Brazil Biofuel Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

Brazil Biofuel Market Trends and Insights

RenovaBio Decarbonization Targets Drive Carbon-Credit Revenue

RenovaBio obliges distributors to offset 10.1% of 2026 emissions, expanding to 11.8% by 2028, which anchors a predictable credit stream for compliant producers.^{[2]Ministry of Mines and Energy, “RenovaBio Targets,” gov.br} CBIO prices rose from BRL 45 in early 2024 to BRL 85 by year-end 2025, rewarding mills that retrofit for cellulosic ethanol or hydrotreatment.^{[3]Argus Media, “CBIO Price Rally,” argusmedia.com} Raízen’s Bonfim 2G plant earns 1.8 CBIOs per cubic meter, a 50% lift over first-generation ethanol, enhancing margins by USD 0.15 per liter.^{[4]Raízen S.A., “Bonfim 2G Plant,” raizen.com.br} Transparent ANP accounting reduces counterparty risk, enabling CBIO-backed loans that accelerate retrofit paybacks.

Mandatory Blend Ratios Lock in Structural Demand

The Fuel of the Future Law lifts ethanol blends to E30 by 2028 and biodiesel to B20 by 2030, removing discretionary toggles that destabilized earlier mandates. The higher E30 ceiling alone requires 2.5 billion additional liters of ethanol a year, equal to the capacity from eight greenfield mills, while B20 pulls an extra 1.2 billion liters of biodiesel, tightening oilseed markets. ANP audits inventory monthly and levies penalties up to BRL 50,000 per violation, ensuring compliance across 27 states. Flex-fuel penetration above 95% of new car sales nullifies infrastructure barriers, allowing rapid field execution.

Sugarcane Feedstock Advantage Underpins Cost Leadership

Eight-point-five million hectares of cane yielded 580 million tons in the 2024–2025 harvest, delivering cash costs of USD 0.32–0.35 per liter, 40% under U.S. corn ethanol. Bagasse cogeneration covers 60% of milling power needs and generated USD 1.2 billion in grid sales in 2025, lifting plant gate margins. Genetic advances caused sucrose content to jump from 13.5% in 2020 to 14.8% in 2025, adding 9% volume without acreage growth. This structural moat shields domestic supply from global feedstock shocks.

Flex-Fuel Fleet Expansion Sustains Demand Elasticity

Flex-fuel vehicles formed 87% of Brazil’s 2.1 million new light-vehicle sales in 2025; the installed base now tops 30 million units. When ethanol traded below 70% of the gasoline price in late 2025, E100 consumption leaped 18% quarter-on-quarter, clearing surpluses. Automakers such as Volkswagen and GM maintain flex-fuel lineups through 2030, ensuring continued demand optionality.

ILUC & Deforestation Concerns Threaten Export Access

Soybean-linked land conversion cleared 7,800 km² of Cerrado in 2024, attracting EU scrutiny under the 2025 Deforestation Regulation. Brazilian biodiesel exports worth USD 420 million risk exclusion unless full traceability is proven, a challenge for smallholders lacking satellite monitoring. Only 38% of ethanol output carried third-party certification in 2025, forcing mills to fund compliance upgrades that raise cash costs by USD 0.02–0.04 per liter.

Soy-Oil Price Volatility Squeezes Biodiesel Margins

Soy oil ranged from USD 1,100 to USD 1,580 per ton in 2024–2025, compressing biodiesel margins from USD 0.18 to USD 0.06 per liter and prompting 12 plants to idle. Used cooking oil trades at a 25% discount, yet collection logistics exist chiefly in three southern states, limiting substitution.

Segment Analysis

By Fuel Type: Bioethanol Dominance Meets SAF Disruption

Bioethanol retained a 55.8% hold on the Brazil biofuel market in 2025, reflecting half a century of fermentation experience and widespread flex-fuel fleet adoption. SAF, though less than 2% in 2025, is scaling at 25.6% CAGR, buoyed by airline offtake contracts and hydrotreatment investments. Biodiesel’s 28% share rests on B15 mandates but faces soy-oil margin risk, while HVO capacity under construction signals a pivot to higher energy density diesel substitutes.

SAF becomes the fastest rising slice of the Brazil biofuel market as Petrobras and Raízen accelerate refinery retrofits. Azul aims for 10% jet blending by 2030, equivalent to 150 million liters yearly commitment, and Embraer certification removes technical doubts. Biodiesel share growth tilts on feedstock diversification toward used cooking oil and animal fats to escape soy-oil volatility, while bio-naphtha lines cater to petrochemical clients but remain niche.

Note: Segment shares of all individual segments available upon report purchase

By Generation: First-Gen Scale Versus Second-Gen Breakthroughs

First-generation pathways commanded 69.3% of the Brazil biofuel market in 2025, thanks to 400 cane mills and cash costs under USD 0.35 per liter. Second-generation cellulosic ethanol is growing at a 15.2% CAGR as mills monetize the 140 million-ton annual bagasse and straw stream.

Second-generation output reached 80 million liters in 2025 and pockets higher CBIO revenue, generating 1.8 credits per cubic meter versus 1.2 for first-generation fuel. GranBio’s plant restart illustrates debt-restructuring efficacy, while enzyme firms target cost cuts to USD 0.30 per liter by 2028, underpinning break-even economics.

By Feedstock: Sugarcane Supremacy Faces Residue Competition

Sugar crops delivered 75.5% of input volume in 2025, benefitting from year-round tropical cultivation, ratooning, and co-generated power that offsets OPEX. Lignocellulosic residues, primarily bagasse and straw, rise at 15.7% CAGR as mills retrofit digesters.

Oilseeds accounted for an 18% share, yet soy-oil price gyrations restrict further penetration. Used cooking oil recovery hit 180 million liters in 2025, but the national potential approaches 600 million liters, contingent on municipal collection rollout.

Note: Segment shares of all individual segments available upon report purchase

By Technology: Fermentation Maturity Versus Hydrotreatment Surge

Fermentation held 70.4% of capacity in 2025, underpinned by mature yeast strains and capex advantage. Hydrotreatment, negligible two years earlier, climbs at 16.3% CAGR on the back of Petrobras’s USD 1.2 billion build and refinery co-processing pilots by BP Bunge.

Trans-esterification remains the main biodiesel route yet faces displacement as HVO meets diesel specs without blending ceilings. Gasification and Fischer-Tropsch stay in pilot stages due to capex multiples three times higher than fermentation.

By End-Use Sector: Road Transport Lock-In Versus Aviation Upswing

Road transport consumed 80.7% of output in 2025, a testament to 30 million flex-fuel vehicles and 42,000 ethanol pumps. Aviation, although small, shows a 25.6% CAGR, reflecting CORSIA mandates and the lack of electrification substitutes for medium-haul jets.

Marine adoption remains marginal pending IMO fuel-spec guidance, while power generation relies mainly on cane-mill cogeneration that exports surplus to the grid. Regional consumption skews to São Paulo and Minas Gerais, which together bought 48% of ethanol in 2025.

Note: Segment shares of all individual segments available upon report purchase

Geography Analysis

Brazil’s Southeast led biofuel consumption in 2025 with a 56% share and maintained average ethanol pump prices at 67% of gasoline parity, anchoring demand resilience. The region also houses most 2G retrofits, easing feedstock-to-mill logistics. Center-West states of Goiás and Mato Grosso posted the highest production growth as land prices remain 40% below São Paulo, though rail bottlenecks limit export velocity.

North and Northeast corridors bear elevated freight costs of USD 0.08–0.12 per liter because of underdeveloped pipelines and reliance on trucking over 1,500 km distances. These penalties offset cheaper land and labor, restraining greenfield attraction despite abundant cane potential. Government feasibility studies for the Paulínia-Brasília-Bahia pipeline underscore long-term intention yet lack funding timelines.

Southern states benefit from robust used cooking oil collection, yielding 120 million liters in 2025, which diversifies biodiesel feedstock and enhances CBIO scores for small refiners. The region’s colder climate favors HVO over FAME because hydrotreatment delivers lower cloud points, prompting Petrobras to prioritize supply to Paraná and Rio Grande do Sul once Duque de Caxias ramps to nameplate in 2028.