According to the DOE's 2015 Quadrennial Technology Review, the internal combustion engine is one of the most promising and cost-effective approaches to improving fuel economy in the near to mid-term. This, the DOE said, can be achieved through engine efficiency improvements which also reduce emissions.

Toward that end, it said significant improvements in engine efficiency and emission reductions can be achieved through the co-optimization of fuels and engines. In particular, it said, high compression ratios in engines can achieve maximum efficiency but compression ratios are limited to the tendency of gasoline to auto-ignite or "knock." This in turn can have a devastating effect on an engine.

But, the DOE points out, engine knocking can be avoided by using high-octane fuels such as ethanol which will also reduce life-cycle GHG emissions.

It adds that increasing the amount of ethanol blended with gasoline would dramatically increase the octane rating of finished gasoline with "the most benefit being realised around 25 percent to 40 percent ethanol by volume."

"Higher-octane fuel would enable downsizing, downspeeding, and charge air boosting of the engine to improve the fuel economy of the vehicles," the DOE said.

So there you have it. After being vilified for decreasing fuel mileage, ethanol can actually improve a vehicle's fuel economy. And it has the added benefit of reducing GHG emissions.

The DOE estimates that if all vehicles had high compression ratios and could use up to 40 percent ethanol, petroleum usage per vehicle would reduce by 30 percent while annual GHG reductions would be up to 149 million metric tons.

Among the technological barriers to the co-development of fuels and engines, the department said, includes decades-old octane tests (Research Octane Number and Motor Octane Number) which were designed to detect auto-ignition in petroleum-based fuels.

"As bio-derived feedstocks diversify the blending streams for gasoline fuels, some of the knock-resistant fuel properties are not adequately measured (such as heat of vaporization).

"Moving forward, it is essential to ensure fuel standards tests measure all of the relevant fuel properties under relevant engine conditions for current and evolving combustion regimes," the DOE said.