The use of bioethanol as an alternative source of fuel could solve energy and pollution concerns. However, its conventional recovery procedures make the overall process costly and energy intensive. Membrane-based pervaporation (PV) has gained significant attention in recent years. Most membranes that purify bioethanol are fabricated from conventional fossil-based polymers. This study presents the first work for biofuel separation by valorizing waste polyethylene terephthalate (PET) bottles into PV membranes. The performance of the membrane was characterized in terms of FTIR, XRD, TGA, WCA, SEM, and AFM and tested for a 10 wt% ethanol–water feed mixture at different temperatures. The mild hydrophobic character of PET allowed the PV membrane to achieve a separation factor of 10.45, a total flux of 1.7 kg m−2h−1, and a pervaporation separation index (PSI) of 18.72 at 45 °C. The recycled PET membrane (rPET) has higher mass transfer resistance for water compared to ethanol. The density functional theory (DFT) analysis confirms a stronger affinity of PET membrane towards ethanol than water. The results showed that rPET membranes have competitive performance compared to conventional fossil-based derived membranes. This study explores an energy-environment nexus approach, which could significantly contribute to achieving the key United Nations’ sustainable development goals.