Ethanol is a high performance fuel in internal combustion engines. It is a liquid, which is advantageous in terms of storage, delivery, and infrastructural compatability. Ethanol bums relatively cleanly, especially as the amount of gasoline with which it is blended decreases. Evaporative and toxicity-weighted air toxics emissions are consistently lower for ethanol than for gasoline. It is likely that vehicles can be configured so that exhaust emissions of priority pollutants are very low for ethanol-burning engines, although the same can probably be said for most other fuels under consideration. Recent work suggests that ethanol may be more compatible with fuel cell-powered vehicles than has generally been assumed. Research and development-driven advances have clear potential to lower the price of cellulosic ethanol to a level competitive with bulk fuels. Process areas with particular potential for large cost reductions include biological processing (with consolidated bioprocessing particularly notable in this context), pretreatment, and incorporation of an advanced power cycle for cogeneration of electricity from process residues. The cellulosic ethanol fuel cycle has a high thermodynamic efficiency (useful energy/high heating value = from 50% to over 65% on a first law basis, depending on the configuration), and a decidedly positive net energy balance (ratio of useful energy output to energy input). Cellulosic ethanol is one of the most promising technogical options available to reduce transportation sector greenhouse gas emissions. It may well be possible to develop biomass-based energy on a very large scale in the United States with acceptable and in some cases positive environmental impacts. To do so will however require responsible management and increased understanding of relevant technological and natural systems. The potential biomass resource is large, but so is demand for transportation fuels as well as other uses. The following hypotheses are offered as tentative hypotheses pertaining to biomass supply and demand in the United States: There will probably not be enough suitable land available to meet transportation demand if total vehicle mires traveled increase relative to current levels, and vehicle efficiency and animal protein utilization are unchanged. There probably is enough suitable land to meet transportation demand, even given some increase in vehicle miles traveled, given large but probably possible increases in vehicle efficiency, or large but probably possible decreases in reliance on animal protein, or a combination of less aggressive changes in both of these factors. The policy debate concerning fuel ethanol has tended to ignore cellulosic ethanol. It is suggested that an appropriate policy objective is to foster a transition to cellulosic feedstocks at a pace such that opportunities for ethanol producers and the farmers that supply them are expanded rather than contracted.