In considering energy balance and the potential to reduce GHG emissions, ethanol is viable as a vehicle fuel in Canada. Using ethanol blended gasoline will reduce l - 5% GHG emissions in an E10 blend when compared to straight gasoline. Because of the high volume of emission from vehicles, this figure represents a significant reduction in GHG emissions. For example, in Alberta, over l00,000 tonnes of gasoline were sold in the province and Alberta alone could have reduced GHG emissions if all gasoline sold was an E10 blend.

Ethanol cannot replace gasoline as primary vehicle fuel. But with the development of cellulosic ethanol technology, it is hopeful that Canada might be able to produce the required volume of ethanol enough to meet the l00% E10 goal. At present, the goal of the federal government is 35% of all gasoline be an E10 blend.

The major difficulty confronting Canadian ethanol industry is that it needs to overcome the need to be cost competitive with gasoline. This is unlikely to happen unless there is a major progress in the technology in ethanol production methods. In order for ethanol to survive in Canada, the government needs to support the industry with fuel tax exemptions and mandatory blending requirements for fuel refinery.

Cost is a limiting factor for ethanol as a renewable fuel. In U.S., ethanol relies on federal and state subsidies to remain economically viable as a gasoline additive. The fluctuating corn prices is a determining factor in the production of ethanol. Howevere, the cost of production of ethanol can be substantially lowered by replacing corn with less expensive cellulose - based feedstock such as agricultural wastes, grasses and woods as well as municipal waste. However, the cost of converting cellulosic materials into ethanol is costly as extensive processing is required. Advances in biotechnology can help lower the cost by using genetically engineered bacteria to feed on the non glucose sugars which are generated in the hydrolysis of cellulose. The future of ethanol production lies in enzymatic hydrolysis of cellulose in which the enzyme cellulose replaces sulphuric acid in the hydrolysis. As cellulase could be used in a lower temperature i.e. 30 to 50 C, this reduces the chances of degradation of the sugars. Cost reduction in the production of ethanol depends on the substantial reduction in the cost of production of cellulase.