One of a series of reports addressing subsidies for biofuels in Australia, Brazil, Canada, the European Union, Switzerland and the United States. (October 2006)

Ethanol is produced primarily by the fermentation of starch from grains (mostly corn) or sugar from sugar cane. It is most commonly used as an oxygenate in reformulated gasoline and in a gasoline blend called "gasohol." These fuels can be burned in gasoline engines. Specialized engines, on the other hand, are needed to burn pure ethanol.

The greenhouse gas (GHG) reduction potential of methanol is dependent on the feedstock. Burning M-85 derived from methane results in total, lifecycle GHG emissions slightly lower than a gasoline vehicle.

Methanol can be produced from natural gas, coal, or biomass. At current and foreseeable prices, the most economical feedstock for methanol production is natural gas, especially natural gas found in remote regions where it has no ready market.