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Brazil is the largest producer of ethanol from sugarcane in the world. While the ethanol industry is economically important to Brazil for several reasons, it also has a significant impact on the environment. Here we analyze the water consumptive use in the transformation of the feedstock (sugarcane) into ethanol and the impact of industrial byproduct effluents on water resources of the state of Sao Paulo, Brazil. Our estimates indicated that in the 2007-2008 harvest, 700 million m3 was withdrawn mainly from rivers and streams by 140 mills, and of this total 440 million m3 was consumed which yielded a water use of approximately 1.53 m3 ·water·tonˉ1 sugarcane or approximately 18 L·water·L-ˉ1 ethanol. At the same time, a total of 120 million m3 of vinasse by-product was produced in the state, equivalent to an organic load of approximately 3 billion kg·BOD during the harvest season or approximately 8 million kg·BOD·dˉ1. Although the water used by sugarcane mills has decreased in recent decades, it is still possible to further decrease the amount of water used by ethanol production. This would decrease the pressure on 1st order streams of the state from which most water is withdrawn. In addition, the enormous volume of vinasse production must be reduced because it exerts constant pressure on aquatic ecosystems, soil and groundwater due to the constant increase in the potassium (K) concentration in areas where it is used as a fertilizer.