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By driving carefully I can get 31 mpg on E85. By driving carefully I can get 40 mpg out of 93 E10. Driving normally, I get 22mpg on E85, and 31mpg on 87 E10. In PA last winter I was paying around 3.30 a gallon for E85, 3.50 a gallon 87 E10, and 3.90 a gallon 93 E10. But in Texas this spring I was paying 2.78 a gallon E85 while 87 was running 3.50. E85's viability from an economic standpoint is very based on how large the discrepancy between it and pump gas is. Even driving 25 miles out of my way to get to the E85 pump I still felt like I was getting a decent deal in Texas, here, it's just something that makes my car more fun, it actually ends up costing me money to use E85 instead.
I wonder specifically about the tax issue; it seems to me the way to make E85 more economically viable is simple enough; don't tax it. The tax on gasoline is a significant portion of the price we pay, if we paid tax only on gas, and not on ethanol, then the tax would be 10% lower on E10 and 85% lower on E85. They could even raise the tax, by exactly enough (coincidentally) to leave the tax the same on E10.
A non-trivial portion of the fleet today is flexfuel ready, but most people are still putting gasoline in their tanks because that's a cheaper way to travel. I would think widening the gap between the two liquids would be all it would take to significantly increase the number of people actually using the fuel, and that might also affect the car buying public, increasing demand for flexfuel cars... and that in turn encourage the car manufacturers to make the things.
Get adoption rates and use rates higher, more stations put in flexfuel pumps, and alternate forms of ethanol production get easier to finance. Everybody wins, except the petroleum producing countries.
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