Zinc oxide (ZnO) and copper-doped zinc oxide (ZnO:Cu) nanopowders were synthesized via solvothermal methods using methanol and hexamethylenetetramine (HMTA). Undoped ZnO nanopowders underwent calcination in O2-rich and H2-rich atmospheres at 600 °C. Samples were studied by scanning electron microscopy, Brunauer–Emmett–Teller (BET) surface area analysis, X-ray diffraction (XRD), and Raman, photoluminescence (PL) and UV–vis absorbance spectroscopies. The doping and calcinations led to a reduction of the optical bandgap of the nanopowders, while their structure remained hexagonal wurtzite with some changes in lattice parameters and average nanoparticle sizes. The Cu2+ doping led to a BET surface area and violet PL component increase. Samples were also examined for environmental related applications, namely as photocatalyzers for dye degradation and as ethanol optical sensors. For photocatalytic activity in methylene blue degradation under UV, H2-rich calcined powders excelled, with a rate constant of −0.076 min−1, surpassing −0.057 min−1 (ZnO:Cu), −0.056 min−1 (O2-rich calcination), and −0.041 min−1 (as-grown ZnO). We propose that this improvement can be attributed to the formation of ZnO/Zn interfaces stemming from the reduction of surface interstitial zinc by H2 during calcination, in addition to the observed reduction of the ZnO bandgap. The doped nanopowders PL also showed excellent response when exposed to ethanol vapor.