Alcohols can be used as a liquid fuel in internal combustion engines either on their own or blended with petroleum. Therefore, they have the potential to change and/or enhance the supply and use of fuel (especially for transport) in many parts of the world. There are many widely-available raw materials from which alcohol can be made, using already improved and demonstrated existing technologies. Alcohols have favourable combustion characteristics, namely clean burning and high octane-rated performance. Internal combustion engines optimized for operation on alcohol fuels are 20 per cent more energy-efficient than when operated on gasoline (Johansson et al, 1992), and an engine designed specifically to run on ethanol can be 30 per cent more efficient (EPA, 1990). Furthermore, there are numerous environmental advantages, particularly with regard to lead, CO₂, SO₂, particulates, hydrocarbons and CO emissions.

Global interest in ethanol fuels has increased considerably over the last decade despite the fall in oil prices after 1981. In developing countries interest in alcohol fuels has been mainly due to low sugar prices in the international market, and also for strategic reasons. In the industrialized countries, a major reason is increasing environmental concern, and also the possibility of solving some wider socio-economic problems, such as agricultural land use and food surpluses. As the value of bioethanol is increasingly being recognized, more and more policies to support development and implementation of ethanol as a fuel are being introduced. A number of countries have pioneered both large-scale and small-scale ethanol fuel programmes. In the United States, the current fuel ethanol production capacity is over 4.6 billion litres and there are plans to increase this capacity by more than 2.3 billion litres. Worldwide, fermentation capacity for fuel ethanol has increased eight-fold since 1977 to about 20 billion litres per year in 1989 (Rosillo-Calle, 1990).

Latin America, dominated by Brazil, is the world's largest production region of bioethanol. Countries such as Brazil and Argentina already produce large amounts, and there are many other countries such as Bolivia, Costa Rica, Honduras and Paraguay, among others, which are seriously considering the bioethanol option (Rosillo-Calle, 1990). Alcohol fuels have also been aggressively pursued in a number of African countries currently producing sugar - Kenya, Malawi, South Africa and Zimbabwe. Others with great potential include Mauritius, Swaziland and Zambia. Some countries have modernized their sugar industry and have low production costs. Many of these countries are landlocked which means that it is not feasible to sell molasses as a by-product on the world market, while oil imports are also very expensive and subject to disruption. The major objectives of these programmes are: diversification of the sugarcane industry, displacement of energy imports and better resource use, and, indirectly, better environmental management. These conditions, combined with relatively low total demand for liquid transport fuels, make ethanol fuel attractive (Hall and Rosillo-Calle, 1991).

The production of ethanol by fermentation involves four major steps: (a) the growth, harvest and delivery of raw material to an alcohol plant; (b) the pre-treatment or conversion of the raw material to a substrate suitable for fermentation to ethanol; (c) fermentation of the substrate to alcohol, and purification by distillation; and (d) treatment of the fermentation residue to reduce pollution and to recover by-products. Fermentation technology and efficiency has improved rapidly in the past decade and is undergoing a series of technical innovations aimed at using new alternative materials and reducing costs (Yasuhisa, 1989). Technological advances will have, however, less of an impact overall on market growth than the availability and costs of feedstock and the cost-competing liquid fuel options.

The many and varied raw materials for bioethanol production can be conveniently classified into three types: (a) sugar from sugarcane, sugar beet and fruit, which may be converted to ethanol directly; (b) starches from grain and root crops, which must first be hydrolysed to fermentable sugars by the action of enzymes; and (c) cellulose from wood, agricultural wastes etc., which must be converted to sugars using either acid or enzymatic hydrolysis. These new systems are, however, at the demonstration stage and are still considered uneconomic. Of major interest are sugarcane, maize, wood, cassava and sorghum and to a lesser extent grains and Jerusalem artichoke. Ethanol is also produced from lactose from waste whey; for example in Ireland to produce potable alcohol and also in New Zealand to produce fuel ethanol. A problem still to be overcome is seasonability of crops, which means that quite often an alternative energy source must be found to keep a plant operating all-year round.

Sugarcane is the world's largest source of fermentation ethanol. It is one of the most photosynthetic efficient plants - about 2.5 per cent photosynthetic efficiency on an annual basis under optimum agricultural conditions. A further advantage is that bagasse, a by-product of sugarcane production, can be used as a convenient on-site electricity source. The tops and leaves of the cane plant can also be used for electricity production. An efficient ethanol distillery using sugarcane by-products can therefore be energy self-sufficient and also generate a surplus of electricity, in addition to CO₂ for industrial use, animal feeds and a range of chemical-based products. The production of ethanol by enzymatic or acid hydrolysis of bagasse could allow off-season production of ethanol with very little new equipment

Methanol which can be obtained from biomass and coal, but which is currently produced from natural gas, has only been used as fuel for fleet demonstration and racing purposes and, thus, will not be considered here. In addition, there is a growing consensus that methanol does not have all the environmental benefits that are commonly sought for oxygenates and which can be fulfilled by ethanol (NAS, 1983).