Today, much of the fuel that powers Brazil’s cars and trucks is grown as sugarcane. Now, the country is brewing a second source in tanks of algae. The world’s first industrial-scale biofuel plant, using waste from making their already popular biofuel (ethanol) to feed the production of another (algae), is scheduled to open in Brazil in 2013.

Brazil’s biofuel sector is the second largest in the world, following the U.S.. But there’s a major difference. In North America, most ethanol comes from corn and $6 billion in federal subsidies lavished on the sector each year. Brazil, rich with fertile soil and tropical sunlight, can grow more fuel for less money, and undercut the price of conventional oil in some cases. The country is poised to rapidly expand its production globally, and provide a credible competitor to fossil fuels.

Adding algae to the mix should only make the process more efficient. The new approach, developed by Austrian company See Algae Technology, combines waste carbon dioxide (CO2) from ethanol production with algae farming fertilized by the excess CO2. The planned $9.8 million factory is supposed to produce 1.2 million liters of algae-based biofuels each year and absorb about 5% of the waste CO2 from the typical ethanol production process, reports AFP. Both the scale, and proportion of CO2 capture, should move up in the future.