As rising oil prices have motorists paying a premium at the gas pumps, consumers are beginning to wonder when it will all end, and where the solution lies.

The answer could be contained in ethanol, a bio-fuel that the government is increasingly touting as the renewable resource of choice that will also help to reduce greenhouse gas emissions.

The provinces and the federal government recently joined forces and announced a plan to boost the amount of ethanol mixed into all Canadian gasoline to five per cent by 2010, up from the current one per cent requirement.

Following a meeting in Regina, Environment Minister Rona Ambrose praised the initiative as an important milestone for Canada, and said the provinces showed a "successful will to move forward" on ethanol benchmarks for gasoline.

"It's an ambitious target but we've done a lot of work in the last few months with the energy minister and agriculture minister, and feel very strongly it's a reachable target," Ambrose told CTV's Canada AM.

"It's time we think Canada start to play in the new economy, and we give opportunities for our agricultural sector and for Canadians to start participating in this kind of environmental challenge."

But there are questions surrounding the viability of ethanol as an economic and environmentally friendly fix, and not everyone sees it as the Green Giant of solutions.

John Bennett, of the Sierra Club of Canada, says Ambrose is talking up ethanol for political reasons. The Conservative government's ethanol plan, he said, amounts to nothing more than a tactic to distract Canadians from the government's position on Kyoto.

"They had a guaranteed positive reception of Tory members and farmers across the country at a time they were in trouble for abandoning Kyoto and they are destroying a national agreement," Bennett told CTV's Mike Duffy Live.

"They are trying to get our attention away from what they are doing."

What is ethanol?

Ethanol is most commonly mixed with gasoline to improve the emission quality and increase the octane of the fuel.

It is derived by fermenting and distilling starch crops such as corn, barley, and wheat. In Canada, it is primarily made from corn and wheat using a milling process.

Ethanol can be processed into industrial ethanol or fuel-grade ethanol for vehicles. This renewable fuel is then mixed with gasoline creating a cleaner burning fuel.

Once blended with gasoline, ethanol can be used in any gasoline-powered vehicle made after 1980. But most vehicles can only run on a blend of gasoline with no more than 10 per cent ethanol. This more common blend is known as 'E-10'.

Some vehicles are specially built to operate on 85 per cent ethanol and 15 per cent gasoline, known as 'E-85'. It is not commercially available in Canada but is used by some large vehicle fleets.

Why is ethanol becoming so popular?

Both Canadian and U.S. officials have called for increases to ethanol production as a way to combat oil dependence while fighting greenhouse gas emissions.

The Conservative push for a 5 per cent renewable fuel standard by 2010 was deemed "a big step forward in terms of greenhouse gas reduction" by Kory Teneycke, president of the Canadian Renewable Fuels Association.

Teneycke is correct if you simply look at the toxins emitted from burning ethanol when compared to the toxins emitted from gasoline.

But Liberal natural resources critic Roy Cullen rebuffed the benefits saying Teneycke's viewpoint does not include the big picture.

"It really does nothing in terms of our greenhouse gas efficiencies because it takes so much natural gas to process these products into ethanol," Cullen said.

Cullen is referring to the diesel fuel and petroleum-derived fertilizers and pesticides that are necessary to create ethanol. In effect, they negate the environmental benefits that come from burning ethanol instead of gasoline.

However, the use of these harmful fuels in ethanol production is expected to decrease as the industry develops, and Ambrose said her ministry is focused on the future of the technology.

"There are concerns about some of the first generation ethanol production, but what we're looking at very closely ... is second generation cellulose-based ethanol and biodiesel, and in that context you're seeing double the amount of emission reductions," Ambrose said.

In the U.S., President Bush is also pushing for the development of domestic, renewable alternatives to gasoline and diesel fuels.

In his January State of the Union address, Bush called for accelerated research into the production of "cellulosic ethanol" -- deriving ethanol from trees and grasses.

Bush allocated $150 million in the 2007 budget, $59 million more than 2006, to develop bio-based fuels from agricultural waste products that include wood chips, stalks and switch grass.

Research scientists claim that the move could make "cellulosic ethanol" cost-competitive by 2012 with the potential to offset up to 30 per cent of current U.S. fuel use, according to the U.S. government.

Democratic Senator Hillary Rodham Clinton is also calling on the U.S. to cut its dependence on foreign oil by half by 2025. She said the goal of cutting nearly eight million barrels a day can be achieved through ethanol-based fuels.

She also wants to see specialized ethanol pumps in half of American gas stations by 2015.

Canada is also involved in ethanol research, helping to fund Iogen Corporation -- the world's first and only full-scale demonstration plant to convert biomass fibres into ethanol.

According to their website, "Iogen is currently assessing potential locations for the world's first commercial prototype cellulose ethanol plant."

Problems with Ethanol

Currently, there are a variety of problems with ethanol including availability, transportation and cost-effectiveness.

In Canada, ethanol-blended gasoline (E-10) is only available at around 1,000 service stations across the country. This does not make it a viable option for most Canadians since it is not readily available.

Also, ethanol has to be transported by truck or train instead of through the pipelines used for gasoline since it picks up water and impurities quickly. If water is found in ethanol it cannot properly mix with gasoline.

It would be an expensive solution to build a completely new pipeline network specifically for ethanol.

Ethanol also gives drivers less fuel efficiency than gasoline and since production and transport costs are high it will not necessarily be cheaper at the pump.

Looking forward

While ethanol already makes up a small component of gasoline, developments in "cellulosic" research could eventually make the fuel more commonplace as it becomes cheaper.

While companies like General Motors are making flex-fuel vehicles compatible with E-85 ethanol fuel, the shortage of gas stations providing the fuel has car makers hesitant about pushing the product.

If Clinton's initiative takes flight, a surge in the manufacturing of flex-fuel cars could be on the horizon.

Bennett, however, said the government's motivation is what is really in question, and the nation's environmental track record is what is at stake.

"What we've seen today is a recycling of a Liberal plan by a government that is trashing all of the other plans," John Bennett, of the Sierra Club of Canada told Mike Duffy Live.

"They just wanted to get our attention from the damage they're doing."

Environmental groups around the world continue to criticize Prime Minister Stephen Harper's government for announcing it could not meet the goals under the Kyoto accord set by the previous Liberals.