Currently in the U.S. an average of 10% of the volume of the gasoline purchased is ethanol. All of this ethanol is produced via fermentation of sugar with yeast at a production cost of about $0.80 per gallon of ethanol. The source of the sugar in the U.S. is corn. In other countries such as Brazil where ethanol is used more extensively as a gasoline additive sugar cane by-products are used.
Technology currently exists where ethanol can be produced from cellulose for a fraction of the cost of the fermentation process with little to no by products. The process involves a controlled combustion or oxidation with a metallic catalyst. The combustion is controlled by containing the reaction in a chamber and limiting the oxygen. The products are ethanol, butanol and trace amounts of water and carbon dioxide. Pilot plant experimentation has shown that the production cost is less than $0.20 per gallon of ethanol.
This synthesis has an environomentally friendly aspect as well. The entire corn stalk, which is a bulk of the biomass within a cornfield can be used in this process whereas in the fermentation process it is simply a waste product. Waste products from the lumber industry can also be used. Much of the cost, in fact, is simply transporting the cellulose to the reactor.
Note that this should not be confused with wood alcohol or methanol. This process does produce ethanol from wood.