Using ethanol as a blend stock for gasoline is not a solution to many of the problems it is purported to solve. It is however a very effective method for subsidizing the farming businesses that produce the feedstocks for ethanol production (wheat, barley, corn, etc.)
Burning ethanol in cars does NOT reduce greenhouse gas emissions. In fact, burning ethanol will increase CO2 emissions (measured on a per mile basis) because the fuel efficiency of the engine is lower. This is because the heating value (ie. energy content) of ethanol is lower than that of petroleum gasoline.
The benefit of reduced GHG emission may come from the lifecycle of producing the ethanol, but this is debatable as planting and harvesting the crops requires energy input (usually as diesel fuel), and the fermentation/distillation process requires energy input. The possible benefit is that growing the crop removes CO2 from the enviroment temporarily (whereas petroleum fuels add CO2 to the environment from geologic sources).
Nitrogen Oxides, Volatile Organics
Burning ethanol in cars may INCREASE emissions of both NOx and VOCs. While significant reductions in carbon monoxide emissions are possible with ethanol, reactive oxygen can result in increased NOx production. NOx is one of the key materials that makes smog.
Burning ethanol can decrease the quantity of volative organic species present at the tailpipe, however, it increases the emissions from filling the tank and evaporation. Also, there has been shown to be an increased amount of aldehyde emission at the tailpipe. While this could be corrected via additional catalytic conversion in the exhaust system, automobiles would need to be retrofitted.
And about the price…
The price of ethanol is related to the price of food, because the primary sources of making ethanol come from food, be it corn, barley or sugar cane. This means that fuel pricing will need to compete with food pricing. As food is more important to people than fuel, it will likely lose this war if there is situation where the price of these feedstocks is driven upwards due to demand. Food buyers will pay more than fuel buyers.