The United States (US) and Brazil have been the two leading producers of fuel ethanol since the 1970s. National policies have supported the production and use of ethanol from corn and sugarcane. US support in particular has included exemption from federal gasoline excise taxes, whole or partial exemption from road use (sales) taxes in nine states, a federal production tax credit, and a federal blender's credit. In the last decade the subsidization of grain-based ethanol has been increasingly criticized as economically inefficient and of questionable social benefit. In addition, much greater production of ethanol from corn may conflict with food production needs. A promising development is the acceleration of the technical readiness of cellulosic alcohol fuels, which can be produced from the woody parts of trees and plants, perennial grasses, or residues. This technology is now being commercialized and has greater long-term potential than grain ethanol. Cellulosic ethanol is projected to be much more cost-effective, environmentally beneficial, and have a greater energy output to input ratio than grain ethanol. The technology is being developed in North America, Brazil, Japan and Europe. In this paper, we will review the historical evolution of US federal and state energy policy support for and the currently attractive economics of the production and use of ethanol from biomass. The various energy and economic policies will be reviewed and assessed for their potential effects on cellulosic ethanol development relative to gasoline in the US. (C) 2007 Elsevier Ltd. All rights reserved.