Strategic financial decision-making for forest bioenergy: investment scenarios and policy insights for charcoal enterprises in Brazil

Bioenergy is widely recognized as a cornerstone of global energy transition strategies. In Brazil, charcoal represents a critical renewable energy source, largely supplied by small and medium-sized forest producers (SMFP) who often operate with limited financial planning and restricted policy support. Unlike previous studies that have focused on technical efficiency or environmental aspects, this paper pioneers a financial decision-support framework explicitly tailored to SMFP. Using primary data from producers in Minas Gerais, Brazil, seven strategic scenarios were modeled – including coppicing, sharecropping, rural credit, legal formalization, and surplus cash reinvestment – through discounted cash flow analysis and a SWOT-based policy assessment. Results show that coppicing and credit-financed strategies deliver the highest profitability, while sharecropping alternatives reduce risk and capital requirements, offering inclusive options for undercapitalized producers. Reinvestment of surplus cash flows into low-risk financial products significantly enhanced returns and resilience, even under adverse conditions. A SWOT-based policy analysis highlights opportunities to improve rural credit access, simplify formalization, and promote financial inclusion, and concludes with five key policy takeaways to guide inclusive, effective, and sustainable bioenergy development. Overall, the findings underscore the need for tailored financial instruments and fiscal incentives that encourage legal formalization. By integrating financial planning into bioenergy policies, this study provides actionable pathways to strengthen rural livelihoods and advance low-carbon bioeconomies in Brazil and other emerging markets.