Ethanol has more octane rating, meaning it will be less likely to pre-ignite, lending to the possibility of more advanced timing without knock, however from composition standpoint, it has less overall potential energy, and as such will give lower power and MPG. Specifically the same amount of ethanol has 34% lower energy than pure gasoline fuel. A pure ethanol engine has the potential for much higher compression ratios (due to the aforementioned anti-knock characteristics, however when you have to make an engine use both pure or hybrid, the engine cannot change compression ratios other than through moderate timing changes, allowing closer to TDC for ignition compared to ignition from retarded timing before full compression is achieved). Forced induction engines can help combat this with the added ability to push more air into the cylinders and increase the ratio.
Ethanol also produces much larger amounts of ozone and formaldehyde, and is much more hygroscopic, so it will tend to readily wick water from the air, causing less combustion when allowed to sit in a tank over a long period (hence the posting on the pump above suggesting it's use for things which all tend to not be driven year round or often). A study in 2006 from the EPA, on E85 (85% ethanol blended fuel) showed that the average fuel economy across these vehicles designed to run E85, and running on that blend, compared to the same models running unleaded gasoline, resluted in over %25 WORSE fuel economy for the E85 vehicles.
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