomethane and second-generation ethanol.

Given the large investment required and an expected long maturation process, the sector must seek to accelerate, as much as possible, the start of initiatives to diversify its products in the context of the green economy and energy transition. Such projects, however, must be carried out gradually by sugar and energy groups, otherwise they will not be able to manage the unprecedented operational challenges that will arise.

In any case, the liquidity generated in recent harvests, due to good prices for sugar and (until a certain point in the past) ethanol, plays a fundamental role and can determine the long-term success of sugar-energy groups, both due to the investment required and the ability to withstand natural growing pains through diversification.