The transition to low carbon economy requires deep changes in the energy systems of the great majority of developing countries. However, only a small group of these countries is engaging significant efforts to develop renewable energies. The success in the diffusion of renewable energy technologies requires dynamic systems of innovation. In this chapter we analyze the recent evolution Brazilian sugarcane innovation system that was pioneering in the development and diffusion of bioethanol. This system is increasingly challenged by the acceleration of the technological regime, which is provoked by the energy crisis and the transition to the low carbon economy. The Brazilian innovation system has different capacities to cope with this challenge. In this chapter we differentiate the agriculture subsystem, which function in a STI (Science, Technology, and Innovation) mode from the industrial subsystem, which operates in a DIU (Doing, Using, and Interacting) mode. The agricultural subsystem has demonstrated a better ability to cope with the technological challenges of the new biotech research methodologies while the capital goods industry has much less propensity to deal with the second generation technologies for bioethanol. We describe also the present ethanol supply crises and its probable causes.
