Given the scarcity of oil reserves, renewable sources of energy have become important. The Brazilian government has established standards and policies to foment the use of bio-energy. Bio-fuels have widespread use and have been inserted into the national energy matrix to help sustainable development. It is necessary to establish the effectiveness of these government initiatives in preserving ecology; otherwise environmental harm such as the loss of biodiversity will increase. The objective of this paper is to identify and analyse, from a systems point of view, the potential benefits and risks to the environment which may arise from the use of bio-energy; whether its production is in agreement with the Brazilian constitution and whether its environmental impact is beneficial when it is exploited economically. It also examines the legal aspects of the National Energy Policy and the introduction of bio-diesel. We conclude that the place of bio-fuel in the Brazilian and the world's energy matrix is irreversible and furthermore, that its role will increase sharply in the future.