Ethanol is a renewable energy source. Unlike limited fossil fuel reserves, the biomass used to produce ethanol is a renewable source of energy. However, fossil fuel is used in the production process. The amount of fossil fuel used compared to the amount of solar energy captured by the ethanol feedstocks is referred to as the net energy balance. The amount of energy gained or lost through the production and use of fuel ethanol continues to be questioned, and can impact significantly the environmental benefits that can be realized through the use of ethanol.
Assuming a net energy gain, ethanol blended fuel can help limit climate change. Ethanol blended gasoline can reduce greenhouse gas. Unlike fossil fuels, ethanol does not increase atmospheric carbon dioxide levels. Through a process called the carbon cycle, atmospheric carbon is simply recycled into plant matter, turned into ethanol, released through combustion, and absorbed again by plant growth.
Ethanol displaces gasoline consumption. Used as a fuel additive, ethanol has the potential to displace 10% of gasoline consumption and up to 15% of diesel consumption. Blends as high as 85-95% are now being tested, but full replacement of gasoline would require improvements in cellulose-based production technology to meet such a high level of demand.
Ethanol can also be used to power fuel cells. Ethanol is being considered as a "bridge" fuel in the potential transition from gasoline engines to hydrogen powered fuel cells because it can be distributed through the existing petroleum infrastructure.
Ethanol replaces harmful oxidants currently being used such as MTBE (Methyl tertiary butyl ether), MMT (methylcyclopentadienyl manganese tricarbonyl) and benzene.
Ethanol also reduces our reliance on imported oil. This improves the security of our energy supply, as well as reduces some of the harmful effects of petroleum exploration, processing, and transportation.
Compared to most petroleum based fuels and additives, ethanol is relatively non-toxic. It is completely biodegradable and poses little threat to groundwater sources.