Shell said it set up a joint venture with ethanol and sugar producer Cosan that aims to produce and sell more than 500 million gallons of low-carbon biofuels every year.
"Low-carbon biofuels will be the most practical and commercially realistic way to take carbon dioxide out of transport fuel in the coming years and will be a vital part of the future energy mix," the company said in a statement.
Shell said biofuels make up about 4 percent of the transport fuel in Europe and 3 percent in the United States. The company said it expects the average use to increase by about 9 percent by 2030.
"We are building a leading position in the most efficient ethanol-producing country in the world," Shell Chief Executive Officer Peter Voser said in a statement.
The company said Brazilian sugar cane has a higher yield for ethanol compared to corn or wheat. Production in Brazil takes up less the 1 percent of the country's land and the government prohibits industries from displacing food crops, Shell said.
"This is a turning point in the search for alternative energy sources," said Rubens Ometto Silveira Mello, Cosan's board chairman, in a statement.