Here is some food for thought.
According to the U.S. Department of Energy, corn-based ethanol provides 26 percent more energy than is required for its production, while cellulosic provides 80 percent more energy. And while conventional ethanol reduces greenhouse-gas emissions 10 to 20 percent below gasoline levels, the reductions with cellulosic range from 80 percent below gasoline to completely CO2 neutral.
http://grist.org/news/maindish/2006/12/04/montenegro/
Switchgrass -- A perennial prairie grass native to North America, switchgrass requires little water or fertilizer to grow and thrives in places unsuitable for most crops, ranging from the Gulf of Mexico to Canada and from the Atlantic to the Pacific. Some five to nine feet tall, this gangly weed also yields twice as much ethanol per acre as does corn.
That said, researchers at the University of Minnesota and St. Olaf College recently found that biodiesel production is highly efficient, generating 93 percent more energy than is required to make it.
Enough biodiesel to replace all petroleum transportation fuels could be grown in 15,000 square miles, or roughly 12.5 percent of the area of the Sonora desert (note for clarification - I am not advocating putting 15,000 square miles of algae ponds in the Sonora desert. This hypothetical example is used strictly for the purpose of showing the scale of land required). That 15,000 square miles works out to roughly 9.5 million acres - far less than the 450 million acres currently used for crop farming in the US, and the over 500 million acres used as grazing land for farm animals.
http://www.unh.edu/p2/biodiesel/article_alge.html
The above article is an excellent treatise on biodiesel from algae. This is doable, cost effective and probably the way to go. The scale of land required would also be much less than from ethanol. The land could be desert land that is not currently used in food production.
Donna
PS: It does assume a reduction in fuel usage through the use of hybrid diesel engines, but that has to be taken as a given.