In the context of the world's energy crisis and environmental concerns, crop-based ethanol has emerged as an energy alternative, the use of which can help reduce oil imports as well as emissions of CO, and other air pollutants. However, a clear disadvantage of ethanol is its high cost over gasoline under the current pricing scheme that does not include externalities. The intent of this study is to perform a life cycle analysis comparing environmental and cost performance of molasses-based E10 with those of CG. The results show that although E10 provides reduction in fossil energy use, petroleum use, CO2 and NOx emissions, its total social costs are higher than those of gasoline due to higher direct production costs and external costs for other air emissions, e.g. CH4, N2O, CO, SO2, VOC and PM10. An analysis of projection scenarios shows that technological innovations towards cleaner production help maximize ethanol's benefits whilst minimizing its limitations. (C) 2008 Elsevier Ltd. All rights reserved.