Having studied this issue of renewable biofuels for the past 2-3 years I've come to conclude that ethanol is really hard to justify due to the negative impacts in the agriculture industry.
-Too much government subsidies/preference given to corn and other grain ethanol crops
-competition on land use for fuel instead of food
-energy balance in the end is roughly +25% to -25% depending on how effective your equipment is and the crop yield which varies greatly
-you can not transport pure ethanol through pipelines, the alcohol eats away too much at the carbon steel pipes
However, we are stuck with ethanol with the current infrastructure because before we used MTBE to increase our octane number to acceptable ranges. MTBE, however, is known now to seap into the water supply and cause cancer causing agents which has discontinued its use unless you're out in the rural areas.
Bio-diesel I think is really a different story in the fact that it has a lot more energy content compared to petro gas and ethanol:
gas=121k btu
ethanol=111 btu
diesel petro= 135k
bio-diesel 131k roughly (numbers off my head +/- 1%)
And since the government wanted a target of 32 mpg by the year 2013, many automakers are now switching to diesel fueled cars (civic, suvs, half ton trucks, why else is europe 50% diesel cars?) in order to meet that requirement. Its the darn epa that is screwing with this transition because the amount of NOx that diesel fuel has (however, these restrictions do not apply if your vehicle weight is more than 6000 GWVR I believe; 3/4 ton trucks and higher).
So increasing ethanol, I would say its not beneficial especially since we import a big portion of it from Brazil and other countries to meet with the government guidelines (sometimes paying more per gallon than gasoline here). Its cheaper at local places (OK, texas, central usa) since it so happens to be more plentiful there.
