Skipping over the deforestation and/or draining of wetlands that often preceeds the planting of sugar cane....

Everywhere I've ever seen sugar cane grown (which is four or five countries now) the harvesting process involves burning the entire field before the cane, bereft of its grassy bits, can be cut and processed.  You see these huge plumes of smoke going up from the fields, as you drive through this surreal snowstorm of ash flakes falling around you.  (Surreal, because it really does look like snow, but sugar cane is grown in places where it never snows.)

It's also a tremendously water-intensive business, both in the growing and the processing.  Sugar cane grows in saturated soil, which makes it singularly inappropriate for arid countries like Egypt, but they're growing it here in vast quantities anyway.  Three crops a year, with heavy irrigation from the Nile, has contributed (although it is by far not the only factor) to the raising of the groundwater tables in towns in the Nile Valley and the Nile Delta, which has serious public health implications, especially given the rudimentary nature of those towns' sanitation systems.

Rising groundwater is also threatening Egypt's famed antiquities:

Some of the world's most precious archaeological treasures - the ancient Egyptian tombs and temples at Luxor - are being devastated by salt water that is eating their foundations, scientists have discovered.

The temples of Amun, Luxor and Karnak, designated World Heritage Sites, have survived 4,000 years of arid desert heat but are now being destroyed by rising ground water.

The crisis has been caused by several factors, including climate change and the breakdown of the area's ageing sewer system. However, the most important threat has involved the recent, massive intensification of farming along the Nile and the widespread planting of sugar cane, a plant that flourishes in saturated soil. To boost harvests - up to three crops a year can now be grown - farmers have been inundating their fields all year round with water sucked from the Nile. Land that was once parched desert now sports massive, flourishing tracts of canes. Drainage canals are now never allowed to dry out, with the result that Luxor's water tables have risen several metres in the past few years.

As if that weren't bad enough, then there's the nasty stuff that's left over from the processing of sugar cane into, um, sugar and stuff.  I really don't know a whole lot about the sugar leftovers, but I know they're not good.  According to WWF, sugar-industry effulent in Australia is damaging the Great Barrier Reef.  

The father of a friend of mine is a sugar-industry scientist whose job is trying to find productive uses for the sugar byproducts.  He's been at it a long time.  Sugar cane byproducts have been used to make paper, animal feed, bioethanol and fertilizer, among other things.

My friend, the scientist's son, who grew up around the sugar industry, will not use sugar in anything.  Familiarity breeds contempt.

When you live near a sugar mill, the air is literally thick with a molasses smell.  A few years ago, I visited the tiny town of Tongaat, about 60 kilometers north of Durban and near the site of South Africa's first sugar mill.  Even if you didn't know there were sugar mills in town, you'd figure it out fast just by breathing.  I actually liked the smell for about the first half-hour, but eventually it gets icky.

There are a lot of other issues surrounding sugar production, not least the fact that sugar cane grown in the (mainly developing-world) tropics competes directly with sugar beets grown in the (mainly developed-world) temperate zones, leading to arguments over subsidies... Perhaps of interest to ET is the WWF criticism of the EU sugar regime, but that's yet another subject I'm not qualified to discuss.

Apparently, in Brazil, some sugar processing plants (which also make ethanol) are self-sustaining, in that the remnants are burned to create electricty to run the processing plant itself.  That is a creative and productive use of byproducts, but still doesn't address the environmental impact.

Last year, WWF published a report on sugar and the environment (.pdf) that provides more details on a number of these issues than I could possibly hope to.  Its conclusions are not suprising, and could probably be applied to most modern commercial agricultural crops:  Managed well, with best practices (e.g. lower-volume irrigation and better wastewater processing) and under good environmental regulations and enforcement, sugar can be a "sustainable source of valuable foreign earnings for some of the world's poorest countries."  But absent those controls, it can be hell on the environment.