CHATHAM, Ont. — A plan to make Ontario gas more ecologically friendly by containing at least five per cent ethanol won't mean all pumps provincewide are serving up cleaner gas, Premier Dalton McGuinty admitted Friday.

McGuinty said the province had considered mandating all gas stations to provide fuel containing the clean-burning additive, but in the end it decided to go with a new standard that would see some oil companies compensate for the ecological shortfalls of others.

"We think it's more pragmatic, it's more practical, it's more responsible,'' McGuinty said after making the announcement at Chatham's Commercial Alcohols Inc., Ontario's only ethanol plant and the largest in the country.

Under a credit-trading system, the renewable energy plan would mean the total of all gas in Ontario contains five per cent ethanol by Jan. 1, 2007.

Wholesalers using more than five per cent would acquire credits that they can sell to companies that choose to blend less than five per cent, or nothing at all. Sunoco, for instance, has a 10 per cent blend, while Esso has zero.

"It achieves our objective economically and with respect to emission reductions overall,'' McGuinty said.

"If I've got zero per cent ethanol in my car and you've got 10 per cent in your car, that's OK because we're going to achieve our five per cent average.''

The renewable energy plan promises cleaner air and jobs for rural communities such as this one in southwestern Ontario, McGuinty said.

But the details of how such a market would operate or how much the credits would cost have yet to be determined, he said.

Forcing all gas companies to use ethanol was simply too costly and too difficult, the premier said following an announcement staged in front of the plant amidst bales of hay and employees in hard hats.

"It's a real challenge to mandate a five per cent blend for folks in northern Ontario,'' McGuinty said.

"That could be a heck of a challenge. It could be a heck of a cost connected with that. The purpose here is to reduce emissions by having an average five per cent component rather than across the province.''

Since the standard would affect the total volume of Ontario's gas, the province would require the same amount of corn and ethanol production as if every pump had been mandated to sell blended fuel, McGuinty said.

Ethanol is a high-octane fuel additive made by distilling organic matter such as wheat, corn and straw. It is blended with conventional gasoline and results in cleaner fuel combustion and fewer emissions.

The move addresses an election promise in which the Liberals pledged to make gasoline contain five per cent ethanol by 2007 and 10 per cent ethanol by 2010.

The ethanol level in gasoline is now at about one per cent.

The province would need to build at least three to four more ethanol plants to produce the 750 million litres a year needed to meet a five per cent standard. A 10 per cent standard would require the production of 1.5 billion litres of ethanol a year.

A plant can cost up to $200 million, and takes about 12 months to build, said Commercial Alcohols chairman Ken Field.

The company produces about 130 million litres of ethanol a year for Sunoco, Pioneer and UPI and is looking into expansion, he said.

The province imports another 95 million litres from the United States and Brazil.

The Integrated Grain Processors Co-operative has proposed an $86-million plant for Brantford, Ont., and is expected to turn nearly 12 million bushels of corn into 125 million litres of ethanol a year.

McGuinty said adding ethanol would not increase the price of gasoline, arguing it would actually act as a hedge against ever-rising oil prices.

The new standards would be the equivalent of taking 200,000 vehicles off the road or reducing annual greenhouse gas emissions by about 800,000 tonnes, McGuinty said.

And it could spark as many as 3,000 new jobs and bring as much as $500 million in new investment into rural Ontario.