Over the past few years, the Brazilian government has invested on research, development and innovation regarding cellulosic ethanol production, with the creation of new research institutions, such the Brazilian Bioethanol Science and Technology Laboratory (CTBE) — part of the Brazilian Center of Research in Energy and Materials (CNPEM) — and Embrapa Agroenergy. National and state research funding agencies have been providing support for cellulosic ethanol research through programs such as the FAPESP Bioenergy Research Program (Bioen). There has also been substantial financing by BNDES (Brazilian Bank for Economic and Social Development) for technological innovation, creation of infras­tructure (e. g., ethanol pipelines) and financing of new production units in the sugarcane expansion areas, as well as other initiatives such as the PAISS program to foster develop­ment, production and marketing projects of new industrial sugarcane biomass processing technologies.

The rising domestic and external demand for ethanol will lead to increased production of feedstocks in Brazil. Cellulosic ethanol production, especially from crop residues, can supply part of the increased demand, reducing the need for land use change, which can potentially increase greenhouse gas emissions. The trend towards phasing out biomass burn­ing in Brazil, driven by municipal, state and federal legislation, as well as from sugarcane sector stakeholder arrangements will increase the availability of crop residues as feedstock for cellulosic ethanol production. In the industrial phase, improvements in boiler efficiency can make more bagasse available for 2G ethanol production. There are still challenges regarding conversion technologies, but cellulosic ethanol has the potential to be technically and economically feasible in Brazil, especially if integrated with first generation ethanol production from sugarcane.