Brazil has diverse sources of energy. Among the countries that produce fuel-based renewable energy, Brazil stands out in its ethanol production from sugarcane. This feedstock has shown the highest levels of technical and economic efficiency com­pared to other cultures used for ethanol production.

The Brazilian ethanol program began in 1975 with the National Ethanol Program, which was called “ProAlcool.” This program was created to encourage ethanol production to replace gasoline as the standard road transportation fuel. The program aimed to reduce oil imports, which compromised the trade balance, and reduce the country’s energy dependence (Moreira and Goldemberg 1999; Hira and Oliveira 2009).

In addition to these main goals, this program was intended to promote other advantageous consequences, such as: (1) a reduction in the economic disparities between Brazil’s highly industrialized southeast and less-industrialized northeast regions; (2) an increase in the national income from exploring the maximum potential of resources (particularly land and labor); and (3) stimulation of the national sector for capital goods, which would increase the demand for agricul­tural machinery and distillation equipment (Hira and Oliveira 2009).

The Brazilian Ethanol Program was a great success until 1990. This success was a result of several national and international factors that supported the devel­opment and implementation of ethanol fuel. In the domestic market, the Brazilian government subsidized agricultural production, financed up to 80 % of the con­struction of new refineries, reduced taxes on ethanol-fueled vehicles such as the excise tax (IPI), and subsidized ethanol at gas stations (setting the price of alcohol as 64.5 % of the gasoline price). In foreign markets, the rise in oil prices and the decline in sugar exports contributed to the increase in ethanol production.

After setting the structure from 1989 to 1990, ProAlcool suffered a major cri­sis. The rise of the international price of sugarcane increased Brazil’s exports of it and thereby compromised the supply of this feedstock for ethanol production, which exhibited a significant decrease. Thus, the Brazilian government was forced to import ethanol to meet the domestic demand created in the previous period (Puerto Rico et al. 2010).

Due to market fluctuations, the 1990s were marked by the deregulation of the sugarcane industry. The main decisions in this period included gradual cuts of subventions that were related to the price guarantees on exports, the elimination of production and trade controls by the government, and the official shutdown of ProAlcool (Hira and Oliveira 2009; Puerto Rico et al. 2010).

During this period, farmers and industries started being reorganized and new government agencies were created for the purpose of chain organization. After the crisis of 1990 and the reorganization of the sugarcane sector, a new boost for the sugar and ethanol industry came with the introduction of “flex-fuel” vehicles in March 2003, which led to the inclusion of new choices of fuel in gas stations. The government offered new incentives to the emerging market with tax benefits by offering the same advantages granted to ethanol vehicles (Kojima and Todd 2005). According to Goldemberg (2007), the rapid rise and success of this market hap­pened because of the maturity of the ethanol industry, the reduction of produc­tion costs (the learning curve), increasing economies of scale, and mastery of the manufacturing techniques for flexible-fuel vehicles.

Ethanol production is a promising market due to the growing global demand. There are different raw materials that may be used in this industry. Therefore, it is necessary to develop the ethanol industry to meet the domestic and foreign demand and promote the country’s development.

In addition to ethanol, another recent source of agro-energy in Brazil appeared: biodiesel. Law No. 11.097-05 established the mandatory introduction of biodiesel in the Brazilian energy matrix in the form of a mixture of 2 % biodiesel (B2) by volume with fossil-fueled diesel (Federal Law 2005). Based on this law, resolution No.6/2009/CNPE stated that B5 would become mandatory in 2013. However, the development of the biodiesel industry enabled enforcement of this resolution in January 1, 2010 (ANP 2010).

Currently, biodiesel is manufactured primarily from soybean oil, which is one of the most valued commodities in the international market. There are public policies for the encouragement of diversification of the feedstock to be used in biodiesel. A variety of options such as soybeans, canolas, peanuts, sunflowers, and cotton is present in the southeast, midwest, and south regions of Brazil. In addition, the north region is able to produce biodiesel from babassu palms and castor beans.

However, with the exception of soybeans, there are no structured and efficient sup­ply chains for these alternative crops, which limit the organized, stable, and cheap sup­plies that can be delivered to the biofuel industry. Regarding the public policies that foster the acquisition of diverse raw materials from companies producing biodiesel, the Ministry of Agrarian Development (MDA) created the so-called Social Fuel label. This label ensures that companies that buy raw materials primarily from family farm­ers obtain special conditions such as lower interest financing by the Brazilian National Bank for Economic and Social Development (BNDES) and other accredited financial institutions; in addition, these firms receive the benefit of tax rates as Pasep/COFINS with reductions of the differentiated coefficients (Garcez and Vianna 2009). It is intended by the government that this percentage shall increase to 10 % by 2014, as biodiesel production already has an installed industrial processing capacity.

Advances in the bioenergy production sector in Brazil have been achieved by developing the industry, and these advances are related to the learning curve that has occurred in this market. Among the improvements, we highlight the development and multiplication of new varieties of sugarcane with high levels of production, progress in the agricultural technology that is employed, cost reductions in the har­vest, the development of new equipment, and the management of agricultural waste. These factors and others have ensured the success of the Brazilian biofuel program.