How is ethanol dirtier than fossil fuel? Ethanol is a renewable fuel - the carbon we take out of it came from the corn that was grown, and thus some of it came from the atmosphere. It's closer to a closed system. Fossil fuels are taking carbon out of the ground and releasing it into the air - an almost completely open system.
As far as new vs old vehicles, that may definitely be true. I had a 2001 Ford Ranger that came with the free E85 upgrade (bigger spark plugs and steel fuel lines). I ran E85 fairly often, because there was a station near me and cost was frequently less than 80% of regular gas. After careful measurement (which I haven't preserved and the truck is now in car graveyard) I determined that I would break even in price as long as it was below 80-something percent. So yes, less efficient per gallon, but this was also 85% ethanol, so I'd be surprised if a modern car suffered nearly as much.
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