Since the creation of the National Alcohol Programme (NAP) in 1975, commonly known as "ProAlcool", it has gone through a number of fluctuations reflecting Brazilian political, economic and energy priorities. In 1996-1997 over 175 Mt of sugarcane (65% of 270 Mt harvested) was converted to ethanol fuel. The ProAlcool started as a highly innovative programme, but in recent years has lost part of its technological zeal and in certain areas is becoming stagnant. This is due to a combination of reasons, e.g. unclear energy policy, high sugar prices in the international market and lower investment in ethanol production as a result of low international oil prices. A new impetus is needed to reflect changing economic and energy policy in Brazil. This paper reviews the implications for ProAlcool of the new economic policies and the possibilities for restructuring the programme to guarantee its survival as a pioneering and sustainable renewable energy source. This will bring new challenges, costs and opportunities to Brazilian society.