[Erax]

As the resident Brazilian, I thought I'd pop in and add these tidbits:

"Despite having the world's largest sugarcane crop, the 45,000 sq km Brazil currently devotes to sugarcane production amount to only about one-half of one percent of its total land area of some 8.5 million sq km. In addition, the country has more unused potential cropland than any other nation."

Brazil no longer subsidizes its ethanol production. It was heavily subsidized at one point, but is no longer so.

There seems to be some debate about whether 'ethanol takes more energy to produce than it yields'. In any event this debate is over corn ethanol, while sugarcane ethanol produced in Brazil (where sunlight is much more plentiful) has a higher yield.

There are some drawbacks to ethanol, the main one (which most Brazilians are familiar with) being that ethanol engines have trouble starting in cold weather.

All in all I'd say ethanol doesn't work as a 100% substitute for gasoline, but it works as a 'let's consume less fossil fuels so we have more time to develop alternative technologies' kind of solution, especially if mixed into gasoline (Brazil already uses a 20/80 mix, I believe) or in bifuel cars which start up on gasoline and switch to ethanol once they're running, thus bypassing the cold-weather problems.