Now, this is not as good as the 30% better fuel economy that the Ethanol enabled Direct Injection engine (designed by MIT professors and with whom Ford has formed a company to build) achieves, but it demonstrates that you can get comparable mpg with ethanol IF YOU OPTIMIZE THE ENGINE TO TAKE ADVANTAGE OF THE HIGHER OCTANE OF ETHANOL. Actually, it didn't take any research by EPA to establish this. GM and Ford knew this could be done. For some reason they didn't want to make the little bit of effort needed to do it. They could have offered something like this as an optional engine.
For this study they used a Volkswagen diesel engine (direct injection originally but reconfigured with Port Fuel Injection) modified with spark ignition and turbo-charging to get the boost in compression to take advantage of the higher octane rating of ethanol.
http://www.epa.gov/otaq/presentations/epa-fev-isaf-no55...
The fuel efficiency benefits with E30, shown in Figure 5, point to a potentially attractive fuel from a performance and economic standpoint, for reasons discussed earlier. The full engine efficiency map with E30, given below in Figure 6, demonstrates in greater detail the extent of the higher-efficiency operating range, with peak levels well exceeding that of even the most efficient production gasoline engines <25>.
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Combined with an optimized conventional drivetrain, the efficiency gain shown in Figure 6 for E30 should yield an estimated
10% to 12% gain in fuel economy, and thus more than compensate for the approximately 8% loss in fuel energy density compared to gasoline.