The government is considering increasing the anhydrous ethanol content in gasoline, a move set to boost the sugar-energy sector and the broader economy.
Brazil’s energy landscape may be on the verge of a new configuration. The Ministry of Mines and Energy (MME) is studying the possibility of increasing the proportion of anhydrous ethanol in gasoline blends from 30% to 32%. This change, expected for the first half of 2026, has the potential to generate a significant economic impact while strengthening the country’s energy security.
The measure aims not only to reduce dependence on imported fossil fuels but also to stimulate domestic biofuel production, consolidating Brazil as a leader in clean energy. Maurício Muruci, an analyst at Safras & Mercado, highlights that the change represents a considerable boost for the sugar-energy sector.
Impact on the Ethanol Market
Maurício Muruci‘s analysis points out that every percentage point increase in the anhydrous ethanol blend in gasoline corresponds to a rise of approximately 840 million liters in the annual demand for the biofuel. With the proposed two-percentage-point increase, the anhydrous ethanol market could absorb about 1.68 billion additional liters every twelve months.
This increment adds to the previous adjustment, implemented in August 2025, which raised the blend from 27% to 30%. Combined, the two increases project an additional annual demand of 4.2 billion liters of anhydrous ethanol. This expansion is expected to reshape the biofuel’s production projections, which were previously around 11.5 billion liters.
Strategic Opportunity for the Sugar-Energy Sector
The timing for implementing this new policy is considered strategic by the government. By coinciding with the start of the 2026 sugarcane harvest, the measure allows sugar and ethanol plants to reorganize and adjust their production mix efficiently. Maurício Muruci explains that this growing demand for anhydrous ethanol encourages directing more sugarcane toward biofuel production, directly impacting the supply and price of sugar.
Maurício Muruci stated:
The increased demand for anhydrous tends to direct more sugarcane toward ethanol, reducing the supply of sugar and driving up prices for both products.
Production Mix Shifts and Competitiveness
Expectations are that ethanol’s share in the sugarcane production mix will reach approximately 54% this harvest, surpassing the 46% of the previous cycle—a period when sugar offered higher profitability. The current landscape favors ethanol, which is becoming more competitive with an estimated price advantage of 30% to 35% compared to sugar.
The change in fuel blending also reflects on the balance of national supply. Projections indicate that the increase in ethanol supply, equivalent to 4.2 billion liters annually, can meet national gasoline consumption for just over a month, reducing the need for imports and reinforcing Brazil‘s energy independence.
Environmental Benefits and Market Projections
Beyond the clear economic and energy security benefits, expanding the use of ethanol as a renewable fuel contributes significantly to reducing pollutant emissions, aligning with global environmental commitments. The initiative reinforces Brazil‘s position as a reference in sustainable energy.
With the confirmation of the new regulation, Safras & Mercado projections point to a harvest more focused on ethanol, with estimated production of 14 to 15 billion liters of anhydrous ethanol and 18 to 19 billion liters of hydrous ethanol. Sugar production, in turn, is expected to see a decline, hovering between 37 and 38 million tons, with consequences for exports.
Despite potential short-term price fluctuations driven by the initial supply increase, the medium- to long-term trend for ethanol remains one of continuous appreciation, fueled by growing demand and policies incentivizing renewable fuels.
