Brazil Biofuel Market: Market Size & Forecast 2026

Brazil's biofuel market is built on a long-established sugarcane ethanol industry and a fast-growing biodiesel segment, supplemented by emerging biogas and renewable diesel production. EPE technical notes indicate sustained investment in sugarcane processing and biofuel plants, with significant sums earmarked for the 2026-2035 period. Federal blending mandates, including the rising biodiesel mix in diesel fuel, underpin domestic consumption. Ethanol, both hydrous and anhydrous, remains the largest sub-segment, supported by the country's universal flex-fuel vehicle fleet.

• •Brazil's ethanol program dates to the 1970s ProAlcool era and serves over 80% of light vehicles via flex-fuel technology
• •EPE October 2025 outlook flags rising capital expenditure in biofuel plants and logistics through 2035
• •Biodiesel mandates continue to climb under RenovaBio and the National Petroleum Agency blending schedule

Growth is propelled by a combination of mandatory biofuel blending targets, decarbonization commitments under RenovaBio, and expanding export opportunities for Brazilian ethanol. Rising investment in biomethane and renewable diesel is opening new revenue streams tied to industrial and transport demand. Feedstock availability, particularly sugarcane and soybean oil, remains a structurally strong advantage versus international competitors. The agricultural sector's scale allows Brazil to expand biofuel output without displacing food production in the near term.

• •RenovaBio decarbonization credits are channeling financing into new biofuel capacity
• •Ethanol exports benefit from India's E100 policy and European Union renewable energy targets
• •Sugarcane productivity gains lower unit costs and improve export competitiveness

By fuel type, the market is split across bioethanol (the largest category), biodiesel produced mainly from soybean oil and tallow, biogas from agricultural residues and landfills, and emerging renewable diesel and SAF volumes. Feedstocks are dominated by sugarcane, soybeans, corn in select regions, and used cooking oil for renewable diesel. Geographically, production is concentrated in the Center-South states of São Paulo, Goiás, Minas Gerais, and Mato Grosso do Sul, while the Northeast hosts expanding biodiesel and renewable diesel projects.

• •Center-South accounts for the vast majority of sugarcane ethanol output
• •The Northeast region is seeing rising biodiesel and renewable diesel capacity
• •Biogas and biomethane projects cluster around São Paulo, Mato Grosso, and Paraná agribusiness hubs

What are the recent trends and outlook?

Outlook is shaped by the ethanol supply scenarios EPE set out in late 2024 and the investment outlook through 2035, both of which project a multi-decade expansion of biofuel capacity. Aviation biofuels, biomethane for heavy transport, and renewable diesel for export will become increasingly important sub-segments. Carbon credit monetization under RenovaBio should accelerate project finance for smaller producers. Through 2030 and beyond, Brazil is well placed to maintain its global leadership as the world's second-largest ethanol producer and a top biodiesel exporter.

• •EPE projects ethanol supply and Otto cycle demand will expand steadily through 2034
• •Biomethane and SAF pipelines are the fastest-growing emerging biofuel categories
• •Brazil's combination of arable land, established mandates, and carbon policy supports a 7%+ CAGR through the forecast period