http://www.eia.doe.gov/oiaf/analysispaper/biomass.html
AND I QUOTE
"Conclusion
Ethanol has enjoyed some success as a renewable fuel, primarily as a gasoline volume extender and also as an oxygenate for high-oxygen fuels, an oxygenate in RFG in some markets, and potentially as a fuel in flexible-fuel vehicles. A large part of its success has been the Federal ethanol subsidy. With the subsidy due to expire in 2008, however, it is not clear whether ethanol will continue to receive political support. Thus, the future of ethanol may depend on whether it can compete with crude oil on its own merits.
Ethanol costs could be reduced dramatically if efforts to produce ethanol from biomass are successful. Biomass feedstocks, including forest residue, agricultural residue, and energy crops, are abundant and relatively inexpensive, and they are expected to lower the cost of producing ethanol and provide stability to supply and price. In addition, the use of corn stover would lend continued support to the U.S. corn industry. Analysis of NREL technological goals for cellulose ethanol conversion suggests that ethanol could compete favorably with other gasoline additives without the benefit of a Federal subsidy if the goals were achieved. Enzymatic hydrolysis of cellulose appears to have the most potential for achieving the goals, but substantial reductions in the cost of producing cellulase enzymes and improvements in the fermentation of nonglucose sugars to ethanol still are needed.
The ban on MTBE in California could provide additional incentives for the development of cellulose-based ethanol. If ethanol were used to replace MTBE in Federal RFG, demand for ethanol in California would increase by more than 550 million gallons per year. California has vast biomass resources that could support the additional demand. In addition, the cost of transporting Midwest ethanol would allow cellulosic ethanol to compete favorably in the market. Ultimately, ethanol’s future in RFG could depend on whether Congress eliminates the minimum oxygen requirement included in the CAAA90. Without the minimum oxygen requirement, refiners would have more flexibility to meet RFG specifications with blending alternatives, such as alkylates, depending on an individual refinery’s configuration and market conditions. Ethanol would still be valuable as an octane booster, however, and could make up for some of the lost volume of MTBE.
Significant barriers to the success of cellulose-derived ethanol remain. For example, it may be difficult to create strains of genetically engineered yeast that are hardy enough to be used for ethanol production on a commercial scale. In addition, genetically modified organisms may have to be strictly contained. Other issues include the cost and mechanical difficulties associated with processing large amounts of wet solids. Proponents of biomass ethanol remain confident, however, that the process will succeed and low-cost ethanol will become a reality."
And here is a company that has accomplished what this study has said was the only barrier to mass producing ethanol on a sustainable basis.
http://www.iogen.ca/HTML/3000.html