In this report
Overview
Pros and cons
Biodiesel
Hydrogen fuel cells
Ethanol
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June 2006
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Ethanol: Growing renewable fuels
Pros Low emissions, made from renewable resources, less dependent on petroleum supplies.
Cons Currently low production volume, lower fuel economy.

Several alternative fuels that can power an internal-combustion engine are readily available, including compressed natural gas, propane, and alcohols such as methanol and ethanol. Ethanol, or ethyl alcohol, is the most promising renewable, not-from-petroleum gasoline substitute. It has long been used in motor fuel, usually as an oxygenate additive or blend with gasoline, because ethanol burns cleaner than gasoline.

In Brazil, 75 percent of the new cars sold can run on either gasoline or ethanol. It is also used in South Africa and Sweden.

Most ethanol fuel in the U.S. is made from corn and sold at service stations in the Midwest, near where it's made. The standard ethanol fuel is called E85, which is 85 percent ethanol and 15 percent gasoline. The gasoline is needed to give the fuel enough volatility to start the engine readily.

Ethanol contains less energy per gallon than gasoline, so E85 gets roughly 30 percent fewer miles per tankful. Factoring in that loss, corn-based ethanol sells for about $4.09 for the energy equivalent of a gallon of gasoline, making it more expensive than gasoline at today's prices.

Ethanol's lower fuel economy also results in more carbon dioxide (CO2) emissions than a similar gasoline vehicle, although ethanol advocates say there is no net gain; the plants used to grow crops for the fuel absorb as much CO2 as the cars burning it emit.

Millions of "flex-fuel" vehicles, which can run on either E85 or gasoline, are already on the road in the U.S. For those models, check out this list. Some are only available to commercial fleets.

An incentive for automakers to produce vehicles that run on E85 is that they are credited to the automaker's Corporate Average Fuel Economy ratings as if they operate 50% of the time on the alternative fuel and 50% of the time on conventional fuel. A National Highway Traffic Safety Administration document details an example "for a dual-fuel model that achieves 15 miles per gallon operating on alcohol fuel and 25 mpg on the conventional fuel, the resulting CAFE [calculation] would be…40 miles per gallon." This offsets the production of vehicles, such as large SUVs and trucks, which get poor fuel economy.

While most ethanol today is made from corn, cellulose is more promising. Cellulose ethanol can be made from corn stalks after harvesting, limbs left from logging operations, and from growing switchgrass. Sweden is moving toward greater dependence on ethanol from wood-based cellulose. And Iogen, a biotechnology firm, is building a plant in Canada to distill ethanol from cellulose.

Since switchgrass and agricultural byproducts aren't food sources, they can replace a much larger portion of our energy needs--up to 30 percent of transportation fuel--according to a 2003 Energy Department study.

So far, cellulosic ethanol costs about 50 percent more than corn-based ethanol--about $6.04 per gallon of gasoline equivalent. Even corn ethanol sells with a 51 cents per gallon tax break for producers, so ethanol has a long way to go before becoming cost effective in the U.S.