Where does ethanol come from? Yeast acts on glucose sourced from plant matter such as sugar or corn to produce ethanol. This is a renewable energy source that is carbon neutral. Some are worried about food being diverted into fuel, raising world food prices. Fermentation Steam, high temperature and a catalyst turns ethene into ethanol with no by products. Ethene is made from cracking longer carbon chains found in fossil fuels. So this process is non-renewable. From Ethene
An ideal fuel would flow and ignite easily but oil mined out of the earth often has very long carbon chains and these are viscous (slow flowing) and hard to ignite.
Cracking is a chemical process, by which these chains are shortened to make a more useful fuel.
Cracking - example + hexane butane ethene C C C C C C H H H H H H H H H H H H H H H H H H C C H C C C C H H H H H H H H H
Ethanol Production from Oil 5 parts Ethene is added to 3 parts water Chemical Reaction 300 °C 60-70 atm Phosphoric(V) acid catalyst Un-reacted gases recycled Cooling the mixture causes the ethanol to dropout as a liquid Pure Ethanol Long chain hydrocarbons from fossil fuels are cracked and distilled to make ethene
Fermentation Carbohydrate e.g. glucose C 6 H 12 O 6 Ethanol + Carbon Dioxide Yeast 2C 2 H 5 OH + 2CO 2
Fermentation But wait! Isn’t Carbon Dioxide a Greenhouse Gas? We just said that this process was Carbon Neutral! Yes, but we must think about the whole carbon cycle. The carbohydrate will have originally been made by photosynthesis by the plant, which would have removed exactly the same amount of CO2 from the atmosphere. Glucose Ethanol + Carbon Dioxide Yeast C 6 H 12 O 6 2C 2 H 5 OH + 2CO 2
Where does the carbohydrate come from? High-input annual grass, mostly grown in the USA and is subsidized around $1.90 a gallon . Output from one hectare: 3100–3900 Litres 10–20% Greenhouse-gas savings versus petrol Production in 2007: 6,000 Million gallons Long-season annual grass, grown in tropical and subtropical climates. Output from one hectare: 5300–6500 Litres 87–96% Greenhouse-gas savings versus petrol Production in 2007: 5,000 Million gallons Instead of growing a crop specially for fermentation, organic waste products can be diverted from landfills. This prevents large amounts of landfill methane production. Methane has 70x the warming effect of CO2.  Limited total market. Corn Sugar Cane Waste Biomass A B C  http://www.economist.com/displaystory.cfm?story_id=10250420  2007 IPCC AR4 Other statistics from Nature 444 (December 7, 2006): 673-676.
Ethanol from Corn Fermentation The “Food versus Fuel” Debate
The amount of corn it takes to fill a large fuel tank with ethanol would feed one person for a year! 
In 2007, biofuels consumed one third of America's corn (maize) harvest.
In April 2008 the World Bank attributed a 75% increase in world food prices to biofuel production. 
V With higher oil prices or extra ethanol subsidies Weighing the Benefits
Ethanol: A fuel for the 21 st Centuary? National Geographic estimated that oil production will peak soon and run out by 2060. Oil prices reached $147 per barrel in July 2008 compared to $24 per barrel in the 90s. Hence the world is looking for cheaper energy. The IPCC estimates a 2-3 ° temperature rise by 2100. This will have massive impact on ecosystems and global climate. CO2 increases this warming.