The Global Biofuel Shift: How Brazil’s Ethanol Strategy Navigates the China-US Rivalry

The global energy landscape is undergoing a structural transformation, and at the heart of this shift lies Brazil. As the world’s leading producer of sugarcane ethanol and a rapidly growing player in corn-based biofuels, Brazil finds itself in a strategic sweet spot between two superpowers: China and the United States. While the U.S. has long been a traditional partner, China’s recent pivot toward Brazilian ethanol as a cornerstone of its green transition is redefining trade dynamics and sending ripples through global commodity markets.

China’s interest in Brazilian ethanol is driven by a pragmatic necessity to meet ambitious carbon reduction targets. With a goal to integrate sustainable aviation fuel (SAF) into its massive aviation sector, which consumes over 80 million tons of fuel annually, Beijing has identified Brazil’s ethanol as a superior alternative to its current reliance on recycled cooking oil. This move is not just about environmental goals; it is a strategic play for self-sufficiency and unity among Global South nations, especially as trade tensions with the U.S. escalate over tariffs and protectionist policies.

The rise of corn ethanol in Brazil is a game-changer that brings both opportunities and complex market challenges. Historically, Brazil’s ethanol production was dominated by sugarcane, but corn-based production is projected to reach nearly 10 billion liters in the current cycle, with capacity potentially doubling by the early 2030s. This expansion is creating a "structural shift" in the domestic market, as corn ethanol begins to compete directly with sugarcane for market share. This competition is likely to depress ethanol prices at the pump, benefiting consumers but squeezing the profit margins of traditional sugarcane mills.

Corn Ethanol Expansion Strengthens Brazil’s Livestock Industry Through DDG Supply

This rapid growth in the 100% corn-based ethanol sector has had a significant and positive impact on Brazil’s livestock industry, particularly in Mato Grosso, home to the country’s largest beef cattle herd. Cattle ranchers in the state view this expansion favorably, mainly due to the increased availability of dried distillers grains (DDG).

DDG is a valuable co-product of ethanol production, obtained from the fermentation of corn starch. With a low moisture content of approximately 10% to 12%, it is easy to store and has become a key component of animal nutrition. Modern livestock farming is built on four main pillars, genetics, nutrition, management, and animal health, with nutrition playing a central role in economic efficiency and profitability.

DDG is especially valued for its crude protein content, which typically ranges from 25% to 32%. This makes it a competitive substitute for soybean meal, which generally contains around 43% crude protein, offering a more cost-effective option and helping to reduce feed costs for producers. The use of DDG in cattle nutrition is well established in the United States, and as Brazil’s corn ethanol industry expands, the product is increasingly reaching international markets.

In 2025 alone, ethanol producers in Mato Grosso exported approximately 73,000 metric tons of DDG, generating revenues of $22.4 million, according to a survey by the Federation of Industries of Mato Grosso (FIEMT).

Beyond the fuel pumps

The repercussions of this corn ethanol boom also extend to the global food and sugar markets. As more corn is diverted to ethanol production, the competition between domestic consumption and exports is intensifying. This trend, coupled with falling corn stocks in China and a potential resumption of large-scale Chinese imports, could drive corn prices significantly higher, echoing the peaks seen in previous harvest cycles. Furthermore, as Brazilian mills face increased competition from corn ethanol, they may pivot back toward sugar production, potentially flooding the global sugar market and impacting international prices at a time when they are already under pressure.

The geopolitical implications are equally significant. The strengthening Brazil-China relationship, characterized by high-level diplomatic engagements and discussions on financing through the BRICS framework, signals a move toward greater economic integration that bypasses traditional Western-centric financial structures. For Brazil, this means balancing its "best moment" in relations with China, its largest trading partner for soy, iron ore, and meat, with the volatile trade environment shaped by U.S. policy.

Ultimately, Brazil’s role in the global energy transition is no longer just about being a supplier of raw materials. It is about navigating a complex web of industrial competition, food security, and superpower rivalry. As the world watches the development of sustainable aviation (SAF) and maritime fuels, Brazil’s ability to manage the delicate balance between corn and sugarcane, and between Beijing and Washington, will determine its standing as a sovereign leader in the new green economy.

Brazil’s Biogas and Biomethane Market Accelerates with New Power Plants, Billion-Real Investments and SAF Projects

From Landfill to Low-Carbon Jet Fuel: How Brazil's Biomethane Policy is Redefining the Circular Economy and Global Climate Fight

Brazil is rapidly emerging as a global laboratory for the circular economy and a key player in the fight against climate change, driven by an accelerating market for biogas and biomethane. This energy revolution is not merely a matter of market growth; it is a systemic policy shift that transforms waste management into a high-value, low-carbon energy source, positioning the nation at the forefront of responsible fuel production and decarbonization efforts.

The expansion is marked by significant private investment, new power generation capacity, and pioneering projects in Sustainable Aviation Fuel (SAF), reinforcing Brazil’s commitment to a cleaner energy matrix and its global climate pledges.

The Policy Pivot: Biomethane as a Decarbonization Bridge

While Brazil already boasts one of the world's cleanest energy matrices, largely thanks to hydro, wind, and solar power, the challenge of decarbonizing transport and industry remains. Biomethane, a renewable natural gas derived from organic waste, is increasingly viewed as the essential "bridge fuel" for this transition — Brazil's light-duty vehicle fleet, predominantly composed of flex-fuel vehicles (approx. 85%), utilizes ethanol in two main ways: as a mandatory blend in gasoline (E30, with 27-30% ethanol content) and as pure hydrous ethanol, chosen by the driver at the pump. 

Added to all of this, the market is responding with massive scale-up. Gás Verde, a major player, is strategically converting its biogas power plants into biomethane production units. This pivot is ambitious, targeting a quadrupling of output from 160,000 cubic meters per day (m³/d) to 650,000 m³/d over the next three years. This shift reflects a broader trend where biomethane is replacing fossil natural gas in critical sectors, from heavy transport to industrial heat.

This growth is underpinned by robust policy and investment signals. According to the Brazilian Association of Waste and Environment (Abrema), biomethane production is projected to double by the end of 2026, with new plants scheduled through 2029 representing approximately BRL 8.5 billion in committed investments.

Policy Innovation: Recognizing "Bioenergy Recycling"

A critical policy debate is crystallizing the role of biomethane within the national climate strategy. Pedro Maranhão, president of Abrema, highlights the need to formally recognize biomethane production as a form of recycling. This policy recognition is not semantic; it is a powerful mechanism for strengthening Brazil’s waste management strategy and enhancing its circular economy metrics.

Abrema’s concept of "bioenergy recycling" incorporates waste-to-energy processes into official recycling statistics. This has already yielded dramatic results: after including informal waste pickers in national statistics, the recycling rate jumped from 3% to 8%. With the inclusion of energy and fuel generation from waste, the rate has now surpassed 20%. This demonstrates the profound impact of policy-driven resource valorization.

Furthermore, COP30 commitments have spurred concrete action, with Abrema facilitating agreements between municipalities and private companies to expand biomethane-powered fleets and scale up infrastructure investments. The message is clear: the diagnostic phase is over; the time for implementation is now.

SAF Breakthrough: The Circular Economy Takes Flight

The global aviation sector, a hard-to-abate industry, is also looking to Brazil for a sustainable solution. The country’s race to produce Sustainable Aviation Fuel (SAF) has gained a significant contender in Geo bio gas&carbon, which is pioneering a closed-loop system using agricultural residues, specifically vinasse and filter cake from sugarcane, rather than vegetable oils.

This approach is designed to produce a highly competitive SAF with one of the lowest carbon footprints globally. Developed in partnership with Germany’s GIZ, the project involves integrating a new SAF plant with an existing biogas unit in São Paulo. The process is inherently circular: residues are converted into biogas, which is then used to produce SAF. Crucially, the CO₂ utilized in the process is biogenic, ensuring a significantly reduced lifecycle emission profile.

The project, backed by an estimated €7.8 million investment and included in Brazil’s Growth Acceleration Program (PAC), is starting as an industrial-scale pilot with a capacity of 100,000 to 150,000 liters per year.

Global Policy Acceptance: The Corsia Advantage

For SAF to be viable, it must meet stringent international carbon accounting standards. Geo’s sugarcane residue-based route has recently secured approval from Corsia (Carbon Offsetting and Reduction Scheme for International Aviation), the global aviation carbon offsetting scheme.

This certification is a major policy victory, placing the fuel in Corsia’s lowest carbon intensity bracket. As Geo’s Technology Director, Allyson de Oliveira, noted, this ensures maximum economic benefits and global market acceptance, potentially making it the most competitive SAF in the world.

Market Consolidation and Public Support

The momentum is further amplified by market consolidation and public sector support. The strategic, cashless share swap between Orizon Waste Valorization and Vital has created Brazil’s largest waste management company, increasing the waste under management to 14.2 million tons per year, nearly 40% of all waste generated in the country. This consolidation significantly boosts the capacity for large-scale investment in biogas, biomethane, and carbon credit projects.

Simultaneously, the GEF Biogas Brazil Project, a collaboration between the Ministry of Science, Technology and Innovation (MCTI), UNIDO, and the Global Environment Facility (GEF), has provided crucial foundational support. Mobilizing over US$ 270 million in funding and co-financing, the project has trained thousands of professionals and helped shape the public policies that now govern the sector.

As officials highlighted at the project’s closing workshop, biogas is a mature, scalable, and strategic solution for Brazil’s decarbonization goals. Looking ahead, the potential is vast: Paraná’s energy plan suggests that biomethane and biogas could supply up to 38% of the state’s energy matrix by 2050 under favorable conditions, underscoring the profound, long-term impact of today’s policy and investment decisions on the future of responsible energy production.

Petrobras (PETR3; PETR4) Bets on HVO and Renewable Diesel to Drive Brazil’s Energy Transition

Brazil’s state-controlled oil giant expands investments in green fuels, positioning HVO as a key pillar of its long-term decarbonization strategy

The global energy transition has become a central concern for governments and corporations worldwide, and Brazil is increasingly positioning itself as a relevant player in the low-carbon fuels market. At the heart of this strategy is Petrobras, which has stepped up investments in renewable diesel and Hydrotreated Vegetable Oil (HVO) as part of its broader plan to reduce emissions while maintaining compatibility with the country’s existing vehicle fleet.

Petrobras’ flagship initiative in this segment is Diesel R, a renewable diesel produced through the coprocessing of fossil diesel with vegetable oils, primarily soybean oil, widely used as cooking oil in Brazil. This new technique, called biorefining, uses advanced hydrotreating technology. The result is a fuel chemically indistinguishable from conventional S10 diesel, requiring no engine modifications and delivering significant emissions reductions.

Diesel R: Petrobras’ Drop-In Renewable Fuel That Cuts Carbon Emissions Without Engine Modifications

Diesel R, a renewable diesel developed by Petrobras, represents a practical step forward in Brazil’s energy transition. The main message is that the fuel significantly reduces carbon emissions compared to conventional fossil diesel, while still being fully compatible with existing diesel engines, meaning no mechanical adaptations are required.

Diesel R is produced by combining traditional mineral diesel with renewable vegetable oils, which undergo a refining process that removes impurities and results in a fuel that is chemically very similar to fossil diesel. Because of this similarity, drivers and fleet operators can use it in trucks and other vehicles exactly as they do today.

With Diesel R, the carbon released during combustion was previously absorbed by plants through photosynthesis, which helps lower net greenhouse gas emissions. This makes Diesel R an effective way to reduce emissions immediately, without waiting for large-scale changes in vehicle technology or infrastructure.

Overall, Diesel R is a low-carbon, drop-in solution that allows Brazil to cut emissions in the transport sector while leveraging its existing fleet and strong biofuel supply chain, reinforcing Petrobras’ role in advancing more sustainable fuels.

HVO-Compatible Fuel Without Changes to Vehicles

At Petrobras’ Cubatão refinery, renewable feedstock is blended with mineral diesel and processed in hydrotreatment units, where hydrogen removes impurities such as sulfur and oxygen. This process produces a paraffinic fuel virtually identical to fossil diesel in performance and stability.

According to Petrobras, the key advantage lies in reducing fossil fuel content without altering Brazil’s current vehicle fleet, enabling immediate decarbonization gains. The company reports that the renewable portion of Diesel R can cut lifecycle greenhouse gas emissions by up to 87% compared to traditional diesel.

Petrobras technicians explain that almost Ten percent of this fuel comes directly from vegetable oil, because the carbon released during combustion was previously absorbed by plants through photosynthesis. Therefore, the fuel operates in a near-closed carbon cycle.

Diesel R Is Not Biodiesel

Despite sharing a renewable origin, Diesel R and HVO differ fundamentally from conventional biodiesel (FAME). While biodiesel is produced through transesterification, HVO and renewable diesel undergo hydrotreatment, resulting in a cleaner, more stable fuel with superior oxidation resistance and cold-flow performance.

This chemical similarity to fossil diesel makes HVO particularly attractive to automakers and heavy transport operators. Global manufacturers such as Volvo, Scania, MAN and Mercedes-Benz already approve the use of HVO 100, reinforcing its role as a drop-in solution for decarbonizing logistics and industry.

Corporate Demand and Voluntary Climate Targets

Petrobras’ initial commercial focus is on large corporate consumers seeking to reduce their carbon footprint and meet voluntary ESG commitments. Early adopters report that the additional cost of renewable diesel is modest compared to the environmental benefits.

One industrial client estimates emissions reductions of around 400 tons of CO₂ per year, calling the cost-benefit ratio “fully satisfactory.”

Scaling Up: From 10% Renewable Content to 100% Biofuels

Currently, Petrobras produces renewable diesel with up to 10% renewable content, with plans to reach 20% in the coming years. Looking further ahead, the company is preparing for a future in which fuels could be 100% renewable from 2030 onward.

Central to this vision is Petrobras’ investment in Brazil’s first fully renewable biorefinery, located in Rio Grande do Sul. The project involves converting the Refinaria Riograndense (RPR) into a facility capable of processing 100% renewable feedstock by 2028. The biorefinery is expected to produce HVO (green diesel), sustainable aviation fuel (SAF), green naphtha and other bioproducts, strengthening Brazil’s bioeconomy.

“This project is already underway and represents a strategic priority for Petrobras over the next decade,” the company states.

Brazil’s Biofuel Advantage and Market Outlook

Brazil has a long-standing tradition in biofuels, supported by public policies such as RenovaBio, which allows renewable diesel producers to generate and trade CBIO carbon credits. Each CBIO corresponds to one ton of avoided CO₂ emissions, traded on Brazil’s B3 stock exchange.

According to studies by the Energy Research Office (EPE), renewable diesel, particularly HVO, is already one of the fastest-growing biofuels globally. Between 2011 and 2018, HVO production expanded at an annual rate of over 37%, far outpacing traditional biodiesel growth in Europe.

Once produced at scale, Brazilian HVO has strong potential to compete in international markets, especially as regulations tighten emissions standards in Europe and other regions.

Challenges Remain, but Direction Is Clear

Despite its advantages, HVO production requires complex refinery infrastructure, high-pressure hydrogenation units and significant hydrogen supply, still largely derived from natural gas. The availability and cost of sustainable feedstocks also remain key challenges.

Even so, Petrobras sees renewable diesel and HVO as essential to staying relevant in a decarbonizing global energy market.

By investing simultaneously in oil exploration and next-generation fuels, Petrobras aims to balance energy security with climate commitments, driving Brazil toward a greener, more competitive and more resilient energy future.