The CO₂ emissions that result from the combustion of bioethanol are designated as biogenous CO₂ and viewed as climate-neutral, since their combustion, unlike that of fossil fuels, releases only as much carbon dioxide as the plants absorbed from the atmosphere during their growth.

Naturally, biofuels are not completely climate-neutral, since fossil greenhouse gas emissions result from the cultivation of the plants (e.g., use of machines, nitrous oxide emissions from fertilisation), from the manufacture of the biofuels (e.g. electrical consumption by the production facilities), and from the transport of the biofuels (e.g. fuel consumption during delivery to filling stations).

However, when comparing the entire product lifecycle of bioethanol and fossil fuels, bioethanol has the more positive CO₂ balance sheet. This is why higher blending of bioethanol is encouraged. In some countries, like Brazil which is the world leader in bioethanol, blends as high as E85 are available. This means the fuel is 85% bioethanol and only 10% gasoline!