Brazil's Eucalyptus Industry Hit as Native Wood Curb Delayed

The Brazilian state of Mato Grosso has delayed implementing curbs on the use of native wood for energy generation in its corn ethanol plants. The agreement to phase out native forest wood was signed in June between the state government and the local prosecutor's office, but it remains unclear when or if these rules will be enforced.

The delay is causing uncertainty for investments in eucalyptus plantations, which are seen as a more renewable alternative to native wood. According to Arefloresta, the reforestation industry association representing companies in the corn ethanol sector, around 10 billion reais ($1.94 billion) would be needed to supply existing and planned corn ethanol projects with renewable biomass like eucalyptus plantations.

This could expand Mato Grosso's eucalyptus tree area to 400,000 hectares (988,422 acres) by 2030 from about 165,000 hectares currently. The state government recently requested a legal review of a proposal that would allow large consumers to meet up to 5% of their energy demand with native wood.

Industry advocates say plantation-grown eucalyptus offers a more sustainable option for corn ethanol plants, but requires long-term investment and regulatory certainty. The use of native wood has raised concerns about illegal deforestation in the Amazon rainforest.