Introduction In the past decade world-wide interest in alcohol fuels, particularly bioethanol, has increased considerably. In developing countries this has been mainly due to the combination of low feedstock cost (sugarcane) and low sugar prices in the international market, and also for strategic reasons. In the industrial countries a major reason is the increasing environmental concern, and also as a way of solving wider socioeconomic problems, such as agricultural land use and food surpluses. Free-market microeconomics of bioethanol are still unfavourable relative to oil derived fuels, although there are many forms of renewable energy technologies which are now competitive in cost with nuclear and fossil fuels under specific conditions. There are also many non-economic factors (social, political, environmental, strategic) that should be considered. In addition, the use of renewable energy sources, contrary to conventional energy sources, produces very few or no external costs and may even cause positive external effects. The cost of bioethanol in the absence of direct or indirect subsidies still remains a serious obstacle to its widespread use. There are, however, a number of alternatives, including better use of by-products, that if pursued further could significantly reduce production costs. Successes and failures in the bioethanol production and use are usually the consequence of a mixture of economic, political and technical reasons. Although economics play a significant role, it is often the case that clear political objectives and commitment will lead to success; the opposite usually results in failure.